It’s Africa calling for mobile operators

By Preeti Mehra, The Hindu Business Line

As operators in India look to offer mobile banking services for the unbanked in the hinterland, it would be pertinent to take a cue from the experiences operators have had while trying to push the service in African countries.

A Harvard Business School (HBS) study looks at the learning of operators in South Africa and Kenya to arrive to a firm conclusion — do not assume that folks at the base of the pyramid need the same types of services that their urban counterparts vie for!

Joint venture

Early this year, the largest bank and the largest mobile operator of the country — the State Bank of India and Airtel — had announced a joint venture for precisely this service to provide banking services to the country’s millions of unbanked people. Other operators and banks, too, are eyeing the same space. The HBS case study could provide a lesson or two.

‘Mobile Banking for the Unbanked’ by Prof. V. Kasturi Rangan and research associate Ms Katharine Lee looked at two different mobile financial service models — one in South Africa and the other in Kenya — targeted at what we in India would call the below-poverty-line population of the two countries.

WIZZIT, a third party start-up in South Africa, entered the mobile banking market in 2004. With the mobile phone penetration rate almost hundred per cent in South Africa due to operators that offered low-cost handsets and pre-paid services, the company thought it would be a “noble and viable business model in bringing banking to the poor.”

What actually happened was far from the aim. One, consumers did not take to the subscription model offered, as the poor are averse to paying for services they may not use. Second, the project ran into regulatory roadblocks as the South African Government allowed only licensed banks to take deposits, and that too at a hefty fee of around $34 million. When the start-up looked around for a suitable partner, the top-tier banks turned them down. They were then forced to turn to a second-tier bank, and the case study shows that even by 2009 WIZZIT could not make any profits. However, Kenya’s M-PESA was luckier. Launched by mobile operator Safaricom (along with Vodafone), the initiative was initially built as a financial service for the poor, and a money-transfer application for microfinance organisations to collect loan payments.

M-Pesa’s strategy

But soon after launching the service in 2007, the company realised that customers were not interested in it. What they wanted was a means to transfer money home. So, M-PESA quickly repositioned its service with the slogan, ‘Send Money Home,’ turning the venture into a success.

The repositioning was done after a thorough probe into what customers really wanted. In Kenya, such as in India, a majority of the population lives in rural areas, but the banks and the jobs are situated in the cities. While in India many use the postal money order or friends and relatives to send money to their villages, in Kenya workers would seal their wages in an envelope and pay a courier to send it to the village, which meant paying for bus fare and loss of a workday.

When M-PESA realised that money transfer is what customers needed, it created a distribution channel by using local kirana stores as franchisee agents for the company, to enable customers to transfer and receive money conveniently.

At the push of a button

To transfer money, the customer had to hand over the money to the agent, plus a transfer fee. Through a computerised process, secured by passwords and PINs, the agent would transfer the payment to the customer’s phone. The customer would then simply press ‘send’ for it to reach the family member. The family member on the other end would then go to the agent in the village and cash the money from the phone.

As Prof. Rangan’s case study points out, companies need to intimately know their target consumers and take the trouble to understand what they are looking for. By January 2010, M-PESA’s efforts had paid off. It had acquired some nine million customers and more than $600 billion has been transferred through the service, garnering revenues of about $100 million.

Ecobank and Bharti Airtel Join Forces to Promote Mobile Banking Across Africa

From AllAfrica.com

Ecobank Transnational Incorporated (“Ecobank”), the leading pan-African banking group, and Bharti Airtel (“Airtel”), a leading global telecommunications company, have signed a Memorandum of Understanding (“MOU”) to promote mobile banking services across Africa.

Under the terms of the MOU, Ecobank and Airtel plan to explore the development of innovative mobile financial services focused both on serving the unbanked and under-banked and contributing to the economic development of the 14 African countries in which they jointly operate. This landmark MOU combines the distribution capabilities of Africa’s largest indigenous banking group, present in 32 countries across the Continent and a world class telecoms operator committed to offering pioneering mobile services in Africa.

Both entities have agreed to launch a wide range of mobile financial services offerings, including Person to Person (P2P), Business to Business (B2B) and mobile savings products under the brand names of “Ecobank Mobile” and “Airtel Money”, subject to legal and regulatory requirements.

