Why does Africa lead the way in mobile money?

Satellite image of Africa, showing the ecologi...

Satellite image of Africa, showing the ecological break that defines the sub-Saharan area (Photo credit: Wikipedia)

Mobile payments,  mobile wallet and NFC are seen as the next big things in the UK mobile advertising landscape. The opportunity around the use of mobile data such as GPS and payment history to allow advertisers to target potential customers dependent on where they are and what they’ve bought is much hyped. It is seen as such an opportunity that former enemies Vodafone, EE and O2 have combined forces to form WEVE, a joint venture allowing advertisers to run targeted campaigns across the 3 giant UK telecoms operators networks. Mobile payment is seen as the future. However, while systems such as NFC limp along in the UK, Africa is at the forefront of mobile payments and it is the African continent that is most likely to teach the rest of the world valuable lessons.

It is important to separate mobile banking and mobile payments. In the UK, mobile banking often refers to an extension of the services of a traditional bank ‘s services and is widely used by consumers. In Africa, mobile money has been driven by the mobile operators and allows people to transfer money, pay bills, and purchase goods and services using a mobile device, all without accessing a traditional bank account. Mobile money, often associated with Kenya’s M-PESA, is aimed at serving the unbanked, the under-banked and the under-served. Mobile payment is an extension of mobile money and involves the use of the device itself to pay for goods, and Africa is likely to see a surge in this over the next few years.

Why is Africa so far ahead of the UK in terms of mobile money and payments?

A lack of entrenched payments systems in Africa

Africa is a continent that is rich in technological innovation and some of this can be attributed to an open-mindedness, a determination, and no fixed way of doing things. There are no preconceived ideas around debit cards and credit cards being used for payment. Mobile payments have therefore seen an early adoption on the continent. Whereas there are countless ways of paying for goods and services in many parts of the world, this hasn’t been the case in Africa, making mobile money a straightforward choice for many.

A tool of necessity for the unbanked

Many Africans fall into the unbanked category and don’t have access to traditional financial services that are taken for granted in the developed world. Mobile money is therefore a ‘must have’ service for many people. It is not a question of being ahead of the curve,  it is a necessity.

Minimal fees associated with mobile money

Fees charged by services such as Safaricom‘s M-PESA  are minimal compared to traditional banks so mobile money is tempting for many cash-strapped Africans. Despite an increase in the fees charged by mobile money agents in Kenya over the last few months, the total value of Kenya’s Mobile Money market hit $5bn dollars in the first quarter of this year.

Geographical distances and city workers

M-PESA was originally designed as a system to pay back microfinance-loans which reduced the transaction costs, allowing for lower interest rates. However, in a country like Kenya where lots of people work in cities like Nairobi and Mombasa and transfer money back to families in rural areas, the M-PESA service became increasingly used as a mobile transfer system. The distance that often separates the main bread earners and dependants in Africa is often vast. This has contributed to the exponential increase in mobile money usage in Kenya.

The integral role of mobile in Africa. Mobile money is simply an extension

Mobile is often an essential part of people’s lives, from agriculture, health care, to education, so it’s use for payments is a natural step for many people to take. If you’re an expectant mother receiving regular SMS updates that offer pregnancy and childbirth advice, why wouldn’t you use your mobile for payments?

Lack of regulation and restrictions

Safaricom’s M-PESA system was launched with very little resistance and it was allowed to flourish without the sort of restrictions we would see in the UK. It began in an experimental way with very little marketing around it and has benefited because of the lack of bureaucratic red tape as well as Safaricom’s dominance of the Kenyan market. This dominance has also meant a simple solution, whereas in other countries the launch of mobile money products has been ineffective due to too many players in the market.

Technology seen as critical in Africa, mobile much the same

The African continent is currently undergoing a technological boom, with mobile at the center, and this entrepreneurial spirit lends itself well to mobile money adoption.

