Building Peace: One Mobile at a Time
Posted: December 9th, 2010 | viewed: (1,540) | Comments: ( 0 ) | Topic: Blog Post |
There is a lot of optimism about the use of mobiles in the peace-building sector and in particular mobile money bringing financial services to the poor. While there is widespread reach of mobile phones in post-conflict countries—Afghanistan has 13 million mobile phone subscribers—is mobile money the silver bullet? Are these services appropriate in post-conflict environments that face unique challenges such as low levels of poverty and illiteracy, corruption, and fragile security? Yes; mobile money provides speed, financial security, the ability to be discreet, liquidity and in some cases transparency in corrupt states. However, the current optimism in mobile money in these areas could be more grounded in reality—in the rather unconventional challenges operators face in these difficult environments including a) weak infrastructure; b) tenuous political and regulatory environment; c) education and literacy barriers; and d) an untrained workforce.
Post-Conflict Mobile Money Opportunities
A study conducted in post-conflict Liberia found that mobile phone penetration was increasing at a staggering rate and identified the following reasons why: many users see their phones as productivity enhancers, a means of connectivity to family and friends, and essential business tools. This same institute also compared data from the Brookings Institute Index of State Weakness in the Developing World from 2008, and compared it with 2008 ITU mobile phone teledensity data and found that mobile phone penetration is sensitive to money, politics, and social development – but seems immune to security concerns. This could be a positive sign for mobile operators, but does the same logic apply to mobile money deployments? It is then important to outline what the advantages are for a mobile operator to introduce mobile money services in post-conflict environments, and then examine some of the accompanying challenges.
Post-conflict economies are often characterized by fragile currencies and economies in a state of hyper-inflation which lead to a high demand for cash (which can be counterfeited). By providing a means for transactions to occur—a reliable and efficient payment system via the mobile phone—the velocity of money[1] offered by mobile money can aid in the growth of the economy. Additionally, in a country where alternatives are less likely available, MNOs who offer this service can gain early entry into an undeveloped but thirsty market and may capture a large share of it.
A good example of a mobile money deployment that has contributed to expanding the cash distribution system in the country but has found it challenging to scale up because of post-conflict conditions is Roshan’s M-Paisa in Afghanistan.
Afghanistan
Afghanistan’s literacy rate is 43% for males and 12% for females, only 3% of its population has access to banks, and her infrastructure has been left in rubble after decades of conflict. Perhaps because of these challenges, Roshan launched M-Paisa in 2009 to bring financial services to the poor.
Zahir Khoja of Roshan recently explained to us that while mobile money agents pose a great alternative to banks that generally cannot operate in sparsely populated rural areas and high-risk security zones, Roshan can still face some of the same security risks. Insurgents and vandals are able to disrupt communication at a cost to operators. Agents who have high liquidity requirements (traditionally Afghans withdraw 100% of their e-money) face security risk from insurgents and thieves, and deal with security checkpoints when travelling rough, unpaved routes and long distances from rural areas to the nearest bank (and sometimes on a donkey!). Providing agents visible protection from these security threats may not work, as that may just increase the number of threats.
On top of the security and logistical challenge is working with a fragile government and a financial sector cautious of mobile money. Roshan needs to constantly engage with the Government and demonstrate the benefits of M-Paisa in order to obtain buy-in from them. In fact, according to some estimates, if the M-Paisa programme were scaled up to its full potential, more than $60 million a year could be retrieved from what is lost in the financial system because of corruption and banking fees.
With the low literacy rate, Roshan has to invest in marketing and workforce training; coupled with addressing cultural sensitivities—particularly barriers women face in a male dominated society. Women’s barriers can range from transacting in privacy and perhaps only with female agents and educating them not to share their PIN with people they have always trusted. Roshan has found that working with local businesses can help them increase awareness and build trust among potential users and eventually help M-Paisa achieve scale.
Despite these challenges, Roshan has brought transparency to payment systems and encouraged microfinance institutions to use the mobile platform for loan repayments.
Where do we go from here?
These challenges, along with knowing your audience, need to be well understood when assessing mobile money’s potential in post-conflict environments. Identifying the costs and benefits can help MNOs focus on what mobile money product can be successful: whether providing a system for government payments will be more successful because of the high extent of state ownership in post conflict countries, or providing a money transfer system in countries where alternatives are unavailable. We hope we’ve given another perspective into the reality of implementation.
[1] The velocity of money is the average frequency with which a unit of money is spent in a specific period of time.