Commenting on this significant development, Ecobank’s Group Chief Executive officer, Arnold Ekpe said: “This MOU reaffirms Ecobank’s commitment to providing banking and financial services to the unbanked and under-banked in Africa. And given that Ecobank and Airtel have already collaborated in some countries to successfully implement mobile financial services, it is logical that we extended this collaboration with Airtel to all the markets of our mutual presence in Africa.”

Manoj Kohli Bharti Airtel’s CEO ( International) and Joint Managing Director said: “Partnering with Ecobank to bring mobile financial services to all corners of Africa further demonstrates Airtel’s commitment to Africa and supports the concept of borderless mobile telecoms services across the continent.”

About Ecobank Group

Incorporated in Lomé, Togo, Ecobank Transnational Incorporated (ETI) is the parent company of the leading independent regional banking group in Africa. It currently operates in 30 African countries, namely: Benin, Burkina Faso, Burundi, Cameroon, Cape Verde, Central African Republic, Chad, Congo (Brazzaville), Congo (Democratic Republic), Côte d’Ivoire, Gabon, Gambia, Ghana, Guinea, Guinea-Bissau, Kenya, Liberia, Malawi, Mali, Niger, Nigeria, Rwanda, Sao Tome and Principe, Senegal, Sierra Leone, Tanzania, Togo, Uganda, Zambia and Zimbabwe. The group also has an affiliate in Paris and representative offices in Dubai, Johannesburg and Luanda.. ETI is listed on the stock exchanges in Lagos, Accra and the West African Economic and Monetary Union (UEMOA) the BRVM. The Group has over 10, 000 employees from 35 different countries in over 750 branches. Ecobank is a full-service bank providing wholesale, retail, investment and transactional banking services to governments, financial institutions, multinationals, SMEs and individuals. For more information, please visit: http://www.ecobank.com.

About Bharti Airtel

Bharti Airtel Limited is a leading global telecommunications company with operations in 19 countries across Asia and Africa. The company offers mobile voice & data services, fixed line, high speed broadband, IPTV, DTH, turnkey telecom solutions for enterprises and national & international long distance services to carriers. Bharti Airtel has been ranked among the six best performing technology companies in the world by BusinessWeek. Bharti Airtel had over 223 million customers across its operations at the end of April 2011. To know more please visit, for more information, visit www.airtel.in For more information please send an email to: contact@ecobank.com or michael.okwiri@airtel.com

AITEC announces impressive speaker line-up for fourth annual West African Banking & Mobile Conference

Aitec Press Release

The first decade of the new millennium has probably been the most traumatic ever for the international banking industry. Added to that, the African region’s mobile banking boom opens up a wide range of new security threats for the industry. And from a commercial point of view, the banks are under siege – on the one hand by mobile operators who have stolen the initiative from them in mobile banking, and on the other hand by microfinance institutions, who are leading the way in banking the unbanked. In addition, with increased regional economic integration, banks are having to develop effective systems for seamless cross-border transactions.

All these dynamics provide a rich source of content for this year’s Banking & Mobile Money West Africa conference taking place in Accra over 8-9 June 2011. As at this year’s conference, over 60 international and local banking, microfinance, mobile payment and data security experts will be making presentations in plenary and specialist track sessions, sharing their knowledge with colleagues from the region’s financial services sector. The theme of the conference, ”Driving trade & investment through financial integration”

reflects the current drive in the region for economic integration.

Although Ghana escaped the worst of the international financial meltdown, there are important lessons to be learnt in terms of governance, security and credit management and these topics will be covered in the Risk Management track.

The event has the backing of key stakeholders in the sector, including Mediterranean Smart Card Company from Egypt and Internet Solutions as platinum sponsors and Rancard Mobility as a conference programme sponsor.

Announcing the initial speaker line-up for the conference, AITEC Chairman Sean Moroney, said: “This is the one educational and business networking event that bankers should add to their diaries now to make sure they are there to experience with peers from throughout the West African region this unique knowledge-sharing opportunity. We have developed a rich conference programme that includes financial services sector thought-leaders  from throughout Africa and beyond.”