We cannot mimic all of Africa’s success with mobile money, however many areas can be ‘copied’. Indeed, M-PESA is starting to do well in other countries, including Afghanistan, and it recently launched in India. In the future, mobile payments will extend to areas over and above the transfer of money, and devices will continually be used to pay for goods and services. This is happening now and will be even more prevalent  in Africa as sub $100 smartphones begin to flood the market. For this next stage to really take off, there needs to be a one system-fits-all approach across devices and network operators. There also needs to be a clear benefit for consumers to pay for goods using their mobile device such as loyalty schemes, offers and location based incentives. The future in mobile money and payment systems is likely to be driven by Africa.


Kenya’s Mobile Money Transfer hits $5billion in Q1. But doesn’t tell the whole story

English: Mombasa ferry, Kenya Русский: Паром в...

English: Mombasa ferry, Kenya Русский: Паром в Момбасе, Кения (Photo credit: Wikipedia)

A Central Bank of Kenya report has shown that mobile phone based transactions across all networks reached $5bn in the first 3 months of 2013. This was an increase of $0.76bn on the same period last year. The CBK said Kenyans made the most transactions in January, when transactions were worth $1.69 billion. In February, the value dropped marginally to $1.68 billion. This fell again at the end of the quarter to $1.6 billion in March. This month on month drop does not reflect what happened in the same period last year, when the value increased month on month significantly.

This drop in value is a slight concern and coincided with M-PESA‘s increase in charges because of the government’s introduction of a tax on mobile money transfer.

What is mobile banking?

Safaricom launched the mobile banking M-PESA service in 2007 and its simple premise is to allow people to transfer money and pay bills who don’t have access to traditional financial institutions. Its success and uptake has been revolutionary in Kenya and the M-PESA service has since launched in other parts of Africa and India. Many Kenyans live and work in big cities like Mombasa or Nairobi and send money home through their mobile devices to families living in rural areas. The system is quick and easy and, crucially, M-PESA has gained the trust of millions of Kenyans with an estimated 17 million Kenyans using mobile banking in what is currently the world’s hotbed for mobile money. As one of many unexpected consequences of the service, mobile money was also credited for easing tensions in Kenya after the post-election violence in 2008 by allowing people to receive money when trapped hiding out in slums.

With mobile banking there is no need for a smartphone or an updated handset which is essential on a continent where the basic feature phone is still very much the phone of choice. Customers hand cash over to a mobile money agent, their mobile account is then credited, and can then send mobile money to a recipient who then cashes it in at another agent through a secret code. Commission is then paid to the agent. However this fee compares favourably to bank fees. The reduced costs coupled with the exponential uptake of mobile devices in Africa and the ease with which you can begin begin mobile banking have been the major reasons for its success.

However does the increase in mobile banking in Kenya tell the whole story? What should we take from the fact that the overall value of transactions fell month on month in the first quarter? What else needs to be done to improve access for the unbanked?

According to a new report from the International Telecomms Union (ITU) the number of mobile phone subscriptions is expected to pass seven billion by early 2013, surpassing the world’s population of 7.1 billion soon after. In Africa, despite the exponential uptake of mobile phones over the last decade, the continent still lags behind in terms of number of subscriptions per head. The poor and those in rural areas are often the ones lacking mobile devices and subsequently excluded from the mobile banking system. Governments need to do more to encourage the uptake of mobile devices or subsidise contracts for the poor to ensure everyone benefits.

Questions around trust in using a mobile device for the transfer of money still remain. Just as in the UK there probably needs to be a UK-wide advertising campaign to persuade people of the security around mobile payments and NFC, so do African governments need to reassure the population around the security of mobile transfers.

People also need to be persuaded of the benefits of mobile banking. What can mobile banking bring to a market trader in rural Kenya who has been using cash all her life?

Despite the success of Kenya’s M-PESA, more needs to be done to ensure the poor are not left behind and the gap between rich and poor is not widened. The premise of mobile banking is to reach those who had previously been unreachable, particularly those in rural areas, and its uptake needs to be stimulated by governments, NGOs and mobile operators.

