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Agriculture, Food Security & Rural Development, Areas of Expertise, Information and Communication Technology for Development, Mobile Money, Originally posted on the GBI Portal

Can this be an Opportunity for Mobile Banking in Ethiopia?

Photo Credit: The Economist

I participated in a very informative event this week in Washington DC where a researcher was sharing his experience on “Weather-Index based Crop Insurance for Smallholder Farmers in Ethiopia”. As I listened to the discussion as an agricultural information specialist, my concern was what is the role of mobile technologies in this?

According to the researcher, Dr. Shukri Ahmed a Senior Economist, Food and Agriculture Organization (FAO), the concept of crop insurance has a long history from Asia with the leadership of India. However, due to the challenges associated with insurance in general and access to credit to smallholder farmers, the idea somehow waned. But according to Index Insurance Innovation Initiative (I4), there is overwhelming evidence that uninsured risk can drive people into poverty and destitution, especially those in low-wealth agricultural and pastoralist households. There is therefore a re-emergence of insurance for smallholder farmers across the globe.

The speaker gave a detailed background to the study in Ethiopia and the importance of partnership in the design and implementation of the study. The difference, however, with this new approach to crop insurance for smallholder farmers is the use of index (indices) to support the insurance service, and intervention against emergency situation. But at the same time the study is targeting farmers that are relatively better off and who are already engaged in the market but are not investing in insurance due to the anticipated risks. The outcome of the pilot study is expected to help protect the livelihoods of smallholder farmers, who are vulnerable to severe and catastrophic weather risks particularly drought, enhance their access to agricultural inputs, and enable the development of ex-ante market based risk management mechanism which can be scalable in Ethiopia.

Dr. Shukri Ahmed, Senior Economist at the United Nations Food and Agriculture Organization (FAO)

Unbanked or Branchless Services

Adding another concept to an already very complex issue that tries to combine weather, insurance, credit/finance, and smallholder farming, should be carefully considered. But the key question is whether mobile technologies can play a catalytic role in this entire complex system?

Among the reasons for choosing a given area for the pilot study, include availability of Nyala Bank branches, the vulnerability of yields to drought, the availability of nearby weather stations, and the willingness of cooperatives in the area to purchase the new product. As the pilot study progresses, the possibility of scaling the project across the country is high. But what will be the implications for the absence of banks in the rural farming communities in a country that has an approximately one bank loan per 1000 adults? Can Mobile Banking help understand why smallholder farmers under-investment in agriculture?

A success story of mobile banking by the Dutch-Bangla Bank Limited (DBBL) in Bangladesh was recently highlighted by the GSMA Mobile Money for the Unbanked. Interestingly, the story pointed out how DBBL learnt from Kenya’s famous mobile money program M-PESA. Kilimo Salama (KS) is an innovative index-based insurance product that insures farmers’ inputs (seeds, fertilizer, pesticides), and outputs (crop harvests), in the event of drought or excessive rainfall. It uses weather stations to collect data and implements SMS-based mobile technologies to administer and distribute the payouts. Mobile technologies will not only help with the financial transactions such as seen in Kilimo Salama’s case but also in support of the weather stations for timely and accurate decision making for pay-outs.

My conversation with Dr Shukri about the possibility of integrating mobile money into the project to address the challenge of absence of banks in rural Ethiopia, revealed the huge untapped market for Mobile Banking in that country. However, the success of such services depends on a convincing business case for both the banks and Mobile Network Operators (MNOs). Most importantly, however, is the state of telecommunication infrastructure and regulation in the country. These need to be in place for services and applications to thrive. With this huge investment

Outside Ethiopia, I believe it is time for African countries to take advantage of the increasing mobile phone penetrations in the continent beyond social networking to general development applications such as for agriculture, health, education, and rural development.

To listen to the audio recording of the event, visit Center for Strategic and International Studies (CSIS).

August 25, 2012/by actualize

Mobile Money, Originally posted on the GBI Portal

Mobile Money Interoperability: A Solution or Just Expensive?

