Looking closer at the credit side of M-Shwari, this is not the first telco-bank partnership to offer short term credit. Airtel teamed up with Faulu Microfinance in May to offer Kopa Chapaa, a 10 day loan up to 10,000 Kenya Shillings. And previously, there was of course M-Kesho from Safaricom and Equity Bank.

We wrote about airtime based credit scoring in March and had contributing posts from Experian MicroAnalytics and Cignifi who both work in this area. With the vast majority of mobile subscribers in emerging markets using pre-paid SIMs, there is incredibly rich data available on airtime purchase and usage behaviours. Couple that with the poor quality of information available at credit bureaus, and airtime based credit scoring is an attractive approach to targeting and risk profiling for credit products.

What does the launch of M-Shwari mean for mobile money? A few thoughts:

• The design of this product suggests telcos may be waking up to the value of their data. Telcos frequently monetise their own data for internal use to design smarter talk time promotions or offer better segmented VAS.  But M-Shwari shows how telco data can be leveraged as an asset to generate external sources of revenues.
• This credit and savings product is being offered through a telco- bank partnership rather than by the telco alone. Telcos don’t engage in direct lending or financial intermediation; rather they are focused on the high volume transaction-fee part of mobile financial services.
• Finally, it is encouraging to see mobile money customers can now earn interest; this benefit has been withheld for too long. Safaricom says 70,000 accounts were opened on the first day alone. But will this vanilla savings offering hold enough appeal to mobilise savings deposits?  One can envision mobile money savings products which better leverage the power of mobile i.e. programmed savings, innovative mobile savings reminders, progress trackers, rewards, etc.

What’s your take on M-Shwari?  What does the launch of this new product mean to you?  Is this a game changer for financial inclusion?  What do you expect the uptake to be of M-Shwari? Share your thoughts with the MMU readers.

M-PESA contributes more revenue to Safaricom than data and SMS combined

M-PESA now comprises 18% of Safaricom revenue, more than SMS (8%) and data (7%) combined. Its 32% revenue growth rate exceeds that of voice, mobile data, and SMS.

Registered user growth has plateaued: Safaricom must deepen usage within a largely static base

One drawback of success is that user growth can be difficult to maintain. Safaricom has already registered 79% of its GSM base onto M-PESA, so finding new subscribers can be difficult. M-PESA yearly user growth has flattened to just 2.4% over the past year versus 69% just two years ago.

The focus has turned to driving activity within the existing base – activating customers and deepening usage for those customers.  Safaricom claims that 30-day active customers have increased 14% to 9.7 million. Activating the remaining 5.5 million inactive subscribers, and driving transactions within the active base will be a focus. Industry watchers will be curious to see what role new products and partnerships have to play in deepening usage.

B2C and C2B transactions are emerging as contributors

The H1 results reveal that M-PESA is more than a P2P story.  While P2P (C2C) transactions still account for a majority of volume, efforts to connect to formal businesses appear to be yielding results. C2B transactions now accounts for 7.4% of value transferred and B2C contributes 5.5% [1].

More cash is being converted into digital form and living within the M-PESA ecosystem

Safaricom’s H1 F13 results reveal that in September 2012 Ksh. 69 bn was deposited into M-PESA accounts while only Ksh. 62 bn was withdrawn back into cash. This implies that Ksh. 7 billion (US$82 million) of cash was converted to digital form in September alone and now lives inside the electronic M-PESA ecosystem.

For those that believe in the importance of digital currency for financial inclusion, the net absorption of cash (US$8.45 per active user in September 2012) should be seen as an important trend.

What do the M-PESA results mean for the mobile money industry? We welcome comments from practitioners and industry observers below or you can email us at mmu@gsm.org.

This blog post was written by Tonny Omwansa, co-author of Money, Real Quick: The story of M-Pesa.

