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Mobile Money Service: An Innovation for Rural Women

Photo Credit: Africa News

I remember vividly carrying bundles of millions of Cedis (Ghanaian Currency) in my car about 9-10 years ago, and driving from Tamale (the Regional Capital) to the remote rural communities to pay local farmers for their seed cotton during marketing. You can imagine all the risks involved in carrying such a huge sum of money across districts with no security – the danger of being attacked by armed robbers, the chance of loosing the money, the risk involved in counting and paying individual farmers accordingly without over or under-payment, the challenge with safe handling of these money by the local farmers themselves, the temptation of overspending the money by the rural farmers immediately after receiving their payments, and the risk associated with “banking” the money in their thatched houses.

Don’t forget about my earlier view of a typical ‘rural’ community – lack of basic social facilities such as credit union or banks. I saw my own mother ‘banking’ her money in some special plastic bags and hiding it from us (the children) and later discovering that the value of the money has depreciated such that she could not use it – don’t forget about the skyrocketing inflation rates in Ghana in the mid-late 80’ after the military coup. I also remember interesting stories of my cotton farmers about ‘banking’ their money in the home under mattresses and being discovered by their children; hidden in a pots and being destroyed by red ants and other insects; buried in the ground and forgotten or swept away by a flood; kept under the roof of their building and being destroyed by fire, among others.

Basically, rural women who are mainly farmers, have the challenge of banking or storing the money they obtain at the end of the farming season safely and inaccessible from others as well as from themselves. These rural women also at some point of their life, need to either send some of this income to their relatives outside their village or receive money from their children in the cities. This ability of transferring money to others, or location-shift one’s own money is also an issue. It is also important for the rural women to have sufficient money (or credit) available in the right format or currency when it is required, especially at the start of a new farming season or the beginning of school year where they have to spend on their kids. Finally, the challenge of actually making saving for future use and for purchases of more expensive farm equipments cannot be ignored.

How did the story change with Mobile Money Services?

Mobile money service is seen as one of the world’s fastest growing industries, following the success of the growth of the ‘mobile’ industry over the past two decades where billions of transactions are done using mobile devices. With leadership from M-PESA in Kenya, innovative mobile payment solutions that enable customers to complete simple financial transactions including person-to-person money transfer have been emerging and transforming rural lives. Mobile money services has its presence already in Ghana, Ivory Coast, Benin, Cameroon, Guinea Bissau, Swaziland, Uganda, Zimbabwe, South Africa in addition to Kenya with Liberia being one of the newest countries across Africa to adopt this innovation.

Rural women all over the world are now using mobile money services to facilitate their work. When asked about the mobile money service being provided to her by Lonestar Cell MTN and Ecobank Liberia Limited, a market woman has this to say:

“In trying out the Mobile Money service, I have been able to send money to my son in Buchanan to pay his fees at the Grand Bassa Community College where he is a student and not worry whether the money I sent would reach him. I found the service very effective, convenient and affordable. Clearly, this is better than any other money transfer service I have ever used” (Woman from Liberian Rural Community).

Within the mobile health sector, the application of mobile money service is seen in the use of Medical Smart Cards that allow people who have no access to medical plans or insurance cover to save money through the use of M-PESA transfers. Savings are used to pay for primary health care, specified laboratory tests and drugs at pre-contracted prices. A combination of mobile banking, public information, and free treatment are used in Kenya to give women access to fistula repair. Women can call a free hotline, and if money is needed for transport to a fistula unit this is transferred via M-PESA. Using mobile money services make treatment a reality for women who otherwise would not have been in the socio-economic position to get an operation.

A study conducted on the use of mobile money services in “Kenya Case Study: Who Is Using Mobile Money?” shows that slightly more than half of the mobile money market (56%) live in rural areas and 51% of the users of mobile money services are women. Another study conducted in Kenya in 2009 about the impact of mobile money on the rural people revealed that M-PESA is boosting their income through cheaper, more accessible, and safer money transfer options. The research also shows M-PESA is empowering rural women because it makes it easier for them to solicit and receive money from their husbands and other contacts in Kenyan cities. Remittances through M-PESA relieve many women in rural areas of the burden of traveling by bus to cities to receive money from their husbands, a process that for some could take as long as one week. Also the M-PESA mobile money transfer system is used in Tanzania for example to pay for the transport of women suffering from fistula, children with cleft palates and other disabilities.

