Archive for: Africa

“Cash is easy.” “Cash is what I know most.” “There are no charges when I use cash.”

Ghana Market Seller (Photo Taken by Adam Jones)

I was sitting in a little room in the outskirts of Accra listening to a group of tomato sellers talk about the financial tools they use to manage their finances. As a part of CGAP’s work in Ghana, we have commissioned Bankable Frontiers Associates (working with Easy Errands, a Ghanaian market research firm) to conduct a market research study on the financial needs of low-income customers in Ghana. One of the first steps was to conduct focus groups throughout the country and listen to diverse groups of Ghanaians, including farmers, taxi drivers, traders and students, talk about their strategies for moving and storing money. They discussed bank transfers and drivers and the use of family and friends but more than anything, they talked about cash.

The trite expression ‘Cash is King’ is over-used in our line of work, but as I sat in that little room listening to these people whom mobile money services have spent millions of dollars trying to woo, I realized yet again that the biggest competition we face in scaling branchless banking is not a rival MNO or bank or even the expensive money transfer operators – it’s cash. (Read some recent posts on our blog about this topic here and here.)

Cash is far and away the preferred method for storing and sending money in Ghana, no matter how inconvenient. One tomato seller, Charity, wraps her cash in no less than six black plastic bags and hides it in the back of her refrigerator, underneath her tomatoes and meats, so that the rest of her family does not suspect it is there.  A timber seller, Emmanuel, told us he keeps his cash under the carpet in his living room. When asked whether the cash does not form a noticeable bulk, he replied with a big grin, ‘That’s why I spread it all around so that people walk all over my cash but have no idea it is beneath their feet!’

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This is the third post in our series on interoperability and related issues in branchless banking and mobile money. Read the first post that presented the overall framework for the discussion and the second post that looked at the interconnection of mobile money platforms. Today, we discuss interoperability at the agent level as it relates to agent exclusivity. We include agent exclusivity in the topic of interoperability because it raises many of the same issues as platform interoperability.

Agent exclusivity revolves around the ability of a customer of one provider to use the agent of another provider for cash-in and cash-out services related to that customer’s account. Non-exclusive agents can expand financial access by providing more access points to a greater  number of customers, while limiting the rise of a dominant actor which could ultimately reduce competition. But as with platform interoperability, regulators are cognizant that prohibiting exclusive agents could deter private actors from entering the market. What service provider would invest in identifying, training, and equipping agents if competitors can piggyback off their investment?

To be clear, when we speak of agent exclusivity, we are only referring to the cash-in and cash-out services performed by agents – not other services (where permitted) such as customer enrollment, related KYC, and processing of loan documents. Agents providing only cash-in and cash-out services are often called “cash merchants”. We distinguish the cash merchant services from other services because cash merchant functions arguably present less risk to the financial service provider since agents typically transact against their own accounts. Think human ATMs.

We identify at least four different ways to share cash merchants:

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Over the past week, the world has been commemorating the 2nd anniversary of the Haiti earthquake. Today and tomorrow we will have two guest blog posts on the mobile money sector that has emerged over the last two years in Haiti. Today’s post is written by two colleagues at USAID. 

Charley Johnson is a Presidential Management Fellow at USAID. Priya Jaisinghani is a Senior Advisor to the Administrator and Director of the Mobile Solutions team.  Prior to her work at USAID, Priya helped launch the Gates Foundation’s work in financial services from 2005-2009.  

Two years after the earthquake, Haiti is rebuilding not just brick by brick, but click by click.

The earthquake left behind a government in rubble, an economy in shambles, and a people living in makeshift camps, coping with enormous loss. Against this backdrop, the possibility of progress lives not just in the resilient spirit of the Haitian people, but also in the simple power of their mobile phones.

In June 2010, USAID and the Bill & Melinda Gates Foundation launched the Haiti Mobile Money Initiative (HMMI). This program leveraged the private sector and the ubiquity of mobile phones to bring financial services to Haitians, 90% of whom didn’t have access to a bank account before the earthquake destroyed nearly one-third of the country’s bank branches, ATMs, and money transfer stations. Put simply, mobile money gives Haitians access to banking without building a single bank.

It worked.  In January 2011, one year after the earthquake, HMMI awarded Digicel and its partner bank, Scotiabank, a “First to Market” Award of $2.5 million for “Tcho Tcho Mobile.” Five months ago, HMMI awarded mobile operator Voila and their bank partner, Unibank, $1.5 million for “T-Cash.” While verification is still underway, data reported by the industry indicate that there are nearly 800,000 registered users.  Moreover, there are over 800 agent locations now available to serve clients. In a country where there are fewer than two bank branches per 100,000 people, this represents a near doubling of accessible financial services.