Speakers and topics announced by AITEC include:

·  Empowering Africa’s new mobile merchants – Graham Gilmour, CEO, The Business Phone, UK

·  Hyper-channel banking – Customers choose, banks follow – Barry Coetzee, CEO, iVeri, South Africa

Intelligent payments switching—Delivering today’s needs – Deon van Biljon, Divisional General Manager, S1, South Africa

The role of shared services in modern financial services – in mobile, cards, microfinance and software – Mac Atasie, MD, Nextzon, Nigeria

Achieving traceability and security in West Africa’s commodity market through mobile banking – Judson Welsh, CEO, AIMS, Ghana

Jump-start Business Intelligence – Shailendra Mruthyunjayappa,  VP & Business Unit Head – Africa, Europe & Americas, iCreate Software, India

Mobile payment microfinance: A field-based approach – Lucas Wellen, CEO, Musoni, Netherlands

How to broaden credit reference services into the microfinance sector – Stephen Leonard, CEO, Credit Risk Connection, United Arab Emirates

Optimising value from the retail, micro and SME segments in the new mobile-enabled, agent-distributor financial services model – Alan Goodrich, Director, Business Development, Experian MicroAnalytics, UK

Increasing consumer choice through shared mobile financial services wallets – Prateek Shrivastava, Managing Director, Monitise Africa, UK

Using mobile money to reach the unbanked – Claudia McKay, Microfinance Specialist, Consultative Group to Assist the Poor (CGAP), World Bank, USA

Regional interoperability initiatives – Stephen Mwaura, Head of National Payments, Central Bank of Kenya

Pre-paid cards – A new horizon – Hany Fekry, Head of Sales & Marketing, Mediterranean Smart Card Company, Egypt

Hyper-channel banking – Customers choose, banks follow - Barry Coetzee, CEO, iVeri, South Africa

Implementing a universal e-banking strategy – One installation, many banks – Polys Hadjikyriakos, Sales Director, NETinfo, Cyprus

The evolution of electronic payment devices – Brian Stobo, Vice-President: Middle East & Africa, Hypercom EMEA, United Arab Emirates

Enabling the technology value chain for mobile payments - Kofi Dadzie, CEO, Rancard Solutions, Ghana

Mobile money: The Reconciliation Conundrum and how to avoid losing money to errors and frauds – Yele Okeremi, CEO, Precise Financial Software, Nigeria

Lessons from the Nigerian Market – Peter Asolo, Head, FlashMeCash Unit, FinBank Plc, Nigeria

Beyond branchless banks with mobile wallets – Mayank Sharma, VP & Head – Africa, Comviva, Kenya

“This is the undisputed market-leading conference for the region’s financial services sector – the knowledge Mecca for CXOs from commercial banks, central banks, insurance companies, innovators, MFIs, mobile operators, mobile payment aggregators and development agencies involved in financial services,” said Moroney.

The  event includes an extensive exhibition, with over 30 international and local suppliers showcasing products and solutions needed by the region’s financial services sector to achieve world class services.

For full details of the conference reply to this email (info@aitecafrica.com , call +44 1480 880774 or log on to www.aitecafrica.com

Banker launches cell phone-based remittances for immigrants in U.S.

Branchless Banking and Microfinance

By Fehmeen, Microfinance Hub -

Branchless banking is a technology-led solution that promises to advance the motives of microfinance, which revolve around access to financial services for the bottom of the pyramid. According to Wikipedia, branchless banking includes the provision of products such as cash deposit, withdrawal, and payments, through the following means:

• Mobile banking and Automated Teller Machines (ATMs) – payment cards or mobile phones (mobile banking) that allow customers to initiate transactions remotely.
• Point of Sale (POS) terminals – use of third-party agents (post offices and small retailers) to provide financial services such as cash handling and customer due diligence for account opening.

Branchless Banking Allows Low-Cost Financial Inclusion

As evident, branchless banking is the provision of financial services to customers without requiring them to visit the bank’s actual branches. As a result, branchless banking platforms offer a low-cost alternative to banks willing to provide financial services in rural areas, because the cost of establishing a traditional banking infrastructure (bank branches equipped with skilled employees) is quite high.

