M-Banking!
14 May 2009
What I’m writing to tell you about is M-PESA! Usually it doesn’t have an exclamation point after it, but I put one there because every time I think about it, I get very excited. M-PESA!
Long story short, M stands for mobile and Pesa is Kiswahili for money. It’s a service that Safaricom, the most popular cell phone service in Kenya, offers (Zain, its largest competitor offers a similar service). Touted as a “branchless banking service” M-PESA users can deposit and withdraw money on their phone by utilizing a network of agents stationed throughout the country – mostly airtime vendors and phone salesman. Why might this be helpful?
Pretend you are John Asuke, the lone loan officer (I’ve been waiting months to write that) here at K-MET’s Revolving Loan Fund. You’ve got a borrower base that stretches from the shores of Lake Victoria to the Indian Ocean (the whole country), a staff of one Kiva Fellow (that’s me!), large loads of small loans to process and businesses in communities that lack the infrastructure that encourages efficiency. Challenging conditions, but K-MET does a pretty good job of keeping costs down given these constraints. One strategy in particular, weekly group repayment and disbursal meetings instead of home visits, decreases costs significantly. Of course, group meetings are also inefficient. Watch this video (with sound if you have it) and you’ll see what I mean.
You may have noticed a few hundred borrowers sitting in a very hot church waiting to receive or pay back their loans. As I mentioned earlier, they must do this once a week – often walking many miles (sometimes through the rain) or spending as much as half a day’s wages on their transport. This is inefficient, dangerous, and frustrating. It is pretty easy to understand why having these borrowers repay their loans via mobile might vastly improve efficiency. And it is really easy to use. Watch my two colleagues, Nick and Debra exchange 10 shillings worth of air-time via mobile.
There are, of course obstacles for MFI’s that want to use mobile banking. Many loan officers (including Asuke) fear that borrowers will be less diligent in repaying their loans, groups lose their community aspect, in K-MET’s case, it would take away face time with the community health workers who make up the bulk of our borrowers — and because it’s a new service that utilizes both humans and technology – there’s going to be a bevy of issues. In addition, while some of the borrowers I talked to were thrilled with the idea, many do not own cell-phones and there was concern about borrowing phones to pay money. Still, Safaricom and the Small and Micro Enterprise Program just announced a new partnership that will allow customers of SMEP to use M-Pesa.
Now, beyond micro-finance, if there are any super-awesome-rich-entrepreneur types reading this (besides Peter Thiel, he’s already all over this…sort of), this better have your wheels churning. As far as I know, there are only a few other countries/companies that offer this service: Afghanistan, Tanzania, South Africa, a pilot program in Uganda and two very successful services in the Philippines. I read recently (on the BBC) that just a few years ago, there were $93 billion in remittances transferred from abroad to Africa every year. Think if you could tap into that market…while at the same time providing a much needed service!
In any case, if you want to read more about M-Banking, check out these articles and links (thanks to fellow Fellow Sarah Forbes for these!):
www.triplejump.eu/making-microfinance-mobile.html
www.mobile-money-transfer.com/africa/
www.valuablebits.com
http://mbanking.blogspot.com/
Brett Dobbs is in his 12th week of his posting as a Kiva Fellow with K-MET in Kisumu, Kenya. Check out the K-MET Lending Team here! If you’re interested in becoming a Kiva Fellow, click here!
Entry Filed under: Africa, All, KF7 (Kiva Fellows 7th Class), Kenya, Kisumu Medical & Education Trust (K-MET). Tags: barca over man u ya'll, Brett Dobbs, exclamation points, hi dad, John Asuke is the man, K-MET, Kenya, Kisumu Medical and Education Trust, Kiva, kiva.org, M-Banking, M-PESA, micro finance.
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1. nickcain | 14 May 2009 at 05:14
Mmmmmm….banking…
2. David Oglaza | 14 May 2009 at 05:18
Are you promoting a future competitor to paypal?
In 5 years I imagine that the growth of mobile banking will have increased dramatically as it makes sense
Go to the local ish shop and spend a v.small amount to transfer the money by phone or walk half a day, or catch a bus etc which is more expensive.
This will create new businesses in itself in rural areas that have mobile connections.
3. Stephanie | 14 May 2009 at 07:02
Brett -
This is an awesome post! Totally informative.
Thanks!
4. Ronan | 14 May 2009 at 08:54
Brett – You sure do know how to make a “boring” video quite entertaining.
It is exciting to hear that more institutions are adopting mobile banking to reduce costs and provide convenience to their clients, especially the dedicated ones who venture out in the rain to make repayments. It will be interesting to see how many MFIs integrate M-Banking into their due diligence procedures (e.g. loan utilization monitoring).
5. Unilove | 14 May 2009 at 16:53
That first video was bouncy
Informative and playful, but gets the message across…
Weekly meetings seem a bit much, so some face time might be lost with mobile banking, but perhaps they can just have face-to-face meetings to open and close loans, and other meeting times can go to trainings and not payings.
6. Sarah Forbes KF6/7/8 | 14 May 2009 at 22:55
Nice post Brett!
I thought about you yesterday as I read an article in one of the Dar es Salaam papers about m-banking. I’m still learning why it hasn’t caught on here in Tanzania as much as it has in Kenya…
7. NSA | 15 May 2009 at 07:30
Nice post, Dobbs. I think this is a brilliant idea and wondering why we don’t use it in the states. I am still unclear on security issues and believe human contact is important. But it is amazing what we can do these days.
8. Mickey Mikeworth | 21 May 2009 at 13:40
On behalf of all of us lenders on KIVA, I would like to personally thank you for your work. Stay safe, open minded, and keep doing the GOOD STUFF.
We are happy to support your efforts and lucky that you are willing to go through all the chaos that bringing change offers.
Mickey Mikeworth
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[...] In this video, you can hear me greet Beatrice saying “Idhi Nade”, which is Luo for “How are you?” Beatrice responds, “Adhi maber,” meaning “very good.” Most people living in Kisumu descend from the Luo tribe, the same tribe as Obama’s father. At the end, you will hear me fluctuate between Kiswahili and Luo saying “Asante Sana” in Kiswahili, meaning “thank you” and “Erokamano”, which in Luo means “thank you.” The voices you hear in the background are people coming for a weekly K-MET borrower meeting. To see what one looks like, check out the first video in this blog post. [...]
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[...] In this video, you can hear me greet Leena saying “Idhi Nade”, which is Luo for “How are you?” Leena responds, “Adhi maber,” meaning “very good.” Most people living in Kisumu descend from the Luo tribe, the same tribe as Obama’s father. At the end, you will hear me fluctuate between Kiswahili and Luo saying “Asante Sana” in Kiswahili, meaning “thank you” and “Erokamano”, which in Luo means “thank you.” The voices you hear in the background are people coming for a weekly K-MET borrower meeting. To see what one looks like, check out the first video in this blog post. [...]
11. Mobile banking: what’s the price? « Kiva Stories from the Field | 24 June 2009 at 11:39
[...] and I’ll be interested to hear follow-ups about m-banking with Kiva Field Partners such as K-MET in Kenya. CGAP’s technology blog has also had some interesting articles concerning m-banking. [...]
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