The potential of mobile money in the Ghanaian market is so huge with an estimated 80% of Ghanaian being “unbanked” – meaning they conduct their transactions outside the banking sector with no access to financial services. Mobile money is reducing the transaction costs of financial services for Ghanaian in rural areas, saving the cost of travel and time spent visiting the nearest town to access financial services, providing people with a way to transfer money safely and keep (or even increase) their savings.

The Bill and Melinda Gates Foundation and the USAID-funded project in Haiti, Integrated Finance for Value Chains and Enterprises (HIFIVE) announced the launch of the Haiti Mobile Money Initiative (HMMI) to stimulate the development of mobile money services in Haiti in 2010. The following two stories show the outcome of this project:

In a cybercafé in downtown Port-au-Prince, Jean Yves deposits money into his TchoTcho Mobile account. Michel, his brother who owns the business, recommended that he register for this mobile money service so that he doesn’t have to carry money across town and risk being robbed. Taking his brother’s ad-vice, Jean Yves deposits cash at the cybercafé and withdraws it via his phone when he arrives at his final destination.

One hour away in the busy port town of Saint Marc, Carmen receives a text message saying that Mercy Corps has deposited US$40 of food aid into her T-Cash account. She picks up her bag and heads off to her local merchant to purchase rice and beans using her phone.

The USAID’s Fostering Agriculture Competitiveness Employing Information Communication Technologies (FACET) project which helps USAID missions and their implementing partners in sub-Saharan Africa to use information and communications technology (ICT) more successfully — via sustainable and scalable approaches — to improve the impact of their agriculture related development projects including Feed the Future projects, shares its experience with the use of mobile money in agriculture in “Using Mobile Money, Mobile Banking to Enhance Agriculture in Africa”. Also with the setting up of the mFarmer Initiative Fund, there is the hope that more rural women will have access to mobile phones and be able to utilize mobile money services to improve their lives.

A recent report “Mobile Money Transfers & Remittances: Markets, Forecasts & Vendor Strategies 2011-2015” by Juniper Research predicts active users of mobile money services to double in the next two years, exceeding 200 million worldwide by 2013. The principle behind mobile services including mobile phones and mobile banking with the structural support from information communication technologies is something that has come to change lives in rural communities in particular. Mobile money services have come to stay. Different models, applications, and innovations will evolve over the years for simplicity, ease of use, less costly, and more compatible to a variety of mobile devices across the developing world.

October 14, 2011/by actualize

Agriculture, Mobile, Originally posted on the GBI Portal

Innovating in Afghanistan

The following post was written by Rajiv Shah and appeared in the USAID Impact Blog.

In 2002, fewer than 200,000 people in Afghanistan had access to telephones. Today, some 15 million Afghans use mobile phones and a full 85% of the population lives within the combined network coverage of the four major telcos. This technological leap connects Afghans to each other and to the economy in ways that were unimaginable just a few years ago. And the mobile phone now opens up a world of possibilities for finding solutions to some of the challenges that Afghans face every day. One important use that is quickly becoming a reality in Afghanistan is the creation of a nationwide mobile financial services sector – using mobile phones to transfer money safely and instantly, reducing the need for cash and giving millions of Afghans who may never see the inside of a bank the ability to use their handsets to conduct basic financial transactions. The possible applications for mobile money in Afghanistan are limited only by our imaginations.

USAID Administrator Dr. Rajiv Shah and Afghanistan’s Minister of Communications and Information Technology Amirzai Sangin test a mobile money application at the ceremony in Kabul. Photo Credit: Barat Ali Batoor/US Embassy

Today I had the honor of announcing three USAID innovation grants, totaling just over $2M, to develop applications in this field and begin to create a mobile banking system that could include all Afghans.