Branchless Banking May Have Better Outreach Compared to Microfinance Institutions

A recent survey conducted by CGAP (McKay and Pickens, 2010) shows that branchless banking solutions have the ability to quickly acquire “more previously unbanked” clients compared to the largest microfinance institutions in the country. Eight branchless banking service providers were studies across seven countries and results showed that over a period of just three years, 5 of these providers had reached more clients than the largest MFIs that had been in operation for 15 years. The following table (taken from the survey report) lists some explanatory figures:

This implies these branchless banking providers had grown five times faster than microfinance institutions. The survey report points out that “in Tanzania, the 2009 FinScope study showed approximately 11 percent of registered M-PESA clients had no other access to formal or semi-formal finance”. This figure may not be as encouraging as it seems, because the survey also discovered that “Low income people represent a clear majority of clients in only one instance—Brazil”.

The sample size is not large enough to come to a solid conclusion that branchless banking is a better financial inclusion tool compared to microfinance, but it certainly is a to ol that warrants much attention.

Reference: McKay, C and Pickens, M . (2010). Branchless Banking 2010: Who’s Served? At What Prices? What’s Next?. Available: http://www.cgap.org/gm/document-1.9.47614/FN66_Rev1.pdf. Last accessed 15th Oct 2010.

Microfinance Opportunities and The MasterCard Foundation Announce Mobile Banking Partners in Africa

From Mobile Financial -

Microfinance Opportunities (MFO) and The MasterCard Foundationtoday announced the selection of two partners in Africa for their ConsumerEducation for Branchless Banking (CEBB) program: MTN Ghana Mobile Money andMobile Transactions in Zambia.

The new partners join a $2.9 million, 3-year globalinitiative with The MasterCard Foundation and MFO  to work with five partners to  promote branchless banking. The program develops and tests financialeducation models  to support theadoption and sustained use of mobile phone  and cardbased financial services among low-incomegroups.

“Technology-based banking services offer an unprecedentedopportunity to increase low-income consumers’ access to financial services,”says Monique Cohen, President of Microfinance Opportunities. “Smart financialeducation programs that understand the consumers’ financial behaviors andpreferences are an important tool for branchless banking to truly take offamong the poor.”

The CEBB program targets youth, women and the unbanked, andis seeking to strengthen participants’ financial capabilities and understandingof how they may use branchless banking to more effectively manage their money.

“Through partnerships like Consumer Education for BranchlessBanking, The MasterCard Foundation is helping to bring innovativetechnology-based solutions to people living in poverty,” says Reeta Roy,President and CEO of The MasterCard Foundation.

Over the next two years, MFO will continue to work withpartners in Africa, Asia, and Latin America/Caribbean to develop financialeducation toolkits for branchless banking, implementing a learning agenda thatpromotes effective and scalable financial education for branchless banking.

Faulu launches mobile banking service

From Daily Nation Kenya -

Faulu Kenya has launched phone mobile banking where customers can open and operate their bank accounts.

Nigeria: UBA Gets Mobile Banking Licence

By Chris Agabi, Daily Trust -

Lagos — To benefit from the about 70 percent (about 54 million) unbanked Nigerian adults, the United Bank for Africa Plc has gotten approval from the Central Bank of Nigeria (CBN) to deploy mobile banking on its platform. The Group Managing Director UBA Mr. Philips Oduoza disclosed this in Lagos at the weekend during the formal launch of Western Union money transfer services in the UBA Plc.

“The CBN has approved the license for UBA to deploy mobile banking. We will roll it out very soon. It will basically be to promote retail banking,” he said.

He also announced that the CBN has also granted UBA the license to open its operations in the Republic of Congo. According to him, that would bring to 20 the number of countries UBA is present in addition to it’s over 700 branches in Nigeria.

The GMD explained that UBA Plc is playing big into the remittances market with the launch of Africash and now Western Union because of the huge funds that travel abroad to Nigeria and in other African countries. The World Bank puts remittances from abroad to Nigeria thus far at some $10 billion.

Speaking on behalf of Western Union, the Regional Vice President for ECOWAS, Aida Diarra said, “Western Union is continually expanding its network in Nigeria to include new agents. As one of the largest financial institutions in Nigeria with significant branch network, UBA is an excellent addition to our agent network complementing our already extensive reach across the nation. We look forward to a long and productive relationship for the benefits of our consumers.”