Photo Credit: Szymon Slupik

In a report released in February, GSMA examined the value generated to both consumers and mobile operators by developing interoperable mobile money systems. Entitled “The case for interoperability: Assessing the value that the interconnection of mobile money services would create for customers and operators” and co-authored by Neil Davidson and Paul Leishman, it was released through the Mobile Money for the Unbanked unit of GSMA.

The report focused on the idea that increasing the interoperability between mobile network operators (MNO) would be better for customers as it would allow greater ability to send money from a phone on one network to a phone on another network. With the understanding that a network’s value to a consumer depends on how many other people they can connect to, there is an obvious benefit to operators creating interoperability between each other. But the article finds that developing interoperability will not create the necessary value to customers in order for MNOs to profit off the investment. The authors came to this conclusion by examining it from both the consumer side and the producer side.

Value to Consumers

By researching the competitiveness of mobile money services, the authors found that there were only three markets in the world that could be labeled as competitive. Although 25 countries have multiple operators providing mobile money services, only three had adoption rates from multiple MNOs that would dictate a need for interoperability. They next turned their attention to discovering the specific problem that interoperability would solve. In viewing the habits of consumers in markets with mobile money, the research showed that they had figured out a workaround to transferring money between mobile networks. Since there is a low cost to purchase a SIM card from another MNO, consumers can “multi-SIM.” This means that depending on which operator the receiver is using, the sender can switch their SIM card in order to send the transfer. With the advent of dual-SIM phones (two ports for SIM cards), multi-SIMing is made easy with no need to switch out the cards manually. In Uganda, a survey from June 2010 showed that 43% of mobile money users multi-SIM. Along with the hardware workaround already available, the mobile operators have allowed unregistered accounts to send and receive money. Registered customers have the ability to send money to unregistered customers. Since all that is needed in order to collect the transfer is a secret code, an unregistered user can give the code to an agent and withdraw the cash. This is called an off-net transfer. The opposite transaction can occur as well as with an unregistered user sending a transfer to a registered customer. This is called an over-the-counter (OTC) transfer. While this does not completely kill the consumer value to interoperability, customers have already discovered and are using workarounds at no further cost to them or the mobile operators.

Value to MNOs

The author’s argument for why MNOs would invest into developing interoperable systems is a simple one – because it will create greater revenue. Mobile money is provided as a value-added service to create greater loyalty in the customer base as well as having them increase the amount of money they spend. But creating a system that works with other mobile operators is not free – nor cheap. The investments would include human resources and infrastructure. But the main question is how would this investment make more money, if at all? Value-added services are used for two reasons – keeping existing customers and enticing new customers. And one or both will have to pay for this service. But since it has already been shown that current customers are already willing to use a workaround to transfer between separate mobile providers, it is not clear that interconnecting systems will create greater loyalty or attract new customers.

Along with the unclear pain from customers about the need for interoperability, the authors made the argument that the investment in it could take away from other investments that could increase loyalty or simply pass the cost of directly onto customers. Unless a clear business reason is discovered, it seems like interoperability will not occur in the near future. But that does not mean it will never occur; just that it is too early for it now.

March 13, 2012/by actualize

Mobile Money, Originally posted on the GBI Portal

Mobile Money for Women: Greater Mobile Adoption or Development of Specific Services?

Photo Credit: The Guardian

GSMA, through its mWomen program, has invested its resources in expanding the knowledge of why there is such a large gender gap in developing countries. As stated in the report entitled “Women & Mobile: A Global Opportunity” (written by Vital Wave Consulting), there is gap between male and female mobile phone ownership in low and middle-income countries which totals 300 million. The report also includes results from surveys about why women did not own mobile phones – cost, need, fear of technology, and cultural issues. In terms of mobile money, there seems to a clear benefit to families if mothers have access to formal financial services. This includes the ability to save and make payments. Research from around the world has shown that mothers are more likely than husbands to spend more on the health and education of their children. But, as shown in the large gender gap, women do not have the same access to mobile money simply because they are lacking the hardware in order to utilize the services. As the work to close the gap continues, it is important to understand how women are using mobile money. This allows for products and services to be designed for women and their needs and desires. Today there are clear examples of mobile money being leveraged by women in developing countries.