At the grant kick-off event, the Afghan Education Minister highlighted the urgent need for mobile payments in Afghanistan by telling us about his staff member who was killed just three weeks ago while transporting cash in a remote province in northern Afghanistan in order to pay a teacher. He expressed his frustration that thousands of his teachers, who are so critical to Afghanistan’s future, often wait months to get their salaries due to the difficulties of transporting cash in the country. I am delighted that USAID is able to help seed a partnership between the Afghan Education Ministry and the mobile operator MTN to begin paying teachers in ten provinces over the mobile platform, thus ensuring they get paid in time and in time, and more importantly, that no Ministry employee loses his life for a duffle bag of cash. And if successful, we expect much of the Afghan civil service to eventually benefit from a mobile payments system that will help the government develop its own capacity as our troops transition home.

The second grant links up telco Etisalat with the new Afghan electricity utility. To my mind, this partnership to design mobile phone-based billing and payment systems for electricity service represents the true art of development by using creative, commercially viable systems to help the Afghan utility collect real revenue. At the end of the day, delivering electricity to all Afghans will require a revenue model that will sustain operations, motivate more public and private investment, and expand Afghanistan’s energy grid so that fewer communities live in the dark. This novel concept applies to any kind of service. In Kenya, some rural communities are sustaining water systems thanks to a mobile phone-based payment system. The concept is simple: consumers use a phone-based app to pay for the water they need, enabling the maintenance required to actually keep the system up and running. Although mobile payments are a simple concept, the possibilities they offer are revolutionary for truly under-served communities.

The third grant funds a partnership between Afghanistan’s mobile money trailblazer, Roshan, and a micro finance consortium whose clients are predominantly women. The concept is to further extend the reach of credit into areas otherwise inaccessible or simply too costly to reach. Running loan extensions and repayments over mobile phones significantly reduces the need for loan officers and clients to travel. This cost savings can be passed on to the customers, making credit more affordable. In culturally conservative Afghanistan, our hope is that this innovation will better serve women who might otherwise not be able to participate in loan programs.

Finally, today we kicked off a contest USAID is co-sponsoring with the Afghan Mobile Money Operators Association to tap the minds of creative young Afghans. University students are being asked to submit ideas for mobile money applications they believe will make a difference in the life of Afghans. Designers of the eight most interesting proposals will receive cash awards and, more importantly, the mobile operators will implement and market the winning apps. We hope this contest will not only drive uptake among a key early adopter demographic, but will also unleash the creativity of young Afghans who have so readily adopted cell phone technology.

With 3G looming just over the horizon (the Afghan Government issued the first tender earlier this month), it is clear that Afghans will increasingly use mobile phones and other modern technologies to build a healthier, better educated and more prosperous society. The days of land-lines or coal-fired development are rapidly being replaced with these new innovations, and I am proud that USAID is able to help unleash Afghan innovation to lead the way.

PS – Check out this video on Afghanistan’s emerging mobile money sector.

August 24, 2011/by actualize

Agriculture, Mobile, Originally posted on the GBI Portal

Embrace mMoney, cautiously

Photo: Institute for Money, Technology, and Financial Inclusion

We all use money everyday. Cash, checks, credit, debit… mobile? Outside of the U.S. people are making payments on their mobile phones daily. What you wouldn’t guess is how ingenious they are at inventing new ways of using money. What do the innovative uses of money mean for banks, regulators, and nations? Does mobile money restructure the role of money in society altogether?

Bill Maurer, from University of California-Irvine’s Institute for Money, Technology, and Financial Inclusion, spoke at a USAID sponsored Microlinks event yesterday, July 25, 2011. I attended the event and was intrigued by Maurer’s anthropological approach to mobile money, a subject dominated by economists. Maurer emphasized the cultural complexities of money in all its forms, and then spoke especially about mobile money.

To summarize, Maurer first explained that money is perceived differently in different cultures of the world. In Nigeria, family members engage in money spraying, tossing money at brides during the wedding dance. In East Asia, mothers send their children on long trips with money inside of small hand sown pockets, believing that the money will protect them, and that they can use it to get settled once they arrive.

