Archive for: Tanzania

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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This blog post is co-authored by Sarah Rotman from CGAP and Mireya Almazan from the Bill & Melinda Gates Foundation.

Various mobile payment services are now available in Tanzania

About a year ago, Sarah blogged on the mobile money landscape in Tanzania, comparing many features of the three mobile money services. In particular, she looked at Vodacom’s M-PESA, Zain’s Zap and Zantel’s Z-PESA.  Many other people were analyzing the same market around this time, including Amrik Heyer and Daniel Laiser cited here, as well as Gunnar Camner, Emil Sjoblom and Caroline Pulver in this GSMA Case Study.

Mireya has been spending time in Tanzania getting a close-up view on this interesting market. In particular, she’s been there for the recent launch of the newest mobile money service in Tanzania, TigoPesa, which is the latest reminder of the massive potential in this country to expand financial services to the poor.

TigoPesa, created by Tanzania’s fastest-growing mobile network operator, Tigo, is the fourth mobile money service offered in Tanzania. Vodacom Tanzania, a subsidiary of the Vodafone Group, is the leading mobile network operator with a 37% market share. Its M-PESA mobile payment service, which launched in early 2008, is currently the most recognized and widespread in the country. But Tanzania’s other major mobile operators, Zain (with 30% market share), Zanzibar-focused Zantel (with 8% market share), and now Tigo (with 25% market share), are following Vodacom’s lead in offering mobile money services. Zantel launched Z-PESA at roughly the same time as M-PESA, Zain’s Zap mobile money service has been in the market since early 2009, and TigoPesa launched just a few weeks ago.

We estimate that, primarily driven by M-PESA, Tanzania’s overall mobile money market is now approaching 1 million active customers, an important milestone at which economies of scale may start to kick-in. With four operators now aggressively marketing their mobile money services and building up their agent networks, general awareness levels on how to access menus (all but Zap being USSD-based) and how to cash-in/out, as well as the overall benefits of such services, have grown significantly in the last few months.  

These are encouraging developments in a market that has been characterized by slow uptake and usage of mobile money, compared to the glaring success of Safaricom’s M-PESA in neighboring Kenya. Although the mobile banking sector is still at a relatively early stage of development in Tanzania, the potential to expand financial access to underserved populations is significant. The vast majority of Tanzania’s population lives under $2 per day and only 12% has a formal bank account, yet most has access to a mobile phone. Mobile network operators, facing intense competition in a highly fragmented market, have seized on this potential new market by rolling-out payment services and mobile wallets. In fact, the market structure of the mobile industry in Tanzania is one of the most important differentiating characteristics with that of neighboring Kenya. You can’t get much more of a contrast than a market where Safaricom had practically 80% market share when it launched M-PESA 3 years ago, a circumstance which is simply not there in most markets. 

It has been clear for some time that the quick success of mobile money in Kenya was not to be easily replicated next door, nor in the over 40 countries that have launched mobile money deployments since 2003. Yet Tanzania appears to be developing its mobile money market at a commendable rate, and can potentially yield multi-player models that we have yet to see elsewhere. This is the partnership model Ignacio Mas blogged about recently, where operators could potentially share the cash merchant network in order to consolidate their transaction volumes at the store level, which can also be leveraged by banks seeking to expand their footprint.

With four MNOs vying for the loyalty and attention of customers, and with less than 500 bank branches serving the entire country, neither MNOs nor banks have the luxury of ignoring mobile money offerings. 

- Sarah Rotman & Mireya Almazan

Welcome to the CGAP Virtual Conference on microfinance and mobile banking!  This conference is taking place right here on the blog, no registration is required. Just post your comments using the “Leave a reply” option at the bottom of each thread.

This discussion is moderated by Sarah Rotman, CGAP co-author of the Focus Note Microfinance and Mobile Banking: The Story So Far.

Mobile banking has become a subject of debate within the microfinance community largely because most MFIs believe that there are certain benefits m-banking can bring to their institutions. But what is the reality on the ground? We asked this question focused on three specific benefits:

1. Can m-banking help MFIs serve existing customers better? The case studies of SMEP in Kenya and XacBank in Mongolia show that m-banking can help existing MFI customers save time and money, experience greater security, and manage their cash flows with more flexibility. For example, at any time during the repayment period when a SMEP customer has the cash flow to make her repayment (or even a portion of the repayment), she can use M-PESA to send the electronic value to the SMEP account directly. Meetings with loan officers now involve a quick verification of the transaction. Obviously, customer willingness to pay a transaction fee depends on the previous cash collection method used. If customers were responsible for transporting cash to make their repayment, they may be willing to pay an M-PESA-like transaction fee. But if MFI loan officers collect cash, customers may want to protect their “free” cash collection rather than pay a fee to make the repayment.