As written about last month on this blog, women in Eastern Kenya are utilizing mobile money to make payments into informal savings groups. It also has been used to make payments into a women’s co-operative in Zimbabwe. The convenience of sending payments via mobile money has allowed women to focus on their businesses and/or their families. Traveling long distances to markets not longer limits their ability to make payments on time. These are two examples in which women have decided to fold mobile money into their informal financial services. This is a clear sign that women are seeking more formalized financial services, specifically focused around convenience of mobile payments. Since they have limited access to services that men has access to, like bank accounts, they are using mobile money in innovative ways to make up for the lack of services they have.

So there is a large gap in mobile ownership between men and women. And women do not have access to some of the financial services provided to men. But there are examples of women creating their own services via mobile money. So the question is: if we want to increase women’s access to formal financial services via mobile money, should we focus more on increasing women’s mobile phone ownership or should the focus be on developing mobile banking services specifically for women? This is a difficult question, particularly because the elephant in the room is their husbands. And this elephant is preventing both issues: low mobile ownership and access to formal financial services.

As mentioned in an interview with Mary Ellen Iskenderian, President and CEO of Women’s World Banking, women have requested greater confidentiality. The goal of their request is to keep their husbands out of their finances. Mobile money is a possible way for women to hide money from their husbands, if they control the phone or own a separate one. If it is a shared phone, the ability to hide money from their husband becomes harder. This would be a reason to push harder to increase mobile ownership. But ownership with not immediately mean that women will begin to have financial freedom. Clearly mobile ownership needs to be pushed further but understanding the cultural dynamics in each country and region will be important in the development of future mobile banking products and services for women.

March 8, 2012/by actualize

Mobile Money, Originally posted on the GBI Portal

IFC’s Report on Mobile Money: A Framework to Analyze a Country’s Readiness for Mobile Money

Photo Credit: Bancore Mobile Financial Services

On February, as a part of the ICT Learning Days at the World Bank, Sonja Oestmann, the Director of Consulting and Partner of Intelecon, presented the findings from a report commissioned by the International Finance Corporation (IFC) about mobile money. Entitled “Mobile Money Study 2011,” the reports focused on the mobile money markets in four countries – Nigeria, Thailand, Sri Lanka, and Brazil.

The IFC has committed to further expanding financial inclusion by 2013 and see the potential in mobile money to help reach this goal. But while it has been successful in some countries, it has yet to take off in others. By focusing on vastly different countries in terms of region, socio-economic conditions, and financial infrastructure, the focus of the report was to show the different ways in which mobile money can be used as well as the business models that make them sustainable. It also used Kenya and Japan as examples of countries in which mobile money has succeeded.

Framework

The report included a framework to assess the sustainable viability of mobile money in a country as well as the most appropriate business model to utilize. This includes the partnership strategy, the necessary regulation environment, and the development tracks of mobile money products and services. By creating a structure of the market research that must be conducted, the report is aimed at providing this knowledge to regulators, mobile network operators, commercial banks, microfinance institutions, telecommunications manufacturers, and all others interested in expanding mobile money opportunities.

User Demand

The report also examined where the user demand of mobile money is based on the major money flows within each country. Based on these flows, the report listed the following as potential areas of demand:

Government-to-person (G2P) payments
P2P transfers
Payroll payments from small companies in the informal sector
Public transport payments
Bill payments to major utilities (e.g., electricity and water), postpaid mobile accounts, fixed phone subscribers, pay TV (cable and/or satellite)
Retail payments
Business-to-business (B2B) payments
Credit and microfinance
International remittances
Savings

Survey Findings

Surveys were conducted in order to further understand how and why individuals were using (or not using) mobile money in the four countries. One of the more interesting findings from the survey is the ability of marketing to increase the adoption of mobile money. Individuals using the service became aware of it directly from either the bank or the MNO. But the nonusers heard about the service indirectly from mass media. The conclusion in the report is that increasing adoption could be done more effectively through direct marketing with a personal touch. Another interesting finding is the state of the formal financial services effect on the perceived value of mobile money. In countries where the financial services sector is less extensive, mobile money is seen has a cheaper and faster alternative. But in countries with a strong financial services sector, cost and speed were not as important. Its perceived value was seen as an increased convenience.