Photo: Institute for Money, Technology, and Financial Inclusion

The various uses of mobile money are equally diverse. For one, those who make mobile money transfers using SMS technology skip traditional banks altogether, as their telecommunication service providers act also as banks. Second, what about people who own multiple mobile phones or SIM cards in order to maintain different accounts? Some hide certain accounts from others; others separate the accounts for organization. Third, there are some cross-border money transfers. Often, if the service provider is the same, then the transfer may be made. Fourth, there is a possibility of mobile money remittances, as Ericsson launched two weeks ago? Still others trade their money from one currency to another to another, eventually “getting to the dollar,” and ensuring the value of their money. All of these actions change relationships between banks, individuals, government regulators, and telecommunication service providers.

Photo: Institute for Money, Technology, and Financial Inclusion

In a way, the elimination of banks from money transfers makes it appear that transfers should be a “public good,” freely and widely available. The policy implications for regulators, then, are immense. Who can take a cut of transaction costs? What rules should be in place about currency transfers? How are regulatory agencies from different nations going to communicate with each other? These questions, with a host of others, set the stage for mobile money’s impact on the global economy.

Though I was thoroughly engaged by Maurer’s presentation, I could not help but wonder what the policy implications were. When Maurer responded to one attendee request for a summary of the lessons learned about mobile money, he originally responded, “I have shied away from the lessons learned because I am open as to what they may be.” Thankfully, though, he followed up this response with three key regulatory innovations that he recommended for policymakers: proportionate due diligence, non-bank e-money issuance, and non-bank deposit taking.

USAID and other international organizations, then, should be careful in their rollout of mobile money projects. Though over 80% of the world has access to a mobile phone, the impacts of mobile money programs are far-reaching—they affect the financial, political, and social sectors, either for the better or the worse. If nothing else, the anthropological research by Maurer shows the complexities of mobile money. Before a list of best practices and lessons learned can be compiled, policymakers should tread carefully, but they should still step forward. As evidence and data is gathered through experiments, best practices can be ascertained. Once best practices are identified, then USAID and other aid organizations should scale mobile-based development projects.

July 27, 2011/by actualize

Connectivity, Originally posted on the GBI Portal

Administrator Shah Emphasizes the Role of Mobile Banking

At an OECD Meeting on May 27^th, 2011, Administrator Shah outlined three areas of reform for USAID, one of which was “leveraging the role of science and technology,” particularly through mobile phone banking systems. The announcement should not come as a surprise, given the growing movement among the leaders of the agency to support mobile phone programs.

Photo Credit: USAID

Shah’s announcement is coupled with his recent talk with MIT economist Esther Duflo at the USAID Development Forum on May 23^rd. During the question and answer session, Shah referred to the power of mobile banking, citing the financial security it provides to rural farmers.

In addition to voicing support for mobile banking, USAID has supported specific initiatives, coming to an agreement last year with the Gates Foundation to provide a $10 million incentive fund to companies in Haiti who provide mobile financial services. Speaking about the fund, Shah said, “Before the earthquake, fewer than 10 percent of Haitians had ever used a commercial bank. A mobile money system can restore and remake banking in Haiti and serve as an engine of inclusive growth.”

Eric Postel, assistant administrator at EGAT, has led USAID’s mobile money programs in Haiti, including one project that allows Haitians to purchase emergency relief food supplies via mobile money payments. Postel praises Haitian shop owners who accept mobile payments, which, he claims, are “broaden their client base” and lower their risk by not carrying cash payments to the bank.

Photo Credit: USAID

Other leaders in USAID have shown support for mobile banking as well. Maura O’Neill, Chief Innovation Officer at the USAID Development Innovation Ventures in the Office of the Administrator, recently co-hosted the Mobile Money Summit in Afghanistan. At the summit, the USAID Mobile Money Innovation Grant Fund was announced, which aims to create unique public-private partnerships to encourage mobile banking. Currently, “only 4% of Afghans have bank accounts,” and given the success of M-PESA in Kenya and similar services worldwide, mobile banking is a legitimate solution to this problem. O’Neill attended the summit with Senior Advisor to the Administrator Priya Jaisinghani, another notable expert in mobile banking.