2. Can m-banking help MFIs reach new customer segments? We found little evidence to suggest that m-banking has helped MFIs reach new customer segments largely due to the fact that microcredit methodology relies heavily on human interaction. The case study of Kenya Women’s Finance Trust (KWFT) shows that this particular MFI does not expect M-PESA to help it expand its loan customer base significantly since loan officers still need to have face-to-face interaction with groups. However, KWFT does see M-PESA as a way to mobilize new deposits easily and cheaply.

3. Can m-banking reduce costs for MFIs and for customers? Early evidence suggests that m-banking can reduce operational costs for MFIs and that these costs can be passed on to customers in the form of lower interest rates. The case study of Green Bank in the Philippines shows that once customers began using GCash for loan repayments, there was less need to send collectors to gather repayments directly. As a result, Green Bank agreed to reduce interest rates from a flat monthly rate of 2.5% to 2%, as well as reduce its service charges from 3% to 2.5%.

What do you think?

• Do these benefits outweigh the costs associated with linking into a mobile banking system?

• Do you think that new customer segments will eventually be reached through m-banking or will the group accountability of microfinance prevent this?

• Will both customers and MFIs see significant cost savings thanks to the use of m-banking technology?

What does mobile money cost for the unbanked and underbanked? CGAP releases pricing study across 16 providers in 10 countries

It is possible that establishing a successful, scaled branchless banking service could be more expensive than expected. Some branchless banking providers want to leave room to come down on prices as more competitors enter the market.

Other highlights:

• The lower the transaction value, the cheaper branchless banking is in comparison with banks. For example, at a transactional value of $23, branchless banking is on average 38% cheaper than commercial banks the study looked at.
• Branchless banking is 54% cheaper than informal options for money transfer.
• Customer usage is influenced not only by absolute prices but by the way a service is priced. For example, in order to encourage trial of money transfers, some services offer free deposits, which make branchless banking an affordable way to save.
• Average branchless banking price is $3.90 per month.
• Informal providers charge double the price for a money transfer than a branchless banking provider.

• Afghanistan: M‐Paisa
• Brazil: Bradesco and Caixa
• Cambodia: WING Money
• Cote d’Ivoire: MTN Mobile Money, Orange Money
• India: Eko
• Kenya: M‐PESA and Zap
• Pakistan: easypaisa
• Philippines: GCash and Smart Money
• Tanzania: M‐PESA, Zap
• South Africa: MTN Mobile Money, WIZZIT

1. Sending Money Transfer
2. Receiving Money Transfer
3. Short‐term safekeeping
4. Medium‐term saving for asset
5. Bill Payments
6. High Usage (as a proxy for financial inclusion)
7. Average monthly transactions per M‐PESA user in 2008
8. Average monthly transactions per Kenyan banking customer in 2008

-Jim Rosenberg

The Globe and Mail uses next month’s World Cup as a good reason to talk about Africa’s economic growth:

For the first time, Africa is becoming a bigger lure for investors than for aid donors. Africa’s poverty rate has been declining by 1 per cent annually since the 1990s, and investment is growing dramatically. A decade ago, Africa was receiving less than $5-billion (U.S.) in foreign investment annually. By 2008, it was attracting nearly $40-billion in direct foreign investment – more than it received in foreign aid. One survey found that 40 per cent of emerging-market equity investors are putting money into Africa today, compared with 4 per cent in 2006.

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In 2008, when my colleagues Mark Pickens and Sarah Rotman examined pricing across six branchless banking pioneers, one of the most interesting models was GCASH, which offered a 10% discount on all airtime purchased through the service. Mark and I have been updating and expanding this research (this time with 16 branchless banking leaders across 10 countries). We found that GCASH’s discounted airtime pricing innovation has caught on. Not only did GCASH’s Filipino competitor Smart Money introduce a similar promotion, but several African providers (such as Vodafone M-PESA in Tanzania, Orange Money in Côte d’Ivoire and Zap in Kenya) are now also offering similar discounts or bonuses. Why are m-banking providers doing this? How does it impact the overall pricing for customers as well as the MNO’s relationship with its distribution network?

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There’s been a lot of talk recently comparing M-PESA in Kenya with that in neighboring Tanzania. I shared some of my initial impressions a few months ago after visiting both countries. While on the surface the countries appear to be similar, there are some important differences in geography, culture and market structure that have impacted the way M-PESA has fared in each place.

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The summer seems to have come and gone – and with it, a surge of interest in mobile banking for the unbanked. But how much of it is hype – and how much of it will really change the way poor people get financial services? I asked that question just after the Mobile Money Summit. You tell me.