10 things you thought you knew about M-PESA

By Claire Alexandre, Senior Program Officer at the Bill & Melinda Gates Foundation, From CGAP -

Few initiatives in microfinance, or for that matter in development, have been as successful as M-PESA: 3 and a half years after launch, over 70% of households in Kenya and more importantly over 50% of the poor, unbanked and rural populations use the service.  I am often struck by how many people fail to be inspired, or even doubt M-PESA. Skepticism is often bred from lack of information.

What about you, how much do you really know about how M-PESA actually works? Here are 10 things you may have thought you knew about M-PESA!

1 – You thought the funds held in M-PESA were held (and used) by Safaricom
The funds are deposited in several commercial banks, which are prudentially regulated in Kenya. In addition, the funds are held by a Trust and are therefore out of reach from Safaricom, which cannot access or use them. In the unfortunate event of Safaricom going bankrupt, the creditors of Safaricom would not have access to the M-PESA funds. This is a requirement from the Central Bank of Kenya which oversees M-PESA. The funds remain at all times the property of M-PESA users.

2 – You thought M-PESA created money outside the banking system
Any amount which goes through M-PESA is 100% backed by the pooled accounts held in commercial banks. In terms of monetary aggregates, the mobile money stored and moved by M-PESA customers is counted as part of M1.

3 – You thought M-PESA transactions were not monitored
Each and every transaction done on the M-PESA platform is electronic and can therefore be monitored by Safaricom, which runs its own bank-grade anti-money laundering system. Even a cash-in or a cash-out operation has an electronic leg and is captured by the system. The Central Bank of Kenya gets regular reports on M-PESA transactions, as it does from other payment service providers.

4 – You thought M-PESA’s success meant it is now a huge systemic risk
The accumulated balance of all the M-PESA accounts represents just 0.2% of bank deposits by value. M-PESA is far from exerting a systemic risk. In June 2010, M-PESA transactions amounted to about 70% of the volume of electronic transactions in the country but were only 2.3% in value. M-PESA’s success means there is a real need for small electronic transactions and storage of value. It was designed with limits on how much can be transacted (no more than 70,000Khs leaving the account daily) and stored (maximum account balance is 50,000Khs). Cash-in, cash-out and P2P transfers are limited to 35,000Khs per transaction.

5 – You thought M-PESA cash merchants held funds belonging to M-PESA or its customers
The M-PESA cash merchants (or ‘agents’ in M-PESA parlance) pre-buy mobile money so that they can sell it against cash to the customers who come to their retail store for cash-in operations. They are investing their own working capital and are not intermediating someone else’s funds. For cash-out operations, they sell their cash and buy mobile money instead. Consequently, the cash and M-PESA balances that cash merchants manage and store are always their own. Cash merchants are mainly super users, who resell their own working capital balances, with no more access to the M-PESA platform than any other customers, except that they have higher transaction limits.

6 – You thought M-PESA cash merchants were unsupervised
The M-PESA cash merchants are recruited by Safaricom after a due diligence process and put under specific training. They are regularly monitored and re-trained, and Safaricom aims to visit them on-site every two weeks. The same process is applied to all cash merchants so that any customer anywhere in Kenya has the same experience at any cash merchant.

7 – You thought it might be dangerous to let customers use M-PESA unless they went through a financial literacy class
There is of course a risk that the ability to pay more easily than before could be abused (i.e. by loan pushers), but this is not an access issue. Financial literacy efforts related to M-PESA would not be efficient in addressing this problem. It is rather a credit issue (in this example), and consumer protection remedies to mitigate such risks, including through financial education, should target the credit side.

8 – You thought M-PESA customers were not identified
To open an M-PESA account, all customers have to identify themselves with an original identification document. Photocopies are not enough. Retailers are specifically trained to perform registrations and can be suspended if they do not identify customers properly. In fact, customers have to show their ID card any time they do a transaction. There is a three-factor authentication (having the SIM card, having your ID, knowing the PIN), which far exceeds what is required by your bank and mine.