These numbers are significant, but what do they mean for the people of Haiti? Why should we care about the growth of mobile money in Haiti and the rest of the developing world?

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Our discussions on branchless banking on this blog do not often touch on the role of microfinance institutions (MFIs). The main actors in this space seem to be mobile network operators, commercial banks, larger microfinance banks and technology companies. We have done a bit of thinking on microfinance and mobile banking, notably in this Focus Note and at this Virtual Conference.

In our last post of the year, we bring the discussion squarely back to the role technology can play for MFIs. Our guest author is Leo Tobias, Grameen Foundation’s Technology Program Manager of the Solutions for the Poorest Microsavings Initiative. 

Cashpor Officer processing loan payments on mobile

Grameen Foundation’s Microsavings Initiative is a three-year project funded by the Bill & Melinda Gates Foundation. It was launched in November 2009 with a goal of reaching 1.45 million new savers across 3 MFIs in the Philippines, India and Ethiopia.

Offering voluntary savings is demanding. Financial institutions compete with the alternatives that exist to formal savings accounts (home, relatives, neighbors, etc.). A common theme in our savings market research is the customer’s desire to have easy and convenient access to their funds. To deliver on those desires, our MFI partners face common technology challenges.

Here are two major challenges:

1. Front End Technologies 

To meet customer demands, financial institutions must develop delivery channels that offer accessibility and close proximity to the end client.

Selecting the right technology is an important first step. The 3 MFIs are at various stages of investigating or implementing mobile technology. In India, CASHPOR (CASHPOR Micro Credit) incorporated mobile in both their credit and savings processes. In the Philippines, CARD Bank (Center for Agricultural and Rural Development) implemented an SMS system for an on-demand savings deposit pickup service. The use of mobile phones is clearly a powerful venue for bringing the transaction closer to customers. However, it is not the only technology to be considered.

In Ethiopia, ACSI (Amhara Credit and Saving Institution) is planning to use cards (most likely smart cards) and POS devices as their first front end technology implementation. With only approximately 14% mobile penetration in the country, all indicators point to the fact that the majority of the rural poor will not have access to mobile phones in the next couple of years. In the Philippines, the majority of microfinance customers are in provinces classified as “urban” or “semi-urban”. In many of these areas, ATM machines are accessible. CARD Bank chose to provide access to the national and international network of ATMs as a feature of its voluntary savings product in addition to the use of mobile phones.

Integrating all the sophisticated technology requires the help of external providers who can bring a wide array of specialized expertise to the organization.  However, managing relationships with outside technical providers can be new and difficult since most of the technical needs of MFIs had previously been met by in-house expertise.

The MFIs are ultimately responsible for the relationship with their customers.  The MFIs therefore have to provide the training and support needed to make sure members are comfortable with and trust the technology. A component of our holistic program has been to recognize this need and to develop educational programs to introduce not only the savings products but the technology associated with them.

2. Core Infrastructure Upgrades

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Everyone is always talking about trying to move the branchless banking industry beyond just payments. Those of us concerned with accelerating “real financial inclusion” long to see credit, savings and insurance products pushed over new delivery channels. But is it possible that there’s still work to be done within the payments space itself, just diversifying a bit beyond simple P2P transfers?

For example, I’ve been hearing a lot of talk recently about really trying to crack the nut on merchant payments. Branchless banking providers see this as a huge opportunity not only for increased transactions (and therefore revenue), but also as a way to solve some of the tricky problems around liquidity management at agent locations when more people use electronic value for direct purchases instead of just cashing in and out. But how do small merchants respond to the possibility of being brought into the formal economy through using a traceable payments service? Will merchants and customers be willing to pay a fee to transact electronically instead of in cash? These are just a couple of the open questions that still need to be answered.

I ran across the organization Venture Capital for Africa (VC4A) at a recent conference in Ethiopia. One of their recently profiled ventures is addressing some of these questions around moving past person-to-person transfers to merchant payments and other business transactions. The start-up Yo! Payments in Uganda is trying to connect the ecosystem and facilitate mobile money as a real “medium of exchange.” Read about some other pretty cool startups in the African mobile market here.

What about even fancier transactions than just merchant payments, like investments? At a recent African bonds market workshop in Nairobi, discussions involved the possibility of allowing mobile phone users to buy Treasury bonds through mobile money transfers. I wouldn’t bank your investments on this yet though, as the article was clear that “details are yet to be worked out” and this seems to be the sort of transaction where the devil is indeed in the details.

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This is the second in a five-part series on product innovation in branchless banking. In the first we described how developing products beyond payments is one part of driving scale for providers, and ultimately boosting financial inclusion.