USAID’s interest in mobile projects is not new. In 2008, USAID commissioned a report on the use of phones in citizen media. As well, numerous projects targeting women in development, have utilized mobile phones. Mobile banking, however, appears to be a high priority for USAID currently.

June 2, 2011/by actualize

Agriculture, Mobile, Originally posted on the GBI Portal

World Bank Publishes Framework to Protect Mobile Money

Last week the World Bank published a new book titled “Protecting Mobile Money Against Financial Crimes: Global Policy Challenges and Solutions” which serves as a practical guideline for relevant industries and governments to regulate mobile money transfers.

Banking services on mobile phones for both domestic and international transfers in developing regions has become a huge industry. Companies and project such as Global GCASH and SmartMoney in the Philippines América Móvil in Mexico; Wizzit in South Africa; Celpay in Zambia/Tanzania/DRC; and Safaricom’s infamous M-Pesa in Kenya, have emerged with viable banking solutions for the world’s poor. According to GSMA, over 1 billion customers have access to a mobile phone but no access to formal financial services and over 80% of mobile banking services are taking place in developing markets.

However, the demand for guidance and technical assistance in creating a legal framework to make these transfers secure is equally profound. Regulatory regimes consistent with the international anti-money laundering (AML) and combating the financing of terrorism (CFT) in new mobile money phone financial services have remained vague.

Written by Pierre-Laurent Chatain, Andrew Zerzan, Wameek Noor, Najah Dannaoui and Louis de Koker, the book’s provides sensible guidance for jurisdictions and internal systems to draft regulations and guidelines in order to comply with the AML/CFT standards with the mobile money transfers. The guidelines are flexible enough for their mobile money to continue to grow.

In particular the paper aims to :

Assesses the new AML/CFT regulations and practices and their relation to mobile money;
Cultivate guidelines for drafting AML/CFT regulations that cover mobile money, and:
Provides examples of best practices within the industry to include AML/CFT in their own business models

This is a great resource for anyone in the mobile banking industry, or government agencies, who want to include the standardized measures of AML and CFT in their business models, or in their regulations, for customer’s transfers.

May 20, 2011/by actualize

Agriculture, Mobile, Originally posted on the GBI Portal

Mobile Money in Afghanistan: m-Paisa

This report was released last week about the mobile money service M-Paisa in Afghanistan. It provides some intriguing insights on lending issues faced by Afghans and the mobile banking services rapidly emerging in their country.

The product branded M-Paisa in Afghanistan was initially piloted by local operator Rashon in collaboration with Vodafone, to provide microloan disbursement and repayments for MFIs as well as a person-to-person money transfers. According to the M-Paisa website they offer safe, reliable and fast access to a range of financial services including:

Person to person money transfer.
Disbursement and repayment of microfinance loans.
Airtime purchases.
Merchant payments.
Disbursement and receipt of salaries.

With low levels of fixed bank infrastructure and rising mobile penetration, it seemingly appears that the cheap and secure features prominent in mobile banking would lead to a rapid adoption of its services in Afghanistan.

However, Rashon soon found that they faced numerous consumer barriers central to the service’s overall adoption in Afghanistan. With a population of 30 million people, 36% of who live below the government defined poverty line and 74% of who are illiterate; Afghanistan is the poorest country in the world outside Africa.

Therefore, textual, mobile and financial illiteracy was one of the largest hurdles that the company had to overcome. Since consumers could not use SMS to transfer funds, Roshan developed an Interactive Voice Response (IVR) system in three languages, English, Dari and Pashto.

Other issues that the authors concluded was a general distrust of financial institutions that go against the well established Hawala agent network, and a commonly established distrust of non-tangible assets. There was also a common “chicken and the egg” problem of investing in a branchless banking agent network without an adequate amount of customers—and customers less willing to try out the service—without there being a strong agent network. The authors of the report stated:

But M-paisa is caught in the tricky position that faces all services requiring network dynamics—to succeed, they must educate and nurture both consumers and agents, neither of which has much incentive to jump in first without the other being around.

