Olga Morawczynski

CGAP, Grameen Foundation and MTN Uganda are introducing Grameen Foundation’s AppLab Money Incubator, a new initiative that develops mobile financial products for the poor. In this blog post, Project Manager Olga Morawczynski and Operations and Strategy Manager Lisa Kienzle introduce AppLab Money and explain how customer insights will be transformed into viable products offered by MTN Uganda. This is the final post in a series about product innovation in branchless banking.

Courtesy of AppLab

If we want to move the mobile financial services sector beyond payments and create products that reach every level of society, we have to be creative. The industry requires product innovation that focuses on customer desires, use patterns, and needs, and then translates these findings into viable products. In Uganda, Grameen Foundation’s AppLab is partnering with MTN and CGAP to do this by launching a product incubator: AppLab Money.

At AppLab Money, we will dedicate 100% of our time and resources to researching, prototyping and testing innovative products in line with AppLab’s approach to sustainable product development. Our agreement with MTN Uganda enables us to sit in MTN’s office, test on its network, analyze the company’s data and swap ideas with its staff. If we find that there is demand for a product that is commercially viable for MTN, we will work to scale it in Uganda.

The key to innovation is a strong research process, and AppLab Money uses several complementary research methods to understand the financial lives of the poor. Data mining and surveys help us make generalizations about the needs and habits of potential customers. Financial diaries and ethnographic methods allow us to determine why such habits exist. What follows is one example of an interesting insight that emerged on a recent field visit that could be translated into a product that poor customers could find exciting: on our trip, we noticed that everyone loves gambling.

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This post is based on a workshop led by Jan Chipchase of Nokia and me at the recent MMT conference in Dubai.

“Ecosystem” seems to be a big buzzword in the mobile money space. Many mobile network operators (MNOs) are extending their focus beyond what they consider to be the  killer applications – storing and transferring money and cultivating strategies to offer financial services at scale.

The cornerstones of a viable network are trust and ubiquity, but this is no easy task. MNOs not only need to find the appropriate partners, they also need to make the ecosystem relevant to the daily lives of their users. This can be done by capturing the various financial practices that constitute daily life, and by monitoring so-called unintended uses. One of the clearest examples of this – the use of M-PESA for the safe-storage of money suggests a latent demand for particular types of services, such as savings. By capturing and integrating these practices, MNOs increase the likelihood that their ecosystem will sustainable.

There are other ways to ensure sustainability. That is, through education initiatives targeting financial literacy. In the context of the mobile ecosystems this term has several meanings. At a more basic level, it could mean providing users with information regarding the various features of the application and could also mean explaining how these features can be navigated. Such initiatives are beneficial because they take some of the burden for education away from the retail agents handling cash-in and cash-out transactions. But financial education can be taken beyond lessons of simple usability, and involve those of better money management. These projects could teach the poor how to initiate savings plans, make strategic investment decisions, or seek out credit from formal financial institutions. If done properly, they could raise financial awareness and, in some cases, have positive implications for the livelihoods of poor users.

Achieving a sufficient level of financial literacy is not an easy task – what to teach, and how to teach it, takes both time and money and whilst the onus of providing (consumer) education leans towards the service provider the boundaries of this responsibility are not clear. As such MNOs may not always be interested in such an investment, especially at earlier stages of ecosystem development. However our position is, that by raising the level of financial and service literacy such initiatives will have substantial benefits for the MNO in the long run: on a personal level people are more willing to invest time and effort in using a wide range of services because there is a clear benefit; and within the broader society – that people are aware of the kinds of services that are available to them. Remember that banking is often seen as something that is ‘for others’ rather than for themselves.

An increase in service use will not without its consequences – the integration of financial practices into the ecosystem makes them both more visible and more traceable, especially in countries where the majority of economic activity is currently informal. For governments, this provides new opportunities for the exploitation of financial information – ranging from  the monitoring and prosecution of criminals to the stricter enforcement of taxation. As such it raises some interesting questions regarding the content of financial education projects. In particular, to what extent should the providers of such projects make clear these potential risks clear, especially given that they may not themselves have a clear idea of how their services will evolve? The actual and perceived mishandling of this issue threatens to marginalize the use of mobile money services, and as such all players in the ecosystem need to clearly communicate where they stand.