Sarah Rotman sent this dispatch from West Africa where Orange and MTN are in hot pursuit of market growth. And a common regulatory framework makes cross-border transactions possible.

Olga Morawczynski told us what we don’t know about M-PESA, while Cameron Goldie-Scot explained how to link microfinance with mobile banking.

We then got a rundown on mobile banking in Tanzania, as Sarah asked if Kenya’s success could be replicated next door. Gunnar Camner and Emil Sjöblom of the Royal Institute of Technology (KTH) in Stockholm, Sweden blogged about their attempts to investigate mobile banking services from a user perspective. In which contexts do alternative uses, e.g. savings, become popular and why?

All this talk about whether M-PESA would thrive beyond Kenya caught the eyes of more than a few folks….

And rounding out what was not a quiet August, Mark Pickens shared his thoughts on big names getting into mobile banking: Nokia, Microsoft, and PayPal have all taken fascinating steps in recent days to enable more financial services aimed at the poor and unbanked…someday. Mark also pointed us to exciting news in India, wondering if a new biometric ID card program could help make government transfers more secure.

Over the last few weeks on this blog, we’ve looked at M-PESA in Kenya and Tanzania (read more about this comparison at www.cgap.org/technology), Zain’s Zap product that recently launched in Tanzania, and Zantel’s launch of Z-PESA. Here are some of my concluding thoughts on mobile banking in Tanzania.

With the success of mobile banking in neighboring Kenya, many people assume that similar success would be quick to arrive in Tanzania. And indeed there are many important lessons from Safaricom’s implementation of M-PESA in Kenya for m-banking launches all over the world. Marketing must be clear and simple, targeted at the common citizen’s need for a specific service. A strategic commitment from the entire company and the specific m-banking team must be strong. A willingness to make considerable investments, such as SIM swaps, must be present. And somehow Kenya was able to get agent acquisition to an auto-catalytic level.

Yet the mobile banking landscape in Tanzania is quite different from that of Kenya and must be adjusted accordingly. In some ways, we already see that happening in a form of “m-banking 2.0” emerging.

1. Zain recognized the need to pay commissions to agents much quicker than Safaricom has done in Kenya. In fact, their business model is such that agents receive commissions immediately. In response, Vodacom has also restructured its commission payments so that agents receive commissions directly into their float account.
2. Zain created a richer product proposition than simply “send money home” like that of M-PESA Kenya. In addition to remittances, Zap is focused on micropayments and business to business transactions. This makes it attractive to banked and unbanked customers alike.
3. Zantel and Vodacom realized that initial float accounts can prove an obstacle for agents to begin offering Z-PESA or M-PESA. They are both considering financing to help these agents get started.
4. Finally, pricing has been approached differently in Tanzania, both by Zain which allows customers to negotiate directly with agents and by Vodacom which has created a more segmented price scale for transaction amounts, making it more affordable for customer to send small amounts of money.

Perhaps Kenya is more of the exception than the rule to always be followed. While there are many good lessons to be learned from the Kenyan experience, it may not always be possible to carbon copy it anywhere in the world.

Over the last several weeks, I’ve been discussing the mobile banking landscape in Tanzania. I started with a comparison of M-PESA in Kenya and Tanzania, and next looked at Zain’s Zap product.

The third mobile payments product that has entered the Tanzanian market in the last year is Z-PESA offered by Zantel, the fourth operator in Tanzania. Zantel originated on the island of Zanzibar and only arrived in Dar es Salaam three years ago. It is now slowly expanding its network throughout the country and has recently achieved national coverage. But as the fourth operator in Tanzania with 8% market share as of 2008, it is already one step behind Zain and Vodacom in competing in the mobile payments space.

USSD-based Z-PESA launched in April 2008 in a race with Vodacom to offer the first mobile payments service in Tanzania. Like M-PESA, Z-PESA got off to a rocky start when it initially launched in April 2008. Looking back at the launch, Zantel believes that it was done more from a technology perspective instead of a commercial perspective. As a result, a new team is currently re-evaluating Zantel’s overall strategy towards Z-PESA, from commission structures to pricing to marketing. There is a comparison of agent commissions and pricing at www.cgap.org/technology.

Business Model & Agents

Zantel has found the task of building its agent network a challenge, as have many MNOs. While they are working with their high volume airtime dealers, they recognize the need to go beyond this network. They have lowered the initial float amount required for agents to get started. They are also considering putting up half of the initial amount and providing the other half to agents as a loan. In addition, agent locations previously required a computer to log transactions. But this made it very difficult to ramp up the agent network, so now agents simply have a physical log book to record transactions.

While Z-PESA may be a few steps behind M-PESA and Zap due to Zantel’s market share, it is still another competitor in this increasingly crowded space in the Tanzanian market.