Conclusions of Studies

The main conclusion from the report was that the value proposition for mobile money depends on the existing financial service infrastructure. When financial services are unavailable to a larger population, there is a higher demand for fast and cheap money transactions. But as the services improve, partnerships between banks and MNOs increase in significance. At the same time, the demand for mobile banking decreases as other e-payment services become competitors. In countries with an established and advance financial services sector, the demand for new services is based on performing at higher speeds, with greater frequency, and increased convenience.

March 6, 2012/by actualize

Mobile Money, Originally posted on the GBI Portal

Social Investing in Mobile Money: Two Recent Investments in Expanding Mobile Financial Services to the Poor

Mobile Transactions Agent next to a store

Photo Credit: http://venture-zamtan.blogspot.com/

As the Mobile World Congress 2012 wraps up in Barcelona, there has been a flurry of news about social investments in mobile money. On Wednesday (February 29^th), Omidyar Network and ACCION International announced a $3.2 million investment in Mobile Transactions International, a Zambia-based organization with a technology platform and network of agents for mobile transactions. On Thursday (March 1), CGAP, Grameen Foundation, and MTN Uganda announced a partnership along with $1 million investment into an initiative to research and design mobile financial services for those living on under $2.50 per day.

Investment Details

As the first venture capital investment in a start-up technology company in Zambia, Omidyar and ACCION see Mobile Transactions as a leader of expanding access to financial services in the country. The money will be leveraged to build up its executive team, agent network, and further develop their platform in order companies and poor consumers both in Zambia and in new markets to make mobile transactions. The investment into Mobile Transactions includes $500,000 in convertible debt funding from Mennonite Economic Development Associates (MEDA), a nonprofit organization focused on alleviating poverty through market-based solutions and financial investments. This funding will eventually be convertible into shares of the Mobile Transactions. As typical with venture capital investments, Arjuna Costa, Director of Investments at Omidyar Network, and Monica Brand, Fund Manager for ACCION’s Frontier Investments Group, will serve on Mobile Transactions’ board.

Mobile Transactions’ business model combines their proprietary technology with an agent network with the goal of creating a “Cashless Africa.” This idea is that all businesses can transact through mobile phones with the unbanked as well as those without mobile connectivity. Their services offer customers the ability to transfer money, make and receive payments, and eVouchers. This business model was created based on the fact that in countries like Zambia over 80% of the adult population does not have access to formal financial services and roughly 50% of them do not have access to a mobile phone.

The focus of the investment by CGAP, Grameen, and MTN Uganda is to build on the success of mobile money providing access to financial services. The idea is to take it a step further by creating a suite of products and services that fit the needs of low-income consumers. The diverse partnership is aiming at combining the expertise of each organization to provide better access to mobile financial services. CGAP, as a part of the World Bank, focuses on expanding financial services to the poor through independent research, policy solutions, and advisory services to governments and financial service providers. Grameen Foundation, through its AppLab in Uganda, already has the knowledge and experience of expanding the reach of financial services to poor consumers by utilizing mobile technology. MTN Uganda also has had success with mobile money in Uganda which includes building the technical infrastructure and establishing a strong agent network.

Social Investing

Mobile money has been in the news lately as global corporations are becoming interested in its revenue possibilities. Visa and Mastercard recently partnered with mobile operators across Africa and the Middle East to start offering their own form of mobile money. Western Union continues to create partnerships in order for their international money transfer services to be used via mobile phones. While these examples are corporations looking to enter new markets and generate new revenue streams, the social investments have much different and hopefully more impactful focus.

Social investing is a necessary component for mobile technology to reach the unbanked. These social businesses have a clear idea of who their targeted consumers are. With this understanding, the products and services will be designed to meet the consumers’ needs. As mentioned, in Zambia, there is a low penetration rate of mobile phones so creating a system based solely for individuals with mobile phones would not reach all the unbanked. The beauty of Mobile Transactions’ services is that provides needed services that are accessible by all, whether they have a mobile phone or not. In Uganda, the AppLab has done extensive research on providing information services via mobile phones to rural communities. The testing and delivery of these services has allowed the AppLab understand the needs of the consumers in the country. This has helped to guide further development of current products as well as the future development of new products. Both of these social investments are exciting as they will create new products and services to expand financial services to the unbanked.