The authors of the report, Jan Chipcase and Panthea Lee, traveled to Afghanistan in August 2010 to four different cities to explore traditional money and emergent mobile money practices in Afghanistan. While in the field they conducted in depth interviews of three potential mobile customers and one M-Paisa agent, their main goal being to contribute to the knowledge base of the mobile money community.

They sought to build on research such as Portfolios of the Poor, which highlighted the strategies the poorest members of societies use to manage their limited resources, as well as the sector-galvanizing discussions led by the World Bank’s consultative Group for the poor and the GSMA’s Mobile Money for the Unbanked initiative.

Throughout the author’s studies, they concluded that with the growth in mobile penetration, the trust in service providers is also beginning to surface. Brand recognition and trust in Roshan and other service providers has been gradually expanding. Concurrent with the evolution of cell phones being a staple in Western society, the authors believe that M-Paisa have a great opportunity to transform Afghan society.

Just as mobile telephony isn’t as much about the phone as it is about the conversation, mobile banking is not about the money—it’s about what the money can enable.

May 20, 2011/by actualize

Agriculture, Economic Growth & Trade, Financial Markets, Mobile, Originally posted on the GBI Portal

World’s First Virtual Card on Mobile Phone Launched in Africa

Customers in Africa can leapfrog conventional payment methods and benefit from greater financial access in an open banking system

Earlier this month in Nairobi, airtel Africa, Standard Chartered Bank, and MasterCard Worldwide announced the launch of the world’s first virtual card, known as the airtel 1time Shopping card. The airtel 1time Shopping Card operates off a wallet residing on a mobile phone. This innovative payment method aims to serve the global unbanked population in Africa, where there are close to 400 million mobile phone users with an unbanked population of 230 million households.

airtel Africa, Standard Chartered Bank and MasterCard (not pictured) collaborate on the first virtual card on a mobile phone

Michael Miebach, Division President, Middle East and Africa, MasterCard Worldwide observed how that airtel 1time Shopping card will connect consumers to the global marketplace, “Whether located in urban or rural communities, people will be able to participate in commerce from their hometown to anywhere in the world,” he commented.

This is how the system will work: airtel Africa customers in Kenya will soon be able to use their mobile phone to make online purchases from MasterCard merchants around the world and through a simplified online transaction. Each time an airtel customer is shopping online he or she will be able to request a single use shopping card number. The airtel money services then will generate a special 16 digit number that enables the completion of the transaction and when the transaction is completed, a confirmation message will be sent to the consumer’s handset.

Utilizing the mobile technology platform, airtel’s vast consumer penetration, combined with the financial and regulatory framework provided by Standard Chartered Bank, and global acceptance of MasterCard, consumers will be able to transact in a reliable, convenient and secure environment.

Airtel CEO Manoj Kohli

Speaking about the Groundbreaking innovation, Manoj Kohli, airtel’s CEO and Joint Managing Director, stated:

The airtel 1time Shopping Card…will deliver innovative and relevant mobile solutions that will help consumers overcome the daily challenges in their lives. The solution will offer consumers a robust e-commerce solution that delivers security, accessibility, acceptance, ability and a global reach

This single-use shopping card will soon be available in Kenya and rolled out to markets across Africa, subject to regulatory approvals.

February 15, 2011/by actualize

Humanitarian Assistance, Originally posted on the GBI Portal

World Food Program: Help Arrives By Text In The Philippines

The Philippines is one of the most phone-savvy countries in the world, but it’s also prone to violent storms and conflict, which force people from their homes and threaten them with hunger.

In emergencies like these, WFP often helps by setting up “Cash for Work” projects that help uprooted communities get back on their feet. With the cash people earn as they work on rebuilding homes and communities, they can buy the food they need.
Now, in the texting capital of the world, WFP is testing mobile phones as a way of distributing the cash.

“It’s like a digital wallet—almost like a bank account,” said WFP Country Director Stephen Anderson, who explained that giving participants cash in the place of food rations allows them to buy a wider variety of food in a way that favours the local economy.“

Our survey shows that they are spending up to 70–80 per cent of the cash on food,” he added. “We think that’s a good thing.”

January 24, 2011/by actualize