The GSMA recently published the results from its Global Mobile Money Adoption Survey, documenting the degree of adoption of mobile money for the unbanked services across the world. The 52 participants to the survey together reported over 60 million registered users as of April 2012. However, a much smaller number of customers were active and only 8 deployments had been experiencing a quick customer uptake. This report provides evidence that supply side factors such as a supportive regulation, a large GSM base, and a high of investment can contribute to the rapid growth of these services. However, not much information is available in the public domain about drivers of adoption and usage from the customer perspective. In this blog post, I present some results from a survey about the adoption drivers for customers at Base of the Pyramid (BoP).

I recently conducted a survey of 283 mobile money users from 8 poor areas around Nairobi, in Kenya. The customers surveyed were users of M-Pesa, Airtel Money or Orange Money. The research objective was to create a model to explain adoption of the mobile money among the BoP population. This model would be used to predict adoption of products that are yet to be deployed or evaluate the success of mobile money products that are in operation. Secondarily, the study was to establish the most important factors considered by the un-banked in choosing a mobile money product. Seven constructs were theorized and operationalised to either cause Behavioural Intention or Actual Use of mobile money.

“I can’t sign up for a money transfer product if I can’t see an agent nearby!”

According to the respondents, facilitating conditions was the single most important factor they would consider when signing up for a mobile money service. Transaction Cost, Social Influence, Perceived Trust and Performance Expectancy were then the most cited factors (in decreasing order of significance).

“I can’t sign up for a money transfer product if I can’t see an agent nearby!”, says Onyango from Huruma Estate in Nairobi. In another area, Kimathi argues “I do my business here in Dagoreti all day long. What I don’t want is to move around agent shops looking for float. That wastes time.” Facilitating Conditions is the degree to which an individual believes that an organizational and technical infrastructure exists to support use of a system [1]. In the context of mobile money it would refer to aspects like easy access to the agent network, confidence in the knowledge of how mobile money works, presence of the network coverage, reliable customer support and availability of liquidity/float. The users want to be assured that whenever they need to transact, nothing will come on their way to frustrate the process.

The fact that the facilitating conditions were ranked as most important speaks volumes about the BoP’s need for support and assurance. These consumers are not technologically savvy; they are likely to have a low level of financial literacy, be un-banked, have irregular or low income and have little or no access to formal savings channels. In their vulnerability, they trust the mobile money provider to ‘keep/manage’ their money. But they want to want to be ‘close enough’ to their money. The closeness comes in form of facilitating conditions.

What lessons can MNOs draw from this research?

The results of this study have significant implications for mobile operators. Given the large investment in developing and deploying mobile money products, a good understanding of the drivers of adoption is useful so as to make the organizations prioritize their resources appropriately.

Since facilitating conditions turned out to be the most important construct determining usage of mobile money among the poor, management must put systems in place to support the use of their mobile money products.

Users, particularly at the BoP, care a lot about supporting services around their money:

• they want to know about the processes and how to use the products;
• they want to be sure they can get help and technical support if and when needed;
• they want a reliable access to the mobile network at anytime and anywhere;
• they want to be sure that their mobile money agent has enough liquidity for cash-in-cash-out services.

Reliable and responsive customer support services, strategic positioning of agents, customer education around product features, availability of liquidity, and marketing around each of these aspects are examples of what mobile money managers can focus on.

In a nutshell, as mobile money products are being rolled out all over the world, thinking about what determines adoption and usage is key. The research provides a basis for investigating what could make a new mobile money service attractive from a consumer point of view. In addition, for products that are already in the market, the research informs what parameters to further investigate with the intention of strengthening the product and improving adoption.

The full results from this research project are to be published in December 2012. Feel free to post comments below if you have questions on the methodology or the interpretation of the results.

FrontlineSMS

FrontlineSMS:Credit enables organizations that serve the base of the economic pyramid to bring the benefits of mobile money to the financially excluded by building and distributing free, open-source software for mobile money management.

FrontlineSMS:Credit’s PaymentView software is an extension of FrontlineSMS’s free, open-source technology that turns a laptop and a mobile phone or GSM modem into a central SMS communications hub. The tool enables users to send and receive text messages with large groups of people without the need for Internet access. With the PaymentView extension, users can also send, receive, and manage mobile money transactions. By expanding the uses of mobile money in developing markets, FrontlineSMS:Credit helps to fulfill the promise of mobile money to offer even the most underserved communities access to financial services and enable new business models that aid in development.