March 2, 2012/by actualize

Agriculture, Mobile, Mobile Money, Originally posted on the GBI Portal

M-PESA responds: Benefits and Challenges of using mobile money to reduce poverty for women in Kenya

This is a guest post by Dr Ndunge Kiiti of Houghton College, New York and the GSMA mWomen programme.

M-PESA Responds

The M-PESA staff members were grateful for the feedback provided by the women’s groups. First, the workshop provided them with a broader context in which to understand how these groups were using their services in the rural areas. Second, they were able to spend quality time explaining how the women might confront and address some of the challenges they have faced as a result of the services. The challenges and M-PESA’s suggested responses are listed below.

Fraud

Several of the women had lost money to fraud. The M-PESA staff acknowledged the women’s concerns and highlighted that reported cases were always investigated. They emphasized several tips to prevent M-PESA fraud including:

Calling M-PESA to confirm the request prior to responding to a text message regarding their account (the phone number, which would require a small fee, was provided)
Checking to see if the text message is actually from M-PESA – if it was it would have the M-PESA logo and/or name)
Being aware of their account balance
Ensuring their pin number is always kept safe

It was also brought to the groups’ attention that M-PESA has introduced a new Safaricom SIM card which allows individuals to save the phone numbers used for M-PESA transactions. This enables the individual to just scroll and pick the accurate number instead of having to retype the number every time it is used. This reduces the problem of sending money to the wrong number. The M-PESA staff provided the SIM card service at the workshop and many of the women paid for the service and got their old SIM cards replaced. The women expressed gratitude for the service.

Network/Connectivity Problems

Why some areas face network problems was explained by the M-PESA staff. The company recognizes that network coverage is a problem in some rural areas. A key challenge for M-PESA is the platform or technology has faced limitations in keeping up with the demand, as the users of the service continue to increase across the country. The women were encouraged to report coverage issues to an M-PESA outlet, if there is one in their area, rather than an agent. They were also given a number to call or text, when they have access to service, to report these complaints to give the service provider the opportunity to rectify the problems. Again, this would require a small fee.

Cost

The challenge of cost for service was discussed; even though the service was deemed very useful by users, sometimes the costs involved proved challenging for them. The M-PESA staff explained their service costs, what they entail and how they have worked to keep them affordable for Kenyans. There was mutual agreement that M-PESA has tried to be fair in terms of pricing. In fact, it came out in the conversation that one of the reasons it was being used by all 21 women’s groups was because it was the most competitive in the mobile money market.

Services for Special Populations

In relation to services for special populations, such as the elderly, illiterate or visually impaired, there were no easy answers. M-PESA staff suggested that they would look into the possibilities of programs that might assist special populations to have positive experiences with their service.

Group Communication and Dynamics

On one hand, mobile money allows for money to be sent to facilitate planning at meetings, even if a member needs to be absent. However, some groups argued this can perpetuate the lack of meeting attendance, thus limiting the social aspects of the group meeting and affecting the socio-psychological support that comes from face-to-face group interactions. Since this issue relates more to the training and capacity building carried out by those running women’s groups, it was not addressed by the M-PESA in detail. However, representatives of the organization running the women’s groups encouraged members not to allow the use of technology to erode or limit their face-to-face communication by not attending meetings. The groups were encouraged to continue reminding members that a key part of their mission is being a support system for one another which require face to face communication.

Summary

Overall, despite the numerous challenges mentioned, the groups made it clear that the benefits of using mobile money services outweighed the disadvantages. In addition, bringing together M-PESA staff and their end users was mutually beneficial. The women’s groups were able to gain information, knowledge and services that will continue to help them with their poverty reduction activities. The M-PESA staff were able to garner insights and understanding that may contribute to framing policies and practice for mobile money services.

February 21, 2012/by actualize

Mobile Money, Originally posted on the GBI Portal

Mobile money technology: not easy, but why?