Mobile’s role in the workplace across the developing world

Jaron Lanier

Jaron Lanier (Photo credit: Wikipedia)

The science pioneer and ‘visionary’ Jaron Lanier has recently published “Who Owns The Future” which discusses the Internet and its detrimental impact on job and wealth creation. The book wages war on digital utopianism and highlights the way in which the Internet threatens to destroy the global middle class by eroding jobs, wealth and the various “levees” that give people stability. In the prelude of the book, he offers the example:

“Here’s a current example of the challenge we face. At the height of its power, the photography company Kodak employed more than 140,000 people and was worth $28 billion. They even invented the first digital camera. But today Kodak is bankrupt, and the new face of digital photography has become Instagram. When Instagram was sold to Facebook for a billion dollars in 2012, it employed only 13 people. Where did all those jobs disappear? And what happened to the wealth that all those middle-class jobs created?”

Lanier, however, still does see the potential in digital technology but just wants it reoriented away from its main role so far, which involves “spying” on citizens, creating a winner-take-all society and eroding professions. I would stress the role in mobile technology in the developing world and its positive impact on business – both on the employee and employer side of the spectrum. With rising unemployment an issue in both the developed and developing world, mobile solutions have the potential to create jobs, help employees and save companies money. Whether it is mobile monitoring of the supply chain or using a mobile phone to pay employees’ wages, the potential for positively transforming the workplace in developing markets is significant.

I have highlighted a few areas in which mobile technology can and currently is having a positive impact on the workforce in the developing world, from a societal level to a personal one.

Helping employees find a Job

Mobile devices can act as mass communication tool for potential recruiters in looking for employees. Job Finder is a subscription-based service designed to link workers to jobs using an SMS-based platform and works on all mobile devices. The Job Finder service compares the job and worker profiles and sends SMS alerts to workers when a suitable job opportunity arises. This simple SMS tool, which suits the African continent where the feature phone is still ever-present, is a cost-effective way of bring employers and employees together.

Mobile Education and mLearning

On the education front, Mobile devices can be used to provide primary school teachers with regular updates on educational content to assist with classroom teaching. A scheme in Nigeria will be delivered by UNESCO and does exactly this. It opens up a far-reaching, easy to implement and cost effective mobile educational tool to teachers allowing them to run their classroom programmes more effectively.

On the employment side, mLearning can deliver basic skills and job-related training via a mobile device by voice, SMS or USSD. The primary audience would be employed workers, where mLearning could offer specific job-related training and updates around product knowledge or health and safety issues. Well prepared and delivered mobile training could enable more people to access education, while reducing the need for costly training facilities. Simple SMS based services give workers a sense of empowerment, independence and improve engagement with the company. As smartphones begin to replace basic phones in the developing world, the mobile training on offer is likely to become a more interactive, one-to-one experience.

Payroll and Microfinance

Microfinance is the provision of financial services to micro-entrepreneurs and small businesses that lack access to banking and related services due to the high transaction costs associated with serving such clients. The rise of the microfinance industry has been driven by a simple premise; get capital into the hands of those entrepreneurs who are cash starved and don’t have access to traditional ‘bricks and mortar’ financial institutions. The development of microfinance itself has been hugely beneficial in stimulating small business growth in parts of Africa and Asia.

mPayroll is an extension of microfinance and is a reliable way of using mobile technology to make secure, cost-effective wage payments to ‘unbanked’ workers, who continue to make up the vast majority of the workforce in the developing world. Their salary can then be delivered securely direct to a mobile wallet such as Vodafone’s M-Pesa. This offers the security that workers in developing countries often need and ensures they are paid the full amount by preventing their seniors siphoning off ‘tips’, which can of course be a huge problem in corrupt businesses.

Worker Panels

Worker Panels gathers anonymous data about working conditions directly from workers to enhance visibility across global supply chains. The Worker Panel solution can be used on a basic mobile device at low cost. An SMS/instant message questionnaire would be used to ask workers about their working conditions, rates of pay, concerns and general feelings about their job.

The system could potentially be used by factory management to collect feedback from their workers and allow two-way communication so that management could also send alerts and information back to workers, thus improving trust and transparency. The mobile device will serve as a tool of empowerment and is likely to open up employment-focused social networks and stimulate workers’ rights groups. In a continent like Africa, massively diverse with companies and employees often separated by huge distances, the mobile tool will act as an essential portal to access information and act collectively on workers’ rights. The mobile device could even eventually act as a  trade union tool.

