Innovative technology turns mobile phones into 24-hour cash machines

Using mobile phones to transfer money from person to person in developing countries, thus making financial services more accessible to those who do not hold bank accounts or use bank services (known as the “unbanked”) as well as soon to those who cannot read and write, is growing at a rapid rate, both formally and informally.

In April 2008, Afghanistan’s “Roshan”, a Vodafone partner, introduced the M-Paisa mobile money transfer system there, patterned on the popular M-Pesa ("pesa" is Swahili for "cash") service introduced in Kenya early in 2007 by Safaricom, Vodafone’s Kenyan partner. Focused on the “unbanked” adults who make up 80% of Kenya’s adult population, M-Pesa now has more than 1.8 million customers who use their phones to transfer small amounts of money (most less than $15), and is revolutionizing the Kenyan economy. Using technology developed by the UK mobile phone giant Vodafone, M-Pesa customers transfer money to each other via text message and are able to pay in and withdraw money at kiosks, petrol stations and supermarkets that sell mobile phone airtime.

Kenya was the first country in the world in which the innovative service, developed as the result of a massive challenge grant by the UK’s Department for International Development which Vodafone matched, was introduced. Vodafone is now looking to extend its mobile payment service to areas such as bill and salary payments, says Nick Hughes, global head of international payment solutions for Vodafone. Vodafone also has partnered with financial services giant Citigroup to pilot a remittance service enabling customers to send money to their home countries via mobile, and in Afghanistan, worked with Roshan to facilitate microcredit loan disbursement and repayment, building on its work with Kenyan microfinance institution Faulu.

Roshan, which means “light” in both Dari and Pashto, Afghanistan’s two most widely spoken languages, was created in January 2003 as the Telecom Development Company Afghanistan Ltd., but has become known as “Roshan” by the people of Afghanistan because of the hope it offers them for the future. Owned by an international consortium formed by the Aga Khan Fund for Economic Development (AKFED), Monaco Telecom International (MTI) and Swedish-Finnish TeliaSonera, Roshan is the country’s single largest investor and taxpayer and has coverage in over 216 major cities and towns and over one million subscribers. Roshan directly employs more than 900 people, 20% of them women, and provides indirect employment to more than 20,000 people as dealers, distributors, contractors and suppliers. In February 2005, at the 3GSM World Congress, Roshan won the Best Marketing Award for its “Light and Hope” campaign to make mobile communications widely accessible to Afghan people, and in 2006, it won the World Communications Award for “best operator in a developing market”.

M-Paisa has a slightly different focus than M-Pesa, as in the beginning it plans to serve mainly as a vehicle for microfinance institutions’ (MFI) loan disbursements and repayments, as well as salary disbursement and airtime distribution. Person-to-person transactions will be available for MFI clients and employees who receive their money via M-Paisa. Roshan’s retail outlets will serve as transaction points, and the company plans to have a network of trained dealers nationwide by the end of 2008. "The benefits of mobile money transfer are particularly relevant in a developing market such as Afghanistan, where the large majority of the population does not have access to traditional banking services,” says Roshan CEO Karim Khoja. “M-Paisa, with Roshan’s mobile network, will provide the backbone to enable such funds to be transferred reliably which will provide an important vehicle for economic regeneration."

In welcoming Roshan to Vodafone’s community, Hatem Dowidar, CEO of Vodafone Partner Markets, said: “We have always envisaged that our mobile money transfer would develop differently in each new market according to the requirements of that country. Vodafone is therefore particularly pleased that, alongside today’s launch with Roshan and a range of microfinance institutions and companies, our trialing of an interactive voice recognition system means that financial services can be successfully brought to people across the world regardless of their social circumstances.” Roshan and Vodafone are trialing interactive voice recognition services which, when launched later in the year, will make M-Paisa more accessible to those consumers who cannot read and write

Even people in developing countries who don’t have their own mobile phone have found informal ways to use the shared village mobile phone as the equivalent of a cash machine. Anthropologist Jan Chipchase, who works as a human behaviour researcher for Nokia, the Finnish company that is the world's leading mobile phone supplier, found in 2006 that villagers in Uganda had developed “sente” – a way of using prepaid air time to transfer money from place to place.”Someone working in Kampala, for instance, who wishes to send the equivalent of $5 back to his mother in a village will buy a $5 prepaid airtime card, but rather than entering the code into his own phone, he will call the village phone operator (“phone ladies” often run their businesses from small kiosks) and read the code to her. She then uses the airtime for her phone and completes the transaction by giving the man’s mother the money, minus a small commission. ‘It’s a rather ingenious practice,” Chipchase says, “an example of grass-roots innovation, in which people create new uses for technology based on need’.”

This story was prepared from a number of sources: an article entitled Social innovation: Good for you, good for me, Ethical Corporation, 10 April 2008;  information on the Roshan website; information on the Safaricom website; information on the Vodafone website; a fascinating story entitled Can the cellphone end global poverty? by Sara Corbett published in the New York Times April 13, 2008; and Jan Chipchase’s Future Perfect blog.

 


Page Information

  • 3 months ago [history]
  • View page source
  • You're not logged in
  • Tags: Stories about Money Kenya Afghanistan Uganda

Wiki Information

Recent PBwiki Blog Posts