The following is a guest post we’re pleased to share by David Montez, Research Analyst with InterMedia’s AudienceScapes project

mobile money in Kenya, led by Safaricom’s pioneering M-PESA product, has set a standard of success and reach by which deployments in other countries are often measured. From a development perspective, a recent study provided encouragement by indicating that M-PESA is reaching down Kenya’s socio-economic spectrum, thus providing efficient and affordable financial services to those at the bottom of the pyramid (BOP).

But what about in neighboring Tanzania, a relatively poorer country where mobile money was notably slower to take off? Are such services getting to the unbanked and other economically excluded residents?

The AudienceScapes project, launched by InterMedia with seed funding from the Bill & Melinda Gates Foundation, conducted national surveys in Kenya in mid-2009 and Tanzania in mid-2010 which included questions about use and knowledge of mobile money. Both surveys took place roughly two years after the first mobile money services had been launched in each country, providing a basis for comparing how mobile money was doing in Tanzania two years on. Our analysis focused on two key questions: Who uses mobile money services? Are users mainly those who previously had access to other banking services, or do they include the BOP?

Researchers have highlighted the significant differences between Kenya and Tanzania in geography, population density, economic development and access to financial services, which put Tanzanian m-money service providers at a relative disadvantage. Indeed, at the two-year point, the surveys showed that only 11.5 percent of Tanzanian adults had used an m‐money service, versus 56 percent of Kenyans.

Furthermore, mobile money in Tanzania remains primarily a tool for the banked and the well-to-do. Only 3.9 percent of respondents among Tanzania’s financially excluded or unbanked adults said they had used mobile money, versus 20 percent in Kenya in July 2009.[i] Similarly, only 7 percent of Tanzanian respondents with a household income of less than $2 a day reported having used m-money, compared to 41 percent in Kenya. (Note that 51 percent of Tanzanian respondents said their household income is less than $2 a day, versus 38 percent in Kenya).

Despite the low rate of use among the poor, they still make up nearly a third of those who said they have used m-money, and their presence among m-money users seems to be increasing. In fact, 36 percent of those m-money users who began using the service in the 6 months prior to the survey also said they live on less than $2 a day. This is a significant demographic shift away from the higher income profile of users who have been using the service longer than six months. Only 23 percent of these earlier adopters have a daily income of $2 or less.

Indeed, mobile money service providers have taken steps to make these services more accessible and convenient. For example, Tanzania’s M-PESA (operated by Vodacom) partnered with the GSMA to tackle the problem of agent liquidity; Bharti Airtel (formerly Zain’s Zap service) continues its work towards creating a cash-free ecosystem. Perhaps in a reflection of such efforts, the Tanzania AudienceScapes survey pointed to a recent, sharp increase in the number of registered users: 63 percent of those who said they had used m-money also said that they first began using a service in the past 6 months. This corroborates recent supply-side statistics and points to a m-money market poised for further expansion.[ii]

This influx of new users also likely reflects greater competition in the market and an effort by providers to capitalize on a law requiring mandatory SIM card registration, which came into effect in July 2009. The information required to register a SIM card is similar to that needed to register for an m-money service, so providers used mandatory SIM card registration as an m-money marketing opportunity. Indeed, the period of mandatory registration (July 2009 through June 2010) coincided with exponential growth in m-money registrations for M-PESA and Zap.

There is further room for optimism for development groups pushing m-money as a tool of financial empowerment for BOP individuals, if only because more lower-income Tanzanians are now owning mobile phones in larger and larger numbers. In the Tanzania survey we found a strong connection between m-money use and mobile phone ownership. The survey defined recent adopters of the mobile phone as those who first acquired a mobile phone in the past year, and revealed that this group includes many more lower-income individuals than those who adopted mobile phones earlier (between two and five years ago).

Thus, as mobile phone usage reaches further down the income scale, there is a greater chance that BOP individuals will use m-money services. The AudienceScapes data indicate that mobile phone ownership remains a key determinant of m-money usage. Just over 92 percent of those who have used m-money also said that they are mobile phone owners. This connection was also found in the 2009 Kenya survey, with some 86 percent of m-money users in the survey owning their own mobile phone.

The Tanzania survey also queried respondents as to why they have not started using m-money. The main reason cited for not using m-money was a lack of knowledge about how to use it. At the same time, respondents expressed interest in learning more about it.

In fact, there is a close relationship between the problem of lack of knowledge and the second-most-cited problem of not having access to an m-money agent. Network agents are on-the-ground representatives for service providers.  Since many agents are already airtime sellers and kiosk operators, agents are in a position to inform existing and prospective customers about m-money. Understandably, lacking access to an agent is a substantial problem in rural areas: 93 percent of respondents who said they do not have access to a network agent are rural residents. Tanzania, in particular, faces this problem as nearly three-quarters of its population reside in rural areas. These regions are often the last to see an agent network roll out due to a lack of prospective storefronts that can support an agent.

The Tanzanian survey suggests that marketers and promoters of m-money services may be underutilizing word-of-mouth, SMS-text messaging and other information channels beyond mass media that have the potential to reach many more potential users. Combining these channels with mass media campaigns can enhance the effectiveness of raising awareness and use of m-money services.

In fall 2010, Vodacom received a $4.8 million grant from the Bill and Melinda Gates Foundation aimed at expanding the public’s knowledge of M-PESA and the services’ benefits, particularly for unbanked individuals. A majority of respondents in the AudienceScapes survey expressed a need for more information on banking services, including m-money. When we asked respondents what types of financial transactions they would like to know more about, 52 said they wanted more information about m-money and 51 percent wanted more info about money transfers. There was an even greater call for information about saving and borrowing of money.

While Tanzania’s m‐money market faces many challenges and has not replicated the success of m-money in neighboring Kenya, there are signs that Tanzania is finally turning a corner.  Based on trends in the first half of 2010, take-up rates of m‐money services are gaining momentum as agent networks expand and service providers devote more resources to direct marketing. It is important to monitor not only the number of people who are signing up for these services, but also on whether there is greater penetration at the bottom of the pyramid.

[i] Formal banking has been defined by a positive answer to the questions “Have you used a bank or a cooperative to save money in the past 12 months?” and “In the past 12 months, have you borrowed money from a bank or a cooperative?” and “Do you have a bank account?”. Informal banking access is defined by a positive answer to the questions “Have you used a savings club/upatu/ROSCA/ASCA to save money in the past 12 months?” and “In the past 12 months, have you borrowed money from moneylenders, ASCA or ROSCA?”. Those respondents who have been described as financially excluded or unbanked answered in the negative to all the above questions.

[ii] According to supply-side statistics from mobile money service providers, more than 9 million Tanzanians have registered for a mobile money service. However, the AudienceScapes survey did not ask respondents whether they had registered for a service, only whether they had used mobile money. Okoegwale, Emmanuel. “M-PESA Service gets U.S$4.8 million boost in Tanzania”. Mobile Money Africa. 17 November 2010. Accessed December 2010. http://mobilemoneyafrica.com/?p=2677. And Leishman, Paul. “A Closer Look at Zap in East Africa”. Mobile Money for the Unbanked Program. GSMA. 4 May 2010. Accessed December 2010. http://mmublog.org/global/gsma-publish-case-study-on-zain%e2%80%99s-zap/.