Tech Cities – job creation

There is a new technology movement in Africa, with mobile at the centre. Cities like Cape Town, Accra and Nairobi are vying for the top position as Africa’s central innovation and technological hub. This has created thousands of job across the continent and is also providing the impetus for countless schools and universities. Kenya’s “Silicon Savannah” has recently begun construction in Konza City, about 60 miles south of Nairobi and aims to be  Africa’s most modern city with 200,000 jobs created by completion in 2017. Projects like Micorsoft’s iHub provide resources for technologically minded entrepreneurs and act as meeting points for young, ambitious Africans.

Despite the need for a healthy debate around the Internet and is potential corrosive effect on wealth and jobs, it should also be highlighted ways in which mobile technology is playing a decisive and positive role in stimulating employment and helping workers in the developing world.

How mobile technology can empower women in the developing world

English: Mobile phone evolution Русский: Эволю...

English: Mobile phone evolution Русский: Эволюция мобильных телефонов (Photo credit: Wikipedia)

The proliferation of mobile phones in the developing world has been both rapid and remarkable and it opens up possibilities to engage with the most vulnerable and marginalised in societies, which in many cases are women and girls. The 2013 Women Deliver conference takes place at the end of May in Kuala Lumpur, Malaysia, and offers the opportunity to galvanise the global community to invest in mobile technology and highlight all the opportunities it brings, some of which I have outlined below.

So, how is mobile technology helping women and girls and what are the potential opportunities?

Mobile devices are improving access to financial services

The move towards mobile banking in developing countries opens up opportunities for women to have more control over their finances. This is particularly relevant in developing countries where the purse strings are traditionally held by men. Mobile payments from work can be made directly to a woman’s phone which offers an additional level of financial control and independence, as well as assurances that the full salary is paid.

Mobile banking systems, such as Kenya’s hugely successful M-PESA, open up financial access to millions of the ‘unbanked’, a large percentage of which will currently be women. The ease with which a mobile bank account can be opened up is vital in allowing women to gain financial control and independence, particularly in countries without access to traditional ‘bricks and mortar’ financial institutions.

Mobile technology, in particular SMS systems, are improving access to healthcare 

Mobile technology circumvents geographical obstacles . It sounds almost too obvious to say, but the mobile device of course removes the need to travel to receive information. In a huge continent such as Africa, which often lacks traditional transport infrastructure, the mobile device can act as an excellent tool to disseminate information from malaria SMS warnings to maternal healthcare and advice. Nothing can replace seeing a doctor, but regular communication via SMS is the next best thing in providing potentially life saving information.

South Africa uses text messaging to improve Maternal Health Access
The mobile phone evokes a feeling of connectivity and independence amongst women

People often refer to ‘the next billion’ when it comes to internet access, and how a large percentage of these users will be from the developing world and will use their smartphone to access the internet. For the moment the basic feature phone is ubiquitous, but the African continent is currently experiencing a boom in its consumer class who are demanding access to the same technology we have in the west. This demand combined with a potential flood of cheaper, Chinese produced smartphones will open up the internet to millions of people who traditional lacked access. For women, the mobile device will serve as a tool of empowerment and is likely to open up female-focused social networks and stimulate women’s rights groups, in areas such as employment. In a continent that is hugely diverse, the mobile tool and the access to the internet it offers will act as an essential portal to access information and act collectively on women’s rights.

More empowerment for women leads to more women in the workforce and greater economic prosperity for a country

It is a fairly broad statement, but the engrossing Hans Rosling puts it very eloquently in a TED talk. The birthrate of a country has nothing to do with religion, but is more closely linked to the number of women in the workforce. As mobile devices offer women access to financial services, educational tools, and health care advice, it will also act as a tool to boost the number of women in the workforce and allow them to contribute economically at a personal and societal level. The more women in the workforce, the more the childbirth rate of a country decreases, the less strain there is on a country’s resources.

Lagos vies with Nairobi to become region’s tech hub

Lagos Island and part of Lagos Harbour, taken ...

