Millions of people in the developing world have access to a mobile phone, but no bank account


Silvio Berlusconi, the Italian prime minister, has promised to make helping Africa, and encouraging development there, a key theme of the G8 summit in L'Aquila, Italy.

In a continent where millions of people have no bank account, Andrew Simmons examines a simple, mobile-based service for transferring money which is rapidly gaining customers.

Africa's big business success story, mobile telecommunications, is taking on another dimension.

Since the mobile phone transformed lives and small businesses across the continent, another phenomenon has been developing, mobile money.

At its simplest level, it enables phone users to send cash by SMS messaging. And it looks destined to pull in even more profits for mobile phone operators.

One forecast claims mobile financial services in the developing world could be worth $5bn by 2012, helping fuel growth when economies are under unprecedented pressure from the world financial crisis.

M-Pesa launch

Kenya has had a prolific start in the business.

In depth


Al Jazeera's coverage of the G8 summit

In a country where you cannot travel anywhere without noticing the garish corporate colours of mobile phone companies adorning shops in towns and villages, a different logo has appeared – M-Pesa.

The M is for mobile, pesa is Swahili for money.

Safaricom, East Africa's biggest mobile operator, launched the operation two years ago

Like airtime scratch cards, the service is available through agents, mainly shopkeepers.

Customers hand over the cash they want to transfer and, for a nominal fee, they are able to send an SMS message to whoever they want. The receiver gets a pin code which enables them to walk into a shop and receive the cash.

M-Pesa already has more than six and a half million customers using in excess of 7,000 outlets.

Many of them are in remote rural areas where the need for mobile money is at its greatest. And it's this part of the business that especially benefits the poor in Kenya.

Rural lifeline
 
Gemima Wanjiru is someone whose life has become much more manageable because of mobile money.

Wanjiru is someone who's life has become much more manageable due to mobile money
She is 70-years old and somehow manages to maintain her small family farm in a remote area 80km east of Nairobi, the capital.

Like millions of other people living off the land and a small number of livestock in Africa she is dependent on money earned by a close relative, far away in an urban centre.

A weekly SMS message from her daughter in Nairobi negates what she used to experience - long delays and sometimes the non-arrival of cash brought by relatives, friends or informal couriers.

Wanjiru is in poor health but manages to handle her mobile phone and the walk to the nearest village to cash in her SMS transfers at the local shop which acts as an agent for the service.

Back in the capital, her daughter, Irene, works as a poorly paid voluntary assistant for an HIV-Aids clinic and is relieved not to face the trouble and cost of the three-hour weekly bus journey to her mother's home.

"I used to send money with friends or relatives or sometimes anyone who I thought would be reliable," she said.

"But so often money gets stolen – or lost."

'Changing lives'

At the glass-panelled tower block of Safaricom in Nairobi, Betty Mwangi, a manager in charge of expanding M-Pesa, says she feels proud of the service.

"Our customers say it has changed their lives," she says.

"It's making things so much easier. People feel so much safer, they don't have to carry that much cash any more."

Aside from the social achievements of such a venture, Mwangi obviously has an eager eye on growth, more innovations and profit.

Although she insists M-Pesa is not a substitute for banking, there are many in the industry who can see it heading in that direction.

It is estimated that more than one billion people in the developing world have access to a mobile phone, but no bank account.

So there are big prospects for major expansion – and the banks are only too aware of this.

International growth

Already, mobile money operators are offering utility bill payments by SMS transfers and a number of other options are soon to be rolled out.

M-Pesa has more than six and a half million customers using in excess of 7,000 outlets 
There is also the prospect of international money transfers – something which would be of great benefit to Africans receiving money from relatives overseas.

Many of the big banks, some of which were originally wary and critical of the services, are now getting in on the act with joint venture deals.

M-Pesa service has now expanded to include Tanzania and Afghanistan with plans to launch in India, Egypt and South Africa.

Zain, a Kuwaiti firm, launched a similar service called Zap in Kenya and Tanzania in February.

MTN, Africa's biggest mobile phone company, has launched its mobile money operation in its home market, South Africa, along with Uganda. It is also carrying out trials in Cameroon, Ghana, Ivory Coast and Nigeria.

France Telecom's Orange has a partnership with French Bank BNP Paribas. It is planning to launch Orange Money for Senegal, Mali and Egypt in 2010 and it is presently piloting the service in Ivory Coast.

All of this activity has analysts in agreement that emerging markets stand to gain substantially. But there are concerns about the lack of regulations that surround such a fast-growing new business.

Costs key

Aden Zoller, a London financial analyst, believes the security risks are relatively low, although the reliability of SMS messages getting through should be carefully monitored.

She says that the main customer base for the services are people the banks have a low priority attitude towards and so there is room for much more development.

But she cautions about the need for regulations on how the services develop.

Zoller said: "There are some things that do need to be addressed.

"The regulatory environment, the pairing up of bank and telecommunications cultures, the need to position things very carefully in a simple way so that people can see the benefits."

And she added another factor: a need to keep the cost low.

There is no doubt African consumers – particularly the poorest in society – will continue to benefit if the services are kept cheap and simple to use.

A few years ago it would have been unthinkable to suggest they could afford to access such banking services at the touch of a mobile phone keypad - now it is a reality.

Source: Al Jazeera