A bank in every African pocket?

Ann Wanjiku walks up to a green-and-white booth with an “M-Pesa agent” sign on it. There she shows the agent her identity card and her cellphone, which displays a personal identification number (PIN) provided by a client.

Using the PIN, the M-Pesa agent takes just a minute to verify that the client has transferred payment for 1 000 traditional carvings into Wanjiku’s mobile money account.
Wanjiku then withdraws the amount in cash.

Like 90% of Kenyans, Wanjiku does not have an account in a regular bank. Across Africa, only 20% of families have formal bank accounts, according to a World Bank survey. In Tanzania, the percentage is as low as 5%; in Liberia it’s 15%.

But the proliferation of cellphone services around the continent has opened a new way to extend financial services to people like Wanjiku. In the few countries where they have emerged, companies such as M-Pesa can use any phone or phone card to provide affordable services to customers wherever there is a cellphone signal.

Expanding such innovations in the use of modern ICT more widely was a central topic at a Connect Africa Summit held in Kigali, Rwanda, in October. More than 1 000 private-sector, government and donor representatives discussed how such technologies can help find solutions to Africa’s development problems.

Money under mattresses

Most banks in Africa have branches only in urban areas. Brian Richardson, CEO of Wizzit South Africa, a cellphone banking facility, notes that expanding access to rural areas has traditionally involved opening new branch offices. “As long as you have that mindset,” he says, “it becomes incredibly expensive to bring banking to the mass market.”

As a result, regular bank services are often simply unavailable. Ethiopia has just one bank branch for every 100 000 people, compared with Spain, which has 96 branches for every 100 000 people. Moreover, requirements to maintain relatively high account balances make such services too costly for most Africans.

Even in South Africa, which has a more extensive banking system, it is estimated that people keep about R12-billion “under mattresses”, says Richardson. “If we could take just a small portion of that into the formal banking system, the impact on the economy would be enormous.”

Established in 2004, Wizzit has signed up 50 000 South African customers. It hopes to reach 16-million others, in a country where about 60% of the population has no bank account.

Holders of Wizzit accounts can use any cellphone, even the cheap, old models popular in low-income communities. Users can deposit cash into their cell-based accounts through any post office, or any branch of Absa or the Bank of Athens. Salaries can be paid electronically into a Wizzit account. Account holders also receive Maestro debit cards accepted at ATMs and by retailers. There is no minimum balance or annual fee, but users pay between about R1 and R5,50 per transaction.

According to Mohsen Khalil, the World Bank’s director of global ICT, Wizzit’s operation is one of the most innovative approaches to mobile banking, since it specifically targets the poor. If this model works in South Africa, he says, the World Bank will help the company expand coverage within and beyond the country. “We may be looking here at ... the most effective way to provide social and economic services to the poor.”

Touch of a button

Some counterparts to Wizzit have emerged elsewhere in Africa. Like Wanjiku, about one million Kenyans use M-Pesa, a joint product of the Vodafone/Safaricom cellphone company, the Commercial Bank of Africa and Faulu Kenya, a micro­finance organisation.

M-Pesa customers deposit money with a registered agent or phone vendor. The agent then credits the phone account. Users can send between 100 Kenyan shillings ($1,50) and 35 000 shillings ($530) via an SMS to a desired recipient—even someone using a different mobile network. The recipient then can obtain the cash from a Safaricom agent by entering a secret code and showing personal identification.

Similar services are now available in the Democratic Republic of Congo and Zambia. In Zambia, Celpay, a product of First National Bank of South Africa, allows businesses to pay for services and receive payments via cellphone accounts. Celpay currently processes up to $10-million in payments per month.

In South Africa, First National Bank also partners with cellphone provider MTN, which provides services for South Africans who already have a bank account but also want to send and receive money over cellphones.

Between them, MTN and Wizzit enable 500 000 South Africans who do not have accounts to send and receive money to relatives, pay for goods and services, check balances and settle utility bills. Until the advent of the two services, South Africans often paid couriers from R200 to R350 to deliver cash to relatives. Now such transactions cost only about R3,50 through mobile bank networks.

The greatest impact is in rural areas, says Beyers Coetzee, a rural community officer for Wizzit. “Eighty percent of all farmers do not have bank accounts.” Moreover, he adds, a Wizzit account, unlike a regular bank account, is not closed if the customer does not use it regularly. That is “very useful for seasonal workers” in particular.

Rob Conway, head of the Global System for Mobile Communications Association, an international group of cellphone service providers, says that such innovations have “changed the lives of millions of Africans, catalysing economic development and strengthening social ties”.

Lauri Kivinen, head of corporate affairs for the Nokia Siemens network, agrees that this development is significant. “It means unprecedented, substantial change for ordinary people,” he says. Through cellphone banking, people can “extend their social and business networks, boost their productivity and so much more, all at the touch of a few buttons on a cellphone”.

Reprinted from UN Africa Renewal

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