Lagos Island and part of Lagos Harbour, taken from close to Victoria Island, looking north-west (NB this is not Ikoyi Bay as wrongly labelled elsewhere) (Photo credit: Wikipedia)

The bustling, metropolitan city of Lagos in Nigeria has an ever growing population of some 8m people and is the country’s economic powerhouse making a significant contribution to its overall GDP. The port city is a city of islands connected by ferries and highways and is the capital of Lagos State. The standard of living is relatively high compared to many cities in Africa and, despite problems such as pollution and gridlocked city traffic, people flock to Lagos from far and wide in Africa with an estimated 30,000 people arriving everyday.

Lagos aspires to be, alongside Accra, Cape Town and Nairobi one of the continent’s tech powerhouses. Indeed, May’s three day Mobile Web West Africa event sold out its Lagos conference, bringing together companies, startups, inspiring investors and developers. The three-day event was the background to the emerging economic and inspired power of the region, and is a statement of intent to be at the centre of mobile innovation.

There are countless examples of centres of innovation cropping up in Lagos. Co Creation Hub is a collaborative work space for young entrepreneurs and is dedicated to accelerating the application of technology for economic prosperity. Individuals converge in one space to share ideas. They even have the chance to meet VCs and angels looking for promising investments. However, such meetup hubs compete with others around the continent. Nairobi has the iHub, a similar space, supported by companies like Google, Intel and Samsung. Nairobi has also recently begun construction of the much discussed Konza City, or ‘Silicon Savannah’ as it is often called. This is a project to build Africa’s most modern city with technology and innovation at the centre and will potentially be a blueprint for further African cities.

In Nigeria, mobile is also being used to reach the poorest and help economic and social prosperity. A mobile SMS educational tool has recently launched aimed at providing primary school teachers with regular updates on educational content to assist with classroom teaching. Launched by UNESCO, the technology will be available to anyone in Nigeria and will send teachers messages with educational information and advice once a day. The project should reach thousands of teachers across the country, who were previously out of reach and simply lacked the resources to teach effectively. Mobile SMS is a step in the right direction.

In Nigeria, and many of the major cities in Africa, there is a sense that anything is possible and the continent is ripe for investment and full of opportunity. A lack of traditional infrastructure is helping drive entrepreneurship, in mobile especially, and suggest that Africa will be the continent of the 21st century.

Nairobi continues its charge to become Africa’s technology innovation hub

English: Beautiful City of Nairobi

English: Beautiful City of Nairobi (Photo credit: Wikipedia)

The future of computing and internet access is widely believed to be mobile. At the recent Mobile Engage in the UK, Facebook discussed ‘the next billion people’, citing the fact that 4.5 billion have yet to access the internet, and the majority of new internet users are likely to do so through a mobile device. Africa, experiencing explosive population growth, a burgeoning consumer class, and the exponential uptake of mobile devices, is likely to be where much of new mobile internet users come from. Indeed, the GSMA believe that mobile connections in sub- Saharan Africa, home to some 900m people, will hit half a billion this year.

Kenya is a relatively stable democracy, has a long history of technological investment, and is likely to be at the forefront of mobile innovation. There are countless examples of why Kenya, and in particular Nairobi, is leading the charge to become the region’s technological innovation centre.

Firstly, and potentially the project with the greatest regional impact, Kenya has recently begun building the much hyped ‘Silicon Savannah’ development in Konza, about 60km south of Nairobi. The project aims to turn Konza into the most modern city in Africa and is widely expected to be a game-changer for Kenya’s $36bn economy.. The initial phase will be completed in 2017, and when finally completed in 2030, Konza City is expected to create some 200,000 jobs as well as countless schools and universities. Konza – economically and politically a “new city” in Africa – may well act as a blueprint for further developments on the continent.

Kenya was the birthplace of M-PESA, the hugely successful mobile banking service, which has opened up financial services to millions of ‘unbanked’ people in Africa. Africa is now a hotbed of mobile money activity, and the continent counts 15 of the top 20 countries by mobile money usage.

This month, Nairobi became the third African city, after Johannesburg and Casablanca, to become home to an IBM innovation centre. The GSMA, the governing body and set of standards for the mobile operators, also recently choose Nairobi for its first African office.