A lot has happened since we last talked to the FrontlineSMS: Credit team. In a previous blog post, we described their approach towards enabling organizations and businesses to easily use mobile money. Over the past few months, they’ve got the opportunity to test this approach through a project in partnership with a Kenyan financial services association (FSA) [1]. 

Challenge #1: Providing an easy and convenient way for groups to transfer money to the FSA…

This FSA is composed of 50 groups of around 20 people each. Like many others, it serves a large geographical area and some groups are more than 30km away from the FSA head office. This means that a representative of each group has to travel there every time the group wants to transfer money: which represents a day of travel for the representative of the group and a cost of around USD8 for the group on a monthly basis. The service implemented by FrontlineSMS: Credit allows representatives of groups to transfer money through M-Pesa directly to the FSA. FrontlineSMS estimates that there has been a reduction of up to 50% in the cost of repaying loans and a reduction of up to 85% in the time spent on repayments, depending on how far away a savings group meets from the FSA office. The groups saving the most are those who are far away from the FSA, as almost every group meets within a short walking distance of an M-Pesa agent.

Challenge #2: … without breaking group dynamics

The board of the FSA was initially worried that using mobile money would break down the group dynamics, which are very important to them. To face this challenge, FrontlineSMS: Credit has developed a process which allows FSAs to receive group payments through mobile money. A representative of the group collects money and transfers it to the FSA via mobile money.

The next step for the team is now to increase the number of FSAs using their service.

MMU: What are the main challenges faced by MFIS trying to use mobile money?

FrontlineSMS: Credit: We’ve noticed that software is a big problem. The ability of an MFI to find a software tool that enables them to easily process mobile payments is very limited, even in Kenya, where the use of mobile money for P2P transfers is very high. This software issue is a major reason why many businesses in Kenya have not adopted mobile money and have instead continued to use other forms of payment.

In addition to this, a transition to a new mode of payment combined with the new business process required at an MFI’s office to process these payments is not a small change. Within an MFI, there needs to be someone who is pushing the project forward and buy-in from the staff is essential, especially loan officer, who will be training clients on how to use the new, mobile money-enabled system. The technology is quite simple, but the human part can be a bit slower as clients adjust to repaying loans in a new way and MFI staff members adjust to a new process.

Finally, increased use of mobile money, especially larger transactions, can put strain on the agent networks in rural areas, who are not accustomed to processing larger amounts. For an individual to make a repayment, this may not apply, but if repayment is done at the group level, sometimes the nearest agent does not have sufficient float to make the transaction. However, increased cooperation between mobile money agents and MFIs or savings groups can alleviate this strain. Because groups meet and repay on the same day each month, a small amount of advance planning enables agents to retain sufficient float for group transactions.

MMU: What advice would you give other MFIs integrating mobile money to their systems?

FrontlineSMS: Credit: We would advise MFIs to plan carefully and make sure to walk through each part of the new, mobile money-enabled process, both from the perspective of an MFI staff member and a client. This enables an MFI to plan appropriately and mitigate any risks that they see in light of the new system. It also enables MFIs to design a system that fits well with their local context and customer base. Because our software, PaymentView, is free, we lower the barriers to technology adoption by MFIs and enable them to easily experiment with new processes.

We would also advise MFIs or any organization or business adopting mobile money to start with a small pilot first to work out the best system for your organization before scaling up. This means try starting out with just loan repayments and with a few savings groups. This way, an MFI can test their new system and get feedback to improve it before scaling up to include all groups and before adding other mobile money-enabled services. During the pilot, carefully measure the impact of using mobile money on your operations. This can range from increase efficiency in payments processing to time and cost savings from clients to other kinds of intended or unintended effects. Be in touch with your clients and staff members frequently to get feedback and make changes to your system as needed.