Close up of mobile phone with "Send Money" as the option displayed on the screen In recent months, unflattering headlines in response to technology related challenges. When the technology platforms through which mobile money services are delivered experience downtime, customers are unable to transact and agents are unable to earn a living. Understandably, both quickly become distressed. Recent headlines have brought attention to this problem, but to be clear, it’s neither new, nor limited in scope to a couple of deployments: for years, the world has read about M-PESA’s downtime in Kenyaon Twitter, and countless other services have faced similar challenges to varying degrees that, because they are smaller, haven’t attracted the same headlines.

Why is it so difficult to install and operate a reliable mobile money technology platform? This is not a question that can be answered in a blog post, but I’d like to highlight some key issues and invite readers to contribute in the comments.

Throughput and reliability
To begin, it’s worth clarifying the complexity of the problem at hand. A mobile money technology platform must meet the performance objectives of disparate industries: telecom systems that are optimised for throughput, and financial systems that are optimised for reliability. So “mobile” suggests throughput, and “money’ suggests reliability: operating a platform that delivers both is anything but straightforward.

Customization
In many cases, operators have a specific set of business requirements and aren’t willing to settle for a vendor’s off-the-shelf platform: they want a customized solution. Vendors that routinely concede to operators’ requests for customization are left with the daunting task of managing multiple versions of their platform. To put this in context, imagine every one of Visa’s member banks demanded a solution that would allow them to implement a unique purchase process and feature-set: it would be chaos. Mobile money technology vendors who find themselves in this situation, albeit at a much smaller scale, are faced with a difficult task – and it’s often compounded by their scarcity of resources.

Planning for the peak is costly
Some of the technology challenges faced by operators today have their roots in decisions made years ago, before it was clear what scale mobile money might achieve. In one prominent case, a software application and system configuration that was designed for a limited pilot made a rapid pivot and was rolled out nationwide. Inevitably, there were scale issues.

But even with time to plan, coping with scale is tough. Operators must anticipate the peak transaction volume their platform must be capable of processing (this is significantly different from a monthly transaction forecast) and design, invest, and manage accordingly. To be clear: this is expensive, and if scale is never actually achieved (remember that for most mobile operators, mobile money is still a much more speculative play than their core business), investment will have been wasted.

Dependencies
No money platform operates entirely in isolation. Every platform has dependencies, and this can cause reliability issues. As an example, if a mobile operator’s SMSC has insufficient capacity at a given second, messages cannot be delivered and transactions cannot be completed.

People

Finally, it’s worth noting that technology is ultimately administered by people (at minimum, people still get to control the on/off switch!) We’ve written at length about the challenges of attempting to scale with a small team, and these challenges are equally relevant when it comes to technology: small problems are multiplied when operators do not have a skilled and experienced hand to liaise with vendors in case of an issue.

February 14, 2012/by actualize

Mobile Money, Originally posted on the GBI Portal

Financial services demonstrate the most proven sustainable business models within ICT4D

The following is a guest post we’re pleased to share by Hystra Consulting and Ashoka.

A recent study reveals how Information and Communication Technology (ICT) can viably provide access to education, healthcare, agro-services and financial services to the Base of the Pyramid (BoP). The study reviewed more than 280 initiatives set up by various types of actors (corporations, Citizen Sector Organizations, social entrepreneurs…) in Asia, Latin America and Africa which are using ICTs to provide services to the BoP. Hystra, a French consulting firm and its partner Ashoka evaluated the projects based on their ability to solve a problem, their scalability and their financial sustainability. The report presents 15 of the most ground breaking market-based business models, which have reached a significant level of scale and have improved the living standards of the BoP using ICTs.

Financial sustainability varies across sectors, financial services being the most mature of the four areas studied.

3 of the projects featured as financial services case studies in the report serve profitably more than 5 million customers each via different business models: M-PESA in Kenya with mobile money, Bradesco in Brazil with branchless banking via post offices and small retail shops, and FINO in India with a suite of POS-powered financial services available to over 40 million clients via door-to-door agents.[1]

Why are financial services the most developed area in terms of business model sustainability? One of the reasons cited is the willingness of clients to pay upfront for the service, because it offers them immediate savings compared to previous practices (such as cheaper money transfers). Moreover ICT-based financial services often go well beyond previous offerings, creating new practices for unbanked populations such as savings or insurance schemes that lower their vulnerability to adverse events. For example, some MNOs have developed innovative loyalty-based life insurance covers. These types of products help reduce churn and attract new customers for MNOs while providing a new valuable service to customers.

