Mobile Money: Is It Reaching Far Enough?

Posted by: admin on Tue, 2012-04-17 09:55

By Michelle Kaffenberger
Research Manager, InterMedia

African Economic Forum logoOver the weekend I was at the African Economic Forum at Columbia University, which covered all sorts of economic issues in Africa. Unsurprisingly, mobile technology came up in almost every session I attended. Panelists discussed the way mobile devices are infiltrating education and health services, international remittances, and of course, basic financial services.  

The consensus seemed to be that mobile services are the way forward for Africa. However, once the low-hanging fruit among potential users has been plucked, so to speak, reaching the poorest and most remote segments of the population will require additional effort.  

That is relevant to the mobile money scenario. Mobile money is making great strides in connecting people in developing countries to basic banking services. Much as many Africans leapfrogged landline phones in favor of mobile technology, many would appear poised to leapfrog the use of physical bank branches in favor of mobile banking. The question remains, however, whether mobile banking is actually achieving this.

A report published by InterMedia a little over a year ago showed that in Tanzania the unbanked (those with no bank account) were less than half as likely as the overall population to use mobile money.  Out of the Tanzanian adult population, 11.5 percent had used mobile money at some point, but only 3.9 percent of the unbanked had ever used such a service (A more recent report shows that mobile money use in Tanzania has since risen to 24 percent of the adult population, but this report did not give numbers specific to the unbanked).  In Kenya, where mobile money is much more common, the unbanked were similarly underserved in 2010. Fifty-five percent of the Kenyan population had used mobile money, but only 20 percent of unbanked Kenyans had used it.

Even so, the potential appears to exist for mobile money to reach a broader population, including the poor and financially excluded.  A more recent report on Tanzania, published at the beginning of this year, showed that 78 percent of Tanzanians have a mobile phone in their household.  Additionally, 93 percent are aware of at least one mobile money brand.  Awareness of mobile money and access to a mobile phone are two primary qualifiers for mobile money use.  What remains is helping the poor bridge that gap from awareness to use.

Kenyan Woman on her phoneImproved training for mobile money agents may help, as the poor are likely to need help understanding and using the technology.  New business models may also help bridge the gap.  As discussed in a recent CGAP blog, the mobile money company Mobile Transactions, in Zambia, has developed a franchise-type approach to mobile money agents.  In their model, rather than using existing retail agents as mobile money agents, they recruit and train their own cadre of agents whose sole employment is marketing mobile money, obtaining new customers, and assisting existing customers.  As obvious as this method may sound, it is unique among existing models.  It is also a more costly and slower way to expand a company’s reach, the main reasons it hasn’t been more widely utilized.  But sometimes slow and steady wins the race.

One panelist at the African Economic Forum was Michael Spencer, who runs SmartMoney, which is helping the poorest and most remote groups gain access to mobile money. He pointed out that there is scope for understanding better the "whys" of money being exchanged. We know that exchanges are taking place, but the underlying drivers are not well-understood. This would help m-money service providers to cast a wider net.

Another challenge is evaluating the effectiveness and reach of mobile money and other mobile services.  How can development practitioners know whether their efforts are reaching those most in need? What long-term effects are mobile services having on the well-being of the poor in developing countries?  How can mobile money operators find unmet demand for their services, especially when that demand is in hard-to-reach rural areas?  InterMedia’s research is helping answer these questions and more through surveys, evaluations, and analysis.


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