-Jan Chipchase and Olga Morawczynski

A recent CGAP brief on M-PESA, which I co-authored with Mark Pickens, revealed an interesting finding on savings. Nearly one in three of the informants in Kibera (an informal settlement in Nairobi) kept a balance in their M-PESA accounts. A survey conducted in 3,000 homes in Kenya by FSD found this number to be even higher. A majority of users stored money with M-PESA. Some used the stored value for daily consumption. Others made frequent deposits of “small money” to accumulate a larger amount.

The fact that M-PESA is being used for savings illustrates the latent demand for appropriate savings products in Kenya. By appropriate, I mean accessible, affordable and safe. M-PESA scores very well on two of the three. In regards to accessibility, there are about 11 times more M-PESA agents than there are bank branches in Kenya. With no monthly or maintenance fees, and free deposits, M-PESA is much more affordable than most other savings services. However, it was not designed to be, nor is it regulated as, a savings mechanism. As a result, there are risks involved with this type of savings; liquidity being the most pertinent. If the network goes down, or the agent is out of float, customers cannot access their cash. Despite these inconveniences, many continue to use M-PESA to store their “small money”. My informants explained that the benefits outweigh the costs. Some also made clear that M-PESA was actually safer than the banks. Given the history of bank crashes in the country, this is no surprise.

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Olga Morawczynski is a doctoral candidate at the University of Edinburgh and has spent more than a year investigating customer adoption and usage in both urban and rural Kenya.  She is the author of a forthcoming CGAP brief on M-PESA and recently co-authored Designing Mobile Money Services:  Lessons from M-PESA with Ignacio Mas.

The story of M-PESA that most of us know usually goes as follows.  The two big players, Vodafone and Safaricom, got together to develop and launch M-PESA. They spent months testing, adjusting, and re-testing the system before it went live. The result—an immensely popular service offering that has radically changed both the financial and telecommunications sectors in developing countries and spawned a lucrative industry for mobile money.  This is not exactly how the story went, at least not in the early days. Vodafone, led by a powerful duo of Nick Hughes and Susie Lonie, was heavily involved from the beginning. While Nick was selling the service idea to the executive staff at Vodafone, Susie was getting her hands dirty, so to speak, and leading the pilot in Kenya.

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photo courtesy of Olga Morawczynski

Last month, I described an observation on usage that came from my ethnographic fieldwork. I noted that money flows reversed during the post-election violence in Kenya. That is, urban migrants were receiving money and airtime from their rural relatives. M-PESA has also generated a variety of impacts to the daily lives of its users. One of the most significant will be described in this week’s blog. That is, changing remittance patterns.

Users began to make transfers “in bits”, remitting smaller amounts of money more frequently.
A significant change to remittance patterns was noted during the fieldwork, especially during the latter stages. Money was being remitted “in bits”. That is, smaller amounts of money were being sent with greater frequency. A shoe maker in Kibera explained:

“Before M-PESA, I used Posta [post office] and would transfer money at month-end. Now I send the money in bits. I send every week. Sometimes I send twice in a week. It is cheaper for me to send with M-PESA…so I can send more times.” Read the rest of this page »

Olga Morawczynski is a doctoral candidate at the University of Edinburgh and has spent more than a year investigating customer adoption and usage in both urban and rural Kenya. Today she begins a series of occasional blog posts based on that work.

During the coming weeks, I will post a series of blogs. These will describe observations made during my fourteen month ethnographic fieldwork. Such fieldwork focused on understanding the adoption, usage and impact of M-PESA in two low-income communities. It began in an informal settlement on the outskirts of Nairobi called Kibera. The money trail was thereafter followed to a small village in Western Kenya called Bukura.  This blog will reveal the first observation, which is on usage. Read the rest of this page »

Olga Morawczynski is a doctoral candidate at the University of Edinburgh and a co-author with Mark Pickens of a forthcoming CGAP Focus Note on M-PESA. She has spent more than a year investigating customer adoption and usage in both urban and rural Kenya. Olga spoke at the Mobile Money Forum at the GSM World Congress in Barcelona earlier today.

Martin is a shoe-maker in Kibera, an informal settlement outside central Nairobi. He has set up a small stall along Kibera drive, the main entry point into the informal settlement. From this stall, he sells and repairs shoes to earn his “daily bread”. Martin lives alone in Kibera. His two wives and eight children live in his rural home, which is located in Western Kenya.  Martin explains that a large segment of his earnings is sent “back home” to his family. He continues that he usually transfers money on a weekly, or bi-weekly, basis.  He then holds up his mobile phone and explains that he always uses M-PESA to make such transfers.

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