Establishing trust in the service is a key factor of success for ICT-based financial services, as they deal directly with people’s money. These services require robust and secured platforms, in addition to trusted agents who are able to sell the service, manage liquidity and provide a direct interface between the technology platform and end-users. Leveraging existing trusted networks such as Safaricom’s airtime resellers (in the case of M-PESA) or post office agents (in the case of Bradesco) appears as an effective way to create trust in these services.

The business models studied in the report tap into multiple revenue sources, getting commissions from governments for g2p payments, banks and insurance companies for the opening of new accounts, end-users for the transactions they perform, and MNOs which benefit from customer retention and higher end-users fees. Governments can actually play a large role in promoting such services: using them for their G2P payments, they can be a sufficiently large first client of ICT-based financial services to justify the initial investment in the technology that new companies entering this space need to make – one of the first services offered by FINO was G2P payments and state health insurance, for example. Many actors have tried – with mitigated success – to replicate M-PESA. However, the study points out to a wider range of models which can be just as effective in providing financial services using ICT. The key is to find which business model is suitable in each local context.

The study was sponsored by AFD, Ericsson, France Telecom-Orange, ICCO and TNO and conducted by Hystra and Ashoka. The full report is available for download in the MMU library.

[1] The number of FINO clients stood at “only” 28 million when the case study was done in February 2011, but FINO grows by over a million customers each month!

January 25, 2012/by actualize

Agriculture, Mobile, Originally posted on the GBI Portal

The Advent of Mobile Finanical Services in Agriculture

Close up of man in Africa looking at his cell phone As the global population continues to grow – it is expected to reach more than 9 billion by 2050. It will require a 70% increase in food production above current levels. Most of this increased yield will have to be achieved in less developed countries (LDCs), many of whose farmers operate on a small scale and are highly exposed to crop failure and adverse commodity price movements. This month, Vodafone, Accenture and Oxfam released a report on mAgriculture. The report titled “Connected Agriculture” assesses the potential benefits of new mobile data services such as mobile financial services, weather forecasts, and agriculture information and advice for smallholding farmers operating in marginal circumstances.

Additionally, in light of market saturation, MNOs face the task of growing average revenue per user (ARPU) and market share in rural areas. Agricultural Value Added Services (Agri VAS) present a considerable business opportunity due to the enormous potential user base in LDCs. The farming sector in these countries often suffers from chronically low productivity. Lack of information acts upon productivity and income levels like a glass ceiling. However, with increasing teledensity in the developing world – Africa is being tipped to pass one billion mobile subscriptions and become the world’s second largest mobile market by 2016, mobiles are uniquely positioned to address the information and financial needs of farmers – an intervention that can help increase their incomes, yields and economic wellbeing. Vodafone’s research indicates potential $138 billion addition to developing world farmers’ incomes by 2020

The financial and information opportunities at the base of the pyramid (BOP) in themselves hold significant untapped value for the private sector. The BOP has both intricate financial and information needs, which have the potential to be met through mobile money and information-based mobile services. Mobile Money can reduce the financial gap for farmers by giving them access to savings and insurance, which in itself reduces the impact of extreme weather and allows for greater investment in improving production.[1] Meanwhile, m-information services have the potential to open up significant markets opportunities, by relaying sales prices, GIS-based commodity demand information, as well as more basic yet essential information on agricultural best practices and reliable weather forecasts.

While there are existing agricultural information services provided via traditional channels such as radio and television, government extension services as they are usually referred to can be made much more efficient by leveraging the mobile channel. This can help improve their quality and trust amongst user communities increasing their potential for scale. In addition, by linking to them to mobile financial services, farmers will not only improve their productivity but will also be empowered to make better investment and risk management decisions (e.g. request credit for new fertilizers or other inputs they need to grow more and better crops). These benefits are also likely to extend to the wider community as increased agricultural income helps rural families afford education, healthcare and other services.

