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Mobile money for the masses: Do the numbers add up?

Mckinsey licks finger, asks audience where to stick....

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MWC Day four of Mobile World Congress saw an assembly of the mobile money working group. Flush with $12.5m from the Bill and Melinda Gates Foundation, it’s working towards the GSMA's target of getting 20m of the 1bn people who have a mobile phone but do not have a bank account onto the first rung of the financial ladder.

Ignacio Mas gave a detailed account of what the Bill and Melinda Gates Foundation wanted to achieve. They wanted the very poor and insecure to be able to save. The target is people living on less than $2 a day. As much as they have low subsistence incomes the real problem is stability - they might only find work occasionally and have to eke out money until they next find work. Or if they are farmers they get paid seasonally at harvest time.

Without access to banks they are very vulnerable. They will often give the money to people they trust for safekeeping but these are people in a similar situation to themselves. Lack of stability means people get multiple jobs. They can’t concentrate on what will get the best return and pull themselves out of poverty because they have to opt for stability.

The mobile payments programme isn’t concentrated on saving but on mobile as a mechanism to pay bills, particularly microfinance - a scheme where the very poor can take small loans from a government agency to help them build their way out of poverty. A real example is the woman who used it to buy a sewing machine to make and sell shirts, sitting at it 20 hours a day to make ends meet. Without a bank account she had to stop for half a day to take a bus to town, travel for an hour, queue for an hour at the bank and then travel back for an hour. Taking half a day once a month to re-pay the microfinance is a major economic challenge.

The poor are exceptionally time-poor too. In this South African example the woman used Wizzit, a virtual mobile bank, to reclaim that time. For those in the developed world with direct debits, credit cards and financial instruments the phone-as-a-wallet, things like NFC and pay by mobile are nice alternatives. For those in the emerging markets it’s the difference between eating and not eating tomorrow.

The mobile payments schemes work because field agents can be appointed who carry a cash float. A relative in Nairobi can send money back to family in the Rift Valley using Safaricom’s M-pesa system. The person in the village takes the phone to an agent, which in Kenya is often a local Safaricom shop, shows the text message and some ID, and is handed the Kenyan Shillings. The receiver doesn’t have to have an M-pesa account, or even be on Safaricom. It’s been fantastically successful, and Safaricom now has 5m accounts in a country which only has 4m bank accounts.

Karim Khoja, the CEO of Roshan which has licenced M-Pesa for Afghanistan gave a powerful talk on how M-Pesa has a crucial role in transforming his country where many people are on $15 a month. This was real World Peace stuff. His environment is very much tougher than Kenya - he only has 450 agents because protecting them in an environment where those receiving money by M-pesa find the agent has run out of cash is difficult. Afgans have much shorter fuses than Kenyans. And guns.

There is an installed base of 3m mobile phone users, and Roshan has 20,000 M-pesa users. Growth is very much slower than in Kenya because of the local hurdles, but the need and effect is very much greater. “Unless we build an economy for the 4m kids coming out of school, they will just go an strap on an IED”. Sitting in a posh conference room in Barcelona, you have to do a mental reset to realise he’s saying Improvised Explosive Device.

Roshan is working to pay the Afgan army by M-pesa. This is a place where financial systems are broken. You can’t use a credit card because no one will clear Afgan credit cards. Paying the army is difficult and there are problems with soldiers going AWOL for a week to take the money home. M-pesa helps them stay at their posts protecting the population from the Taliban.

Running a financial and communication system in a country which produces 80 per cent of the world’s heroin and is under the shadow of the Taliban means treading a careful line with the government. Roshan gives full disclosure to the government, so the Taliban blows up their cell sites, and yet Roshan has a policy of social good that goes beyond survival, employing 25 per cent women “in a country where women are treated very badly”. You know when Khoja says “very badly” what happens is beyond imagination.

This was followed by talk from Mckinsey on sizing the market. Their wet finger in the air says that there is a potential for 290m currently unbanked subscribers for mobile payments, but really they didn’t know how to count.

Jon Gravråk and Martin Sjolund asked the attendees – many of them people who were working on similar projects to Karim Khoja saving people’s lives better - if they could spend some time to help Mckinsey with their spreadsheet.

Whatever the numbers are – the GSMA’s 20m target or the guess at 290m opportunity - it doesn’t seem right that money from the Bill and Melinda Gates Foundation is being used to pay Mckinsey to provide a better guess. It’s worse that they don’t even know how to do it. ®

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