Mobile money

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In East Africa the banking revolution continues


Kenya’s M-Shwari (No Hassle)

M-Shwari (“No Hassle” in Swahili) is a banking platform set up in late 2012 that allows subscribers of Kenya’s biggest mobile network, Safaricom, to operate savings accounts, earn interest on deposits, and borrow money using their mobile phones.  Safaricom has 19 million subscribers, or about 70 % of the Kenya mobile-phone market.

The practice of sending money by mobile phone – M-Pesa, “mobile money” in Swahili – began in 2007 and is widely used in Kenya where about 70 % of the population has a mobile phone. M-Pesa revolutionised banking for millions of the “unbanked” – people left out of the formal system by their poverty or remote location.  Central bank estimates say at least 12 million Kenyans are still outside that formal banking system.  M-Pesa is used for all kinds of transactions including paying bills and sending money to distant relatives. There are $50m worth of M-Pesa transactions every day in Kenya.

M-Shwari builds on and expands the M-Pesa phenomenon with an application for savers and borrowers.  Loans have to be paid back within one month and a single fee of 7.5 % is charged. Maximum loans relate to the amount the client has in his or her M-Shwari account.

A privately-owned bank, the Commercial Bank of Africa (CBA) partnered Safaricom for M-Shwari and the family of newly elected President Uhuru Kenyatta hold the major stake in CBA.

In February 2013, three months after it was launched, M-Shwari transactions crossed the $35million mark, with 1.6 million customers having used the service for deposits or loans.

Others came before M-Shwari. Indian-owned Bharti Airtel, launched Kopa Chapaa (Swahili for “borrow money”) in 2012 and smaller micro-credit loan companies have set up similar schemes but none with the M-Shwari success.

Uganda – Usage Triples

Although Kenya leads the way, there are major signs that mobile money is on the rise elsewhere in East Africa. Charles Abuka, director for financial stability at the Bank of Uganda, said the number of users of the mobile money transfer system in that country grew from 2.9 million in 2011 to 8.9 million at the close of 2012. This pushed the number of mobile money accounts past the 4.9 million bank accounts as at December 2012, the East African reported.

“The number of mobile money transactions increased from 87.5m in 2011 to 242m at the end of 2012, and the value of the transactions grew fron $1.46 billion to  $4.5billion,” Dr Abuka said.

He attributed the development to increased  mobile phone penetration. All the five major operators have mobile money transfer platforms. They are MTN Mobile Money (MTN), Waridpesa (Warid), Airtel Money (Airtel), Msente (UTL), and Orange Money (Orange).

Experts say further development of products on mobile payment platforms is hampered by the absence of effective co-ordination between the regulatory authorities, the Bank of Uganda, Uganda Communications Commission and the Uganda National Bureau of Standards.  Mr Kasekende said building a regulatory framework for mobile money and financial inclusion would improve financial stability and integrity and would further protect consumers, especially those for whom this is the only channel to access formal financial services – up to 12 million Ugandans are outside the formal banking sector.

West Africa Lags Behind

Nigeria’s Pagatech

Nigeria’s leading mobile payments service provider, Pagatech, recorded the 500,000th user of its service at the end of March, according to the online Nigerian Communications Week on April 6th.

The local firm, which started in April 2009, received its operational licence from the Central bank of Nigeria as a fully-fledged mobile money operator in November 2011, the Pan-African News Agency (PANA) reported.

Despite the promise and enthusiasm that attended the launch of mobile money systems in Nigeria two years ago, the service is still struggling to gain a foothold in the country said Business Day Nigeria. This is despite the huge potential market size, which is expected to grow to Naira 1.1 trillion by 2015.

Industry experts and analysts say this is because banks, mobile money operators and other players have  failed to clearly define, articulate and communicate the benefits of using the service to prospective customers. Analysts have also identified regulatory issues, absence of interoperability amongst disparate mobile money systems, and poor agent networks, as some of the drawbacks to the speedy adoption of the service.

“Mobile money is not getting traction in Nigeria and across West Africa…there are regulatory issues particularly amongst West African countries which have not allowed mobile money to grow as much as we would have liked it in the telco space,” Wale Goodluck, corporate services executive, MTN Nigeria said in an interview.

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