A recent Microsoft initiative, Microsoft 4Afrika, is investing in a strategic cooperation with business incubator iHub and m:lab in East Africa to help start-ups build and grow their businesses using Microsoft technologies. The cooperation aims to increase access to software and improve technological innovation in Kenya and the surrounding area. Indeed, both Google and IBM have regional offices there.

There are huge numbers of benefits for companies operating in technology and mobile to set up operations in Africa. Firstly, there is a real lack of red tape preventing innovation, which can often be found in Europe and the US. This means that innovations such as M-PESA can get off the ground quickly and spread to Tanzania and India as it has done. In addition, international companies can learn from efforts in Africa and transfer projects to the West. How much can we learn from the M-PESA mobile banking system to encourage uptake in the west. Indeed, in areas such as NFC and mobile payments, Africa is way ahead of the UK which will need to do a huge amount to gain the trust of the consumer around areas such as data use and security. What can we learn from the recent project in Ivory Coast which saw Orange open up its mobility data to help redraw Abidjan’s bus routes? Although projects using mobile technology are likely to be vastly different across continents, surely there are lessons to be learnt.

So Nairobi may be a leader in Africa, but as the poor outnumber the rich online, particularly through mobile connections, it may become a global leader in mobile technology. Watch this space.

Madagascar and its growing microfinance sector

Map of the regions in Madagascar

Map of the regions in Madagascar (Photo credit: Wikipedia)

Madagascar is one of the biggest islands in the world and, because of its isolation, much of its wildlife has managed to flourish uninterrupted for thousands of years. Its natural beauty and wildlife are well known and many of its animal and plant life are unique to the island and exist nowhere else on earth. What is not so well known about Madagascar is its burgeoning microfinance industry.

Microfinance is the provision of financial services to micro-entrepreneurs and small businesses that lack access to banking and related services due to the high transaction costs associated with serving these client categories. An extension of microfinance is mobile banking, and its success is well documented. The rise of the microfinance industry has been driven by a simple premise, originally associated with Muhammad Yunas and Grameen Bank who won the Nobel Peace Prize in 2006, and it is to get capital into the hands of those entrepreneurs who are cash starved and don’t have access to traditional ‘bricks and mortar’ financial institutions. These entrepreneurs need a helping hand to get their businesses up and running, and that is how the idea of microfinance came about. It allows institutions to help the poor in the ‘unbanked’ world, much in the same way credit cards have allowed people access to money in the developing world.

The World Bank has estimated that 70% of people in Madagascar live on less than $1 per day. Poverty and competition for agricultural land have put pressure on the island’s dwindling forests. Its microfinance industry was established in 1990 and has experienced massive growth over the last 10 years. It is seen as a vehicle to help Madagascar achieve some of its millennium development goals. The millennium development goals were established at the Millennium Summit in 2000 and range from eradicating extreme poverty and hunger to improving child mortality and reducing maternal deaths. Microfinance and mobile banking are seen as key vehicles for countries to achieve those goals in Africa and other parts of the developing world. It is particularly important in a country such as Madagascar, where not only do people lack access to traditional banking services, but it also suffers frequent cyclones. Microfinance has allowed people to introduce savings plans which help protect them when they hit hard times.

Microfinance is also prevalent in other parts of the developing world and there are plenty of examples of how it helps peoples’ everyday lives. It was initially thought of as a product to help entrepreneurs and small businesses, but more is being done to ensure access to financial services helps the whole population. Selco, an Indian company that sells solar-powered lighting to people who cannot afford grid-based electricity, formed partnerships with banks allowing customers to take out small microfinance loans to be paid off in instalments over 3 – 5 years. WaterCredit is another example of an organisation that decided to break up payments into smaller instalments to allow people to get access to water and sanitation in India, Bangladesh, Kenya and Uganda.

In Madagascar, and in other parts of the developing world, microfinance continues to allow people and businesses access to financial services and offers a way to completely transform small businesses. It is also being used to help people pay for essential products and services, like water, education and healthcare, and its use has therefore changed from purely being aimed at small businesses and entrepreneiurs to helping the poor as well. Of course, the poorer the person the ‘riskier’ the investment and, despite success stories around the world, more needs to be done to encourage lending to those in most need.