9 – You thought M-PESA was not really contributing to financial inclusion as it only offers a transactional service
Actually, you’re right on this one, M-PESA does not equate financial inclusion. Poor people need a wide variety of different financial services, including savings, and the ability to transact, no matter how efficiently, is not enough. But let’s be clear about the objective here: it is access. M-PESA is the mechanism through which financial inclusion can be delivered. So it is the means, not the end.

10 – You thought criminals could use M-PESA
Correct again: criminals can very well use M-PESA. They can certainly decide to use a payment platform which limits daily transactions, requires identification, monitors any single transaction and knows the localization of the device used for the transaction.

Systems like M-PESA are no more than a transactional and store of value platform, but no less either, and need to be licensed and supervised as such. As they don’t invest the public’s money, they can make do with a lighter regulatory treatment than full banks. Remember, their role is not intermediation, it is access.

CGAP Drives Expansion of Mobile Banking to Reach the World’s Poorest People

WASHINGTON, Nov. 16, 2010/PRNewswire-USNewswire/ — Ground-breaking mobile and agent banking programs have enabled poor people from Kenya to the Philippines to access financial services for the first time. CGAP today announced a further 3-year commitment to take this innovative approach to millions more around the world.

The Bill & Melinda Gates Foundation is providing CGAP, an independent microfinance group housed at the World Bank, with a grant of US$6 million to support the next phase of CGAP’s Technology Program to promote mobile and agent banking to scale up in developing countries. The grant is in addition to a major grant the foundation provided in 2006, as well as CGAP funding and GBP 8 million that the UK’s Department for International Development (DFID) committed to the CGAP Technology Program in March.

“The concept works. Now it’s time to take it out of the lab and into the mainstream,” said Tilman Ehrbeck, CGAP’s chief executive officer. “There is tremendous potential for innovative delivery channels to reach the 2.7 billion poor people who have no access to affordable financial services.”

CGAP’s Technology Program aims to help drive the expansion of a range of financial services for the world’s poorest people by significantly reducing transaction costs. It will focus on target markets to demonstrate how such a system would work at full scale, while also improving industry knowledge and practice to ensure the systems work effectively.

The Technology Program at CGAP will also advise governments on how to put in place appropriate regulations to ensure growth is balanced by appropriate protection for mobile banking customers, and help them connect social safety nets and remittance payments to mobile banking networks to ensure the poor can more readily use financial services to save, pay bills, and even buy insurance.

To date, CGAP has provided financing and technical guidance to more than a dozen mobile banking start-ups in Asia, Africa, and Latin America and has performed detailed policy assessments in 13 countries.

“If we are to take the initial success seen in the limited markets so far and really bring it to the people, we need to go a lot further in demonstrating its successes, its sustainability, and its security for all those involved,” said Ehrbeck.

In 2009 alone, there were 120 e-money initiatives globally.  CGAP research shows that nearly 40% of branchless banking customers in developing countries previously had no access to services at all. CGAP researchers have found that branchless banking scales five times faster than traditional microfinance institutions, and is 38% cheaper than traditional banks for low value transactions typically done by the poor. But much more work is needed, according to CGAP, to design innovative saving, insurance, and other financial products that take advantage of branchless banking channels to provide a full set of financial services that poor people can use to improve their families’ lives.

“One of the key lessons is that to reach the sort of scale that’s needed, you absolutely must have the right business models, and the right regulations to ensure that the people relying on branchless banking can be confident it will last, and will be secure,” said Stephen Rasmussen, Technology Program Manager at CGAP.

This grant was announced today by Melinda French Gates at the Global Savings Forum in Seattle, Washington, as a part of the foundation’s $500 million pledge to expand access to savings accounts and help the world’s poor build financial security. The pledge included a package of six grants, totaling $40 million, from the foundation’s Financial Services for the Poor initiative, to support projects and partnerships that will bring quality, affordable savings accounts and other financial services to the doorsteps of the poor in the developing world.

About CGAP

CGAP is an independent policy and research centre dedicated to advancing financial access for the world’s poor. It is supported by over 30 development agencies and private foundations who share a common mission to alleviate poverty. Housed at the World Bank, CGAP provides market intelligence, promotes standards, develops innovative solutions and offers advisory services to governments, microfinance providers, donors, and investors. More at http://www.cgap.org.

SOURCE CGAP

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