Recently I had the opportunity to talk with Lazarus Muchenje. Based in South Africa, Muchenje is the CEO of Celpay Holdings (Pty) Ltd., which operates mobile phone banking in the Democratic Republic of Congo and Zambia. He says working within existing regulations - which often do not take into account the technology - is Celpay’s toughest challenge.

Tell me about Celpay. We really operate in two markets, Democratic Republic of Congo and Zambia. If I was to compare the two then Zambia is a little less challenging, the stage of development today vis-a-vis the Congo. Zambia has been a democratic country for a long time, while DRC has just had its first democratic elections last year.

Regulations are not clear-cut? In DRC we don’t have clearly defined legislation governing e-commerce yet. This is quite normal in a post-conflict country, however, if tomorrow a new law to regulate e-transactions, that does not support our current business model is promulgated this may jeopardise our investment. The Central bank of Congo has assured Celpay that they are working on the necessary regulatory framework. In Zambia, the National Payments Systems Act has just been promulgated last month. It is very broad in its current format but it is an excellent starting point in defining how e-commerce is regulated. Generally I would say the regulatory environment is extremely challenging, from undefined to starting to define how to manage e-transactions, e-commerce.

Is that cause for concern among customers? Customers have confidence in the Celpay brand and in the partner banks, therefore they trust that between these parties they would be able to manage any regulatory risk.

I believe that customers also do not see the regulatory risk as affecting them as they know that central banks are there to protect them, so while new laws may adversely affect Celpay’s profitability or existence, the customers believe that the central bank will look after the customer’s deposits and interests.

Is mobile banking the great solution to increasing access to finance? The biggest thing is that mbanking is not the panacea for every market. It’s not going to work in every market. Certainly not in developed countries where people have numerous alternatives.

What about in countries where banking is already established? I don’t see it working in places where there is some kind of infrastructure and there’s a good banking infrastructure or system, probably it will not take off as well as where there is no infrastructure.

If we invested the same amount of money in mbanking in the DRC as we did in South Africa, our take-up in DRC would be more than it is in South Africa. That’s simply because in the Congo we are providing a tool that is not just a luxury but the only way to access banking services for many people.

So you think there’s a misconception about the potential reach of mbanking?
There’s a big misconception, that it must take off in Britain, in New York City, in Johannesburg, Mumbai… maybe not. Maybe we see it only in urban areas of poor countries and maybe in poor areas of these other big countries.

What about rural areas? The biggest challenge to rolling out to rural areas is that the commercial imperatives are against that. The question is, if you have a dollar, where are you going to put it? Do you choose to invest that dollar where you have to spend a lot of money on marketing, infrastructure and education? No you don’t, you spend it where it is easier to get clients and currently that is in the urban areas.

Technology can bring these services to rural areas? Technology enables that, we are doing that, lots of people are doing that, but the push is not there as this is not commercially viable in many cases and the move of the models has achieved critical mass yet to enable cross-subsidisation.

What do you mean by “push”? We are not a government, we are not a development agency, so it is going to be a year or two before we exhaust current opportunities and start to look at going into more rural areas.

If you look at our business model we are highly successful between corporate- and micro- enterprises, so you get a Coca-Cola distributor in Zambia and DRC and they receive 20-30 % of their payments, through mobile facilities by Celpay. This business opportunity has scale and is viable.

Now, up until the stage where we have exhausted that, probably we are not going to spend the money to go to villages and get people to sign up.

In villages, if there is an SME linked to Celtel, Coca-Cola or Heineken, we will link to him as well. So we are currently in villages where the large corporates have a footprint only.

So it’s not person-to-person yet? Person-to-person take-up with mbanking will happen gradually on a commercial basis. We’ve been relatively successful, on the back of business-to-business (b2b) because businesses see the need to adopt this technology to satisfy certain needs that they have, especially not handle physical cash.

The real challenge is the next step, to bring individuals to the system, only then do we become successful. So our business in Zambia has broken even but will never really be commercial until we can bring the masses on board, then we get volumes.

This is a volumes game. Yes, absolutely.

Assess the level of financial literacy your customers have. It’s a big challenge. We try to overcome that by having an intuitive menu on the phones. However on the issue of financial literacy, the answer is that there are very low levels of literacy however most people are numerate, therefore they can deal with numbers.

What about people who can’t read? What I have found and been shocked by is that there are individuals who use our service who can’t read but, for example, someone might know that in menu 1 he presses this to do that, and on menu 2 he presses that to do this. And if he hits a problem he calls the call center.

Ninety-nine percent of the time he goes through life and we think he can read but he can’t. He does the same action every day to purchase something via the cell.

That means intuitive interface is important. The issue of literacy we address with intuitive menus, so that one does not have to enter a lot of information on the telephone in order to transact.

What has surprised you the most in this business? Probably the inability of some certain stakeholders and customers, to see how much more they can do if they embrace this technology.

Are people attached to cash? I don’t know. If I were to guess I would think maybe there is some attachment to cash. Certain people do get some feeling of comfort and perceived wealth if they are in possession of cash.

Why do you do this work? I believe we are making a big difference in these countries. We are making a massive difference in terms of the rehabilitation and reconstruction of the financial services sector in the DRC. Even if we are mainly in the SME and corporate space, those SME’s would otherwise never have got an account because the banking rules don’t help small business. And even if they did meet the criteria of the banks they wouldn’t afford to pay the monthly fees.

In both countries we are playing a big role with individuals and small businesses that would otherwise not be in the formal financial system.

So I would say, “How can we bring on board other people?”

And how do you do that? Maybe it’s money transfers, we could play in that space, a lot of that is happening but it is being done in a way that a person doesn’t need an account and therefore the current systems will never allow them to participate in a more meaningful role in the mainstream economy. With Celpay these transactions would be linked to the customer’s account and would therefore help the client in establishing a financial profile which could be used to access credit from large banks.

Your mission goes beyond seeking profit? Do we have a mission bigger than profit? Yes. We want to play a fundamental developmental role in the development of the countries that we’re operating in. And of course make some money while we’re doing it.