Henry Ford famously said, “If I’d asked people what they wanted, they would have said faster horses.”

There’s two ways to understand what he meant. One is customers don’t know what they want, so why bother asking. But for every Henry Ford or Steve Jobs (Who said “It’s not the customer’s job to know what they want.”) there are 1000 businesspeople who thought they knew the next brilliant product and are now staring at a cash flow statement soaked in red. Genius is in short supply.

The rest of us mere mortals must subscribe to a second interpretation: customers often can’t or won’t tell you what they want, so you must work to dig down to what they really need. To understand this requires knowledge about not only their current use of substitute products, but also their broader life context: their household situation, their aspirations, and their worries.

A prime example of this need for deeper customer understanding is the vastly different levels of success which very similar mobile money products have encountered across markets. M-PESA Kenya’s success has spurred providers across the globe to launch services with similar functionality: a liquid wallet with an emphasis on P2P transfers (“send money home”) and bill pay functionality. As we highlighted in the first post in this series, the “send money home” proposition has not yielded as much success outside Kenya where just 1 in 15 services launched since 2007 have accumulated more than 250,000 active users. This can be explained by differences between markets that have profound effects on how consumers perceive the value of otherwise similar services.

A truly valuable service would meet two criteria: they must fill both a deeply felt and a poorly met need (see figure): Read the rest of this page »

Tanzania is one of the fastest growing mobile money markets in the world. Today mobile telephone penetration is 49% according to Wireless Intelligence as of Q3 2011. There are four active mobile money businesses, the largest of which is Vodacom’s M-PESA which has over 2 million active users.

A visit to community-based women’s savings groups in Arusha provided an opportunity to find out how people are using financial services. Savings groups are expanding rapidly in Tanzania as well as other countries in Africa. Group members save weekly, take loans as needed, and distribute profits and return share capital at the end of a year (what the experts call “time bound distributing accumulating savings and credit associations”). The groups we met had accumulated $6,000-7,000 in capital and were capable of approving loans to members that went from $100 to as high as $1,000, usually requiring repayment in three months. They had been together for almost two years and clearly knew their business well.

Twenty five percent of the more than 50 women we met with have bank accounts, and groups keep some of their accumulated capital in banks. The women live on the edge of a major city and some have salaried jobs in addition to their side businesses. Salaries might be paid into a bank account and a few individuals have personal bank accounts to accumulate larger amounts of savings than what they keep in the savings group. But what is interesting is that they do not use these bank accounts to transact any of their day-to-day business nor do they try to get loans from banks, for all the well known reasons.

The surprise came when we found out that all but one of these fifty women owns her own mobile handset and SIM connection. What was even more interesting was that two thirds have a mobile money account and many of the rest of the women want to get one. Given the fact that they are members of good, active savings groups, have access to banks if they so desire, and can even get services from MFIs if they so choose (none have so far), what exactly do they use their mobile money account for? It turns out that they use these accounts to send money to children studying or living in other towns, receive money from relatives living far away (to help them make their group payments amongst other things), load airtime for themselves and other family members, and in some cases receive payments from customers who make telephone orders for goods or services. These women took to using mobile money on their own and see it as a natural, useful addition to the value they derive from their savings groups.

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One of many Brazilian agents that move people outside of bank branches

I’m blogging from Dakar, Senegal where I had a stark reminder of why innovation in financial services is so necessary. A colleague of mine had a check to cash, so after one of our meetings we made our way to a “to-remain-unnamed” bank in the city center. Good thing I decided not to wait in the car because this relatively simple transaction took well over an hour to complete. First we had to wait about 30 minutes for our number to be called behind all the people waiting ahead of us. But once he was at the teller, it still took my colleague about 45 minutes to finally walk away with his cash.

My intention is by no means to bash banks…the computer system seemed to be running slowly and the check was for a couple thousand dollars, so he was sent to another desk for some sort of extra authorization. But it was a good, and admittedly frustrating, reminder of the potential of branchless banking, technology and innovative business models to transform the way people, especially the unbanked, access financial services…outside of bank branches.

This experience aside, the Senegalese market is full of exciting initiatives and inspiring energy from banks, MFIs, mobile network operators, technology companies, various government institutions and the central bank. In perusing my Google feed of news on branchless and mobile banking, there are plenty of things around the world to get excited about. Here are just a few that caught my eye:

One of the banks that has a regional presence in the West African Economic and Monetary Union (WAEMU – of which Senegal is a part) is Morroccan-based Attijariwafa Bank. Wafacash, a specialized subsidiary of Attijariwafa and leader in international money transfers, announced the launch of a new mobile money transfer corridor in partnership with Belgacom subsidiary BICS between Belgium and Morocco.

