One of the big raps against mobile banking is that it will unleash a wave of cross-border terrorism funding and criminal money laundering, because the practice is so unregulated.  It’s a major concern that regulators are beinning to come to grips with.

But what if mobile banking might actually reduce AML and terrorism funding. How m-banking can reduce money laundering (Business Daily, May 27), by Matt Herbert of The Fletcher School, suggests that might be possible:

In the epicenter of global m-banking today(Kenya), the M-Banking 2009: Balancing Regulation and Innovation conference in Nairobi was a landmark event–bringing together bankers, telecoms and Central Bankers to hash out the issues and resolve the tensions between them. The protagonist was/is Safaricom’s  M-PESA money-transfer-by-mobile phone, which has caught bankers flat-footed.

From hotel porters to members of Parliament, everyone is using M-PESA, to send money home to villages, pay bills and tuition–and store money in their phone.  Even in Kibera, the largest slum in Africa with 1 million people living without electicity or sewage, M-PESA is being used by local savings groups to mobilize money.  Some groups have used their meager savings to invest on the stock market–in M-PESA.

Organized largely by students at The Fletcher School (Center for Emerging Markets Enterprises) and co-sponsored by the Kenya School of Monetary Studies, with lead support from Kenya’s Equity Bank, the conference provided a forum for the Central Bank of Kenya to address simmering tensions between the banking community and Safaricom, whose M PESA mobile-money transfer system is spreading like wildfire. With more than 6 million M-PESA accounts, more people in Kenya are transferring money by mobile phone than have bank accounts.

High-level Kenyan dignitaries included the Governnor of the National Bank, the Vice President of Kenya, and the Ministers of Finance and Communications. Attendees included the Central Banks of Uganda, Tanzania, and Rwanda, numerous commerical banks, Safaricom,  and interested parties primarily from Africa and Europe, butalso including World Bank’s CGAP and Bankable Frontiers from the U.S. The presentations and debate were high-level and high-spirited.

The week of the conference,  Business Daily Africa ran a 12-page spread representing numerous points of view; during and after the conference, local TV and print media ran multiple stories.

More updates to follow…I’m going to predict, there’s something happening here.

M-PESA, the extremely popular mobile-banking product offered by mobile carrier Safaricom in Kenya, is being audited by the Central Bank of Kenya.  In December, a cartel of local banks attacked M-PESA as a “Ponzi” scheme and asked the government to investigate.  See the story in allAfrica.com.

M-PESA, launched by Safaricom in 2007 in conjunction with Vodafone, has gotten the attention of bankers because of its quick growth. M-PESA now has 5 million users and 5,000 outlets–compared to 3 million with bank accounts at 750 banks.

Because M-PESA is primarily aimed at the “unbanked” population, the limit on a single transfer is under $500.

Safaricom overall counts 12 million users.

That cellphones are full-fledged computers useful for a lot more than basic communications is well known, but actual, practical applications are just coming online. To date, most have been in the transfer of market information (CellBazaar) and money (M-PESA), with a host of trials in the medical arena. But getting doctors to use new technology isn’t always easy–unless it fits right into what they are used to doing.

ClickDiagnostics, a new company spawned at MIT (and winner of the MIT Enterprise Forum’s $100K competition in the “development” field), may have accomplished that. The idea is to use cell phones in the field, particularly remote rural areas, to take pictures of people’s eyes and skin, then transmit those images to doctors for diagnosis of cataracts and skin cancer. In an initial test last winter students travelled to Bangladesh to shoot images, then tested their quality with doctors at Massachusetts General Hospital (aka MGH, aka “man’s greatest hospital”) in Boston. The doctors said they were of high enough quality to make an initial diagnosis and prescribe a treatment regimen–or point to the need for immediate hospital-related care.

In addition to the common skin disease prevalent in all developing countries, these simple cell phone images can detect the onset of HIV, Malaria, Hepatitis C, and TB. To the extent the product can be deployed in the field, it could have a huge impact on the early recognition and treatment of these debilitating and potentially deadly diseases.

With the MIT prize and some seed funding under its belt, ClickDiagnostics has its first contract to provide service in Egpyt, starting this fall.

Dear Mr. Sullivan,
 
I hope this e-mail finds you well into the new year.
 
As you know, the Kenya Elections has been an ongoing situation keeping us at AfricaNews.com pretty busy. Here is some background on what we are doing and in terms of mobile reporting. Pretty interesting stuff that might be interesting to you and your readers. 
  
Rgrds,
 
Ben and AfricaNews.com team!
+31 (0)23 531 5040
benwhite@africa-interactive.net
 

See Voices of Africa for mobile news reports, and see how cell phones are democratizing the media. 

The mobile banking phenomenom is one of the more exciting and unpredictable offshoots of the cell phone revolution in poor countries. People who until very recently had no phones and no bank accounts are now transferring money by phone.