The GSMA mAgri Programme

The Development Fund’s mAgri Programme was set up in 2009 to accelerate the development, provision and adoption of mobile solutions to benefit the agriculture sector in emerging markets. In June 2011, the programme announced the second phase of their mobile agricultural programme, the introduction of the mFarmer Initiative, a partnership between GSMA, USAID and the Bill and Melinda Gates Foundation. The scope of the mFarmer Initiative is to support mobile phone operators and agricultural partners in launching commercially viable mobile information services that bridge the information gap and increase the productivity and income of rural small-holders. It aims to attract 2 million of the worlds’ poorest farmers to become users of mFarmer Services by 2013. This compliments their previous work on mobile agricultural services in India and Kenya.

The team has recently launched the Agri VAS Market Entry Toolkit which explores the opportunities for Agricultural VAS and covers emerging best practice on marketing, service design and business modelling. It is primarily addressed to Mobile Network Operators (MNOs), other service providers, and agricultural organisations that are looking to partner and launch Agri VAS.

Just as the successful provision of mobile financial services for the BOP requires innovative partnership models; Agri VAS will require similar efforts from the part of its stakeholders. While MNOs have a leading role to play, they will need the collective support and partnerships from key stakeholders in the agricultural supply chain in order to fully unlock the benefits for farmers in LDCs.

November 21, 2011/by actualize

Education, Originally posted on the GBI Portal, Workforce Development

Mobile Money to Pay Rwandan Teachers

Ange is a teacher at the Rubona Public School living too far from the nearest branch of the Rwandan Teachers’ Credit and Savings Cooperative, or the Umwalimu SACCO, to receive her monthly salary.

She relies on her payment each month to put food on the table.

To resolve this problem, Umwalimu SACCO announced last month commencing a mobile money transfer service to pay members living in areas where the cooperative has no branches.

Currently, the cooperative has 16 branches countrywide, with about 57, 000 members.

Teachers living in rural areas similar to Ange, complain of having to trek long distances to access their salaries and loans, which is costly and time consuming, so SACCO decided initiate a mobile money transfer system.

Umwalimu SACCO, is a Rwandan cooperative of credit and saving which gives out loans and salaries to teachers, allowing them to set up income-generating activities to complement their measly monthly pay

The typical salary for Rwandan teachers is $40 per month. To supplement this, requests for start-up loans to engage in activities such as making mandazis (donut-like pastries) and selling them to other teachers on school grounds, is standard.

Jean Marie Vianney Nzagahimana Photo Credit: Rwandan Patriotic Front

Jean Marie Vianney Nzagahimana, the Chairman on the Board of Directors of the cooperative, recognizes that mobile payments allow teachers to be paid on time, while spurring further economic development and growth.

“We knew about the problem and that’s why we came up with this system to further address teachers’ needs. We cannot do it at once but we will be addressing them beginning with priority areas,” Nzagahimana says.

Although MTN and Tigo are currently offering money transfer services in Rwanda, Nzagahimana said that the SACCO money transfer system is to be implemented in partnership with South African company, MFS. Teachers will be able to get overdrafts through the same process.

The cooperative is also looking to expand beyond merely providing fiscal provisions for the teachers, aiming to meet the demand for new services from one of the biggest cooperatives in the country.

The Umwalimu SACCO cooperative has experienced rapid growth. Their financial assets have nearly doubled in a year from 3b Rwandan franc (Frw) in 2009, to Frw 7.3 billion in 2010.

The cooperatives financial budget for the next fiscal year worth Rwf 11.7 billion, converts roughly to $US 18 million.

“We are committed to at least establish a permanent SACCO office in every district by the end of July,” Nzagahimana asserts “This (is) done to get close to teachers and facilitate access to our services, which we also want to expand beyond financial ones. We are working on one laptop per teacher and solar energy at every teacher’s house.”

The financial services provided by SACCO are encouraging more teachers to educate Rwandan children in the classroom, while the cooperative’s new mobile payment system ensures that educators receive the money they deserve—in the time and place they need it.

July 19, 2011/by actualize

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