A new study reports on the first randomized evaluation of a cash transfer program delivered via the mobile phone – Zain’s Zap service in Niger (now Airtel’s Airtel Money). The report highlights several benefits of this new delivery mechanism and we’ll be profiling this experience in more depth on our blog in the coming weeks.

Also related to cash transfers, a new report by UNCDF examines Fiji’s experience in leveraging government-to-person (G2P) payments as a mechanism to enhance financial inclusion and provide savings to government and social welfare recipients via a savings-linked electronic payment system.

In Bangladesh, the Bangladesh Bank has just published new guidelines on mobile financial services and the Financial Express reports that nearly a dozen banks are preparing to introduce such services, in addition to those services that are already in the market.

In Pakistan, the largest mobile network operator Mobilink, a subsidiary of Orascom Telecom, was recently granted a license by the State Bank of Pakistan to initiate microfinance activities, seen as their foray into branchless banking.

But I admit that what excited me the most when I looked through my Google feed was the fact that I read more than 20 headlines before finding a story that mentioned M-PESA. The rest of the world is catching up!

- Sarah Rotman

Summer is now officially over here in Washington and the busy fall season is off to a quick start. If you are just getting back into high gear, maybe this is a good time for us to recap some of the things we’ve been discussing on the blog over the last couple months, some of the latest news that’s caught our attention, and some things to keep your eye on in the coming weeks.

The South African bank FNB has recently launched its latest mobile banking offering Pay2Cell which allows FNB account holders to make payments to other FNB clients using only the recipient’s mobile phone number. This is a different product offering from FNB’s eWallet which allows FNB account holders to send money to anybody with a mobile phone. The recipient does not need a bank account and can withdraw the cash at any FNB ATM.

South Africa is one of the 7 markets that we covered in our recently released branchless banking country notes. The other countries include India, Pakistan, Mexico, Brazil, Ghana, and WAEMU in West Africa. The report for WAEMU is now also available in French – la version en français UEMOA.

An active branchless banking provider in West Africa, Orange has recently launched the Orange African Social Venture Prize. This initiative aims to reward innovative projects using ICT for social and economic development in Africa. In this contest, 3 winners will be selected and will receive financial grants along with 6-months of mentoring support from management and ICT experts. The project should target at least one country where Orange has a footprint and the prizes will be announced during the AfricaCom Awards in Cape Town in November. The deadline for applications is the end of September. Read more about it here.

Staying in West Africa, Nigeria continues to buzz with branchless banking activity. The Central Bank of Nigeria recently issued operating licenses to 11 mobile money firms. As this article explains:

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A mobile money user in Afghanistan

As everyone who reads this blog knows, there’s been a great deal of excitement over the last few years regarding the potential for mobile money to solve a host of development problems. And as we’ve all learned over that same period of time, it’s not as easy as it looks, or at least as easy as Kenya made it look. Countries like Afghanistan, Iraq, Haiti, the Democratic Republic of the Congo, even the newly minted South Sudan are all experimenting with or thinking about mobile money implementations. In addition to the normal issues and challenges facing policymakers and service providers, post-conflict and post-disaster countries face additional problems that merely serve to exacerbate the overall challenges with mobile money.

1. Skilled resources are scarce commodities in a post-conflict region. Finding experienced staff that can implement and/or regulate mobile money services is hard enough in most places, but finding those people and convincing them to go live and work in high-risk locations is proving almost impossible for service providers, governments and donors alike. Recruitment and hiring can take many months, and even when good people are found, at high cost, many leave early, deeming the stress, danger and distance from family not worth the price. What usually results is a procession of short-term consultants (like me) coming in to dispense advice but not sticking around to help get it implemented, meaning things take twice as long to do and often achieve half as much.
2. Introducing innovative mobile financial services in a country that is struggling to form a stable government can embroil a new market in larger coordination problems, especially when private enterprise and government services are both involved. Mobile money is a new area of regulation and may require coordination between different parts of government, which can be hard in markets where governments are newly formed or struggling to manage disaster recovery. In the absence of clear direction, you could end up with situations where regulators act hastily and unilaterally, which may lead to turf battles with other ministries. For example, in a couple of markets, the telecommunications ministry has demanded – and charged a fee for – a “letter of no objection” for a mobile operator to offer mobile money services. In others, the regulator will ask for a specific identification document for account opening when another part of the government is still struggling to even implement such identification. Haiti is a good example of this where many people either never had particular identification documents or they lost them in last year’s earthquake. Read the rest of this page »