M-banking is most pronounced in the Phillippines, where it started, but it’s heating up in Africa. Vodafone in conjuntion with Safaricom in Kenya recently launched M-PESA (”mobile money” in Swahili), initially with the intention of streamlining microfinance operations by allowing loans dispersal and repayment by cell phones. In three months, the service has attracted 175,000 subscribers, who aresigning up at the rate of 2,500 a day.

Nick Hughes, Vodafone’s head of international payments, told The New York Times (In Poorer Nations, Cellphones Help Open up Microfinancing):

“The idea was to reduce the cost of loan disbursal and recovery, but what we found was that customers were using it for person-to-person transfers.”

Customers don’t need a bank account, but can load money into their phones by paying cash at selected outlets, including grocery stores and gas stations. They then text money (”stored value”) to other cell phones.

The Vodafone/Safaricom m-banking case study is fully detailed in Innovations journal (MIT Press), in the current issue (M-PESA: Mobile Money for the “Unbanked” Turning Cellphones into 24-Hour Tellers in Kenya). The June 28th Economist has a piece on M-PESA called Dial M for Money. And, of course, there Chapter 9 in my book, Cell Phone as Wallet, which tracks the evolution of mobile banking. 

The Times’ article (above) also describes the way new technologies, including fingertip authentication, are being used by microlenders to extend the reach and efficiency of their lending operations.

From Telegeography:

Kenya’s mobile market contributed over 5% of the country’s GDP in 2006, according to figures released by Celtel, the second largest of the two local cellular operators. This was equivalent to KES111 billion (USD1.65 billion), Celtel says. The operator is calling for the government to lower excise duty on airtime in order to encourage greater take-up among low-income users. Subscribers currently pay 26% tax on each call, with value added tax at 16% and the airtime excise charge at 10%. Celtel’s CEO David Murray wants to see the excise duty lowered to 5%, according to a report from CapitalFM in Nairobi; he says: ‘At 26%, the levy is among the highest in the world, locking out millions of low-income earners, especially in the rural areas and the marginalised areas.’

In Toronto’s Globle & Mail, Jennifer Hollett writes about cellphones connecting the “poor and vulnerable to the rest of the world.” Some parts of her Cellphone gaining global reach are based on an interview with me, but the most interesting quote comes from a research officer at CARE Canada, for which Hollett volunteered in Africa:

“People will often prioritize connectivity above nourishment.”

This seems inconceivable, at first blush, but it does point to the fact that for most people in developing countries the phone is a productivity tool that either saves time and money–or makes money. It also helps to explain the answer to one of the big questions about phones in poor countries: How can people living on $1 or $2 a day afford phone service?

Because they a) share the phone and thus the cost and b) they find that the phone more than pays for itself.

Indeed, an old but still relevant study in Bangladesh by the Canadian Telecommons Group found that the cost of a trip to Dhaka was anywhere from 2 to 8 times the cost of a phone call. In economic jargon, the resultant “consumer surplus” suggests that people get far more than what they pay for in a phone–and that they’d be willing to pay more. The surplus is increasing all the time; a new study from TeleGeography’s Wireless Operators Research Service notes that ARPU (”average revenue per user) is declining globally–giving subscribers more and more bang for their buck.

The village-phone scheme pioneered by GrameenPhone in Bangladesh has been successfully implemented in Uganda and Rwanda by South Africa’s MTN, and in the Philippines by Globe Telecom. The common thread to these replications is consulting advice from the Technology Group at Grameen Foundation USA.

After several years working out the kinks and writing manuals to ease implemenation, Grameen Foundation has now released a Village Phone Direct kit, which it sells to microfinance institutions around the globe. The kit includes:

• Nokia mobile phone with earpiece
• External booster antenna for areas without strong mobile signal coverage
• Custom designed cables to connect the phone to the antenna and the recharging equipment such as a automobile battery or a solar panel

To complete the Village Phone Equipment Kit for the microfinance client, a SIM card and prepaid airtime, which can be purchased through regular outlets.

I just returned from the Emerging Markets Private Equity conference in London, where VC and private equity fund managers and investors from around the world gathered. Lots of talk about returns in emerging markets, which are outpacing those in the U.S.–by a long shot. The other big news, at least for people investing in Africa, was the recent announcement of a $5 million prize for “good governance” instituted by Mo Ibrahim, the founder of Celtel. The Mo Ibrahim Prize for Achievement in African Leadership is touted as the largest monetary prize in the world.

Celtel is the sub-Saharan African cellphone company that was bought by Kuwait’s MTC in May 2005 for $3.4 billion. That made good money for the investors, some getting spectacular multiples in return–and within Celtel created nearly 100 milionaires, many of them African. Dr. Mo, as Ibrahim is fondly known (or “just Mo” as he prefers to be known), is using some of his proceeds to encourage good governance in Africa.

The prize will go to elected leaders who eschew corruption, according to the Ibrahim Index, as designed by Prof. Robert Rothberg at Harvard’s Kennedy School of Government. The winner, upon leaving office, will receive $500,000 a year for 10 years, and $200,000 a year thereafter as long as he or she lives. The Ibrahim Foundation calculates that the prize will more likely be worth in the range of $8 million, assuming leaders live 20 years after leaving office.