Detailed planning and iterative pilot testing can help to ensure success of a new system and process by helping with staff buy-in and improving customer satisfaction.

A lot has been written on the opportunity of using mobile money to provide microcredit and on why Micro Finance Institutions (MFIs) should be using mobile money. Indeed, mobile money is a cheap and convenient channel that can be used for loan disbursement and repayment. It also reduces the risk of fraud as MFI officers often travel with cash from the place they collect it to the MFI branch office.

However, the number of MFIs substantially using mobile money is actually quite limited, and for good reason: typical mobile money services have not been designed with the vision of serving MFIs, but rather individuals, and using mobile money to supplement their operations presents a number of challenges for MFIs. In this blog post, we present how two organizations are trying to find solutions to these challenges in Kenya.

Musoni

Musoni (‘M’ for Mobile and ‘Usoni’ for future) is a young but very promising MFI in Kenya. Established at the end of 2009, Musoni believes the next generation of microfinance is mobile. Musoni’s vision is to substantially improve the quality and availability of financial services to low income, unbanked and underbanked individuals in the developing world through the establishment and support of best-practice MFIs with an emphasis on efficiency, transparency and client focus.

Musoni is the first MFI in the world to go 100% mobile, using mobile money transfer services for all loan repayments and disbursements. Musoni has successfully integrated its back office with the leading Kenyan mobile network operator, thus enabling seamless processing of all transactions. Musoni’s success in taking advantage of the Kenyan M-PESA service, with its 45,000 agents and 18m clients, has enabled it to offer a flexible and convenient alternative to the traditional time-consuming and manual microfinance processes.

Musoni has cash-lite operations, but not branchless. The branches are places for clients to visit to meet Staff and discuss issues on hand but not for Cash transactions which are done at Money Transfer Agents and Shops. After a little over two years, Musoni has set up five branches spread out in three cities, two of which are in and around the capital city of Nairobi.

Musoni has identified Uganda as its second country of operations and plans are underway to set up the first office in Kampala, Uganda. In Kenya, Musoni works with Safaricom’s M-Pesa, but plans to use multiple mobile money services in Uganda.

Challenge #1: Reducing the cost of setting up MFI branches…

Setting up brick-and-mortar branches is quite expensive for an MFI, and Musoni made the bet that this cost could be substantially reduced if transactions were not in cash. For example, a strong room is an obvious requirement if cash is to be held at a branch. In addition, tellers are required in the branches to process the cash repayments. In many MFIs, a number of the costs associated with brick-and-mortar operations are eventually passed on the consumer. And it’s not just about cost; it’s also about convenience, speed of transaction processing and fraud related risks.

This is why Musoni decided to operate cashless. This way, using the same resources as other MFIs, particularly staff, Musoni has been able to establish more branches and serve a much larger number of customers. Going forward, Musoni has a better capability of setting up branches in more remote areas than a traditional MFI would due to its cashless nature.

Challenge #2: … while improving quality of service

Loans are disbursed and repaid via mobile money enabling Musoni to disburse loans much faster than traditional cash and cheque based models. Musoni guarantees its customers loan money within 72 hours of application. The MFI enjoys lower risks, less paper work, better customer service, easier and more accurate transaction tracking.

The first loan was given in May 2010 and since then over 18,000 loans have been disbursed, totalling over KSh.500M (approx USD 6M). Musoni currently serves over 8,000 clients.

At the moment Musoni does not take deposits or savings, but is now moving in that direction, planning to offer a variety of products around savings. A lot of work is being done to define the nature of savings products to offer, particularly to the base of the pyramid, but one thing will be unifying – they will all be mobile.

MMU: What are the main challenges faced by MFIS trying to use mobile money?

Musoni: Creating the automated bridge between mobile money and the back end systems has been the greatest challenge. Customers not only pay for themselves, they pay for others within the group and beyond. Non customers also pay for our customers. There are individuals who make wrong entries even after rigorous training, including paying for the wrong person. So the technology must be “intelligent” enough to learn and accommodate these issues with the support of customer service personnel. There being no such software in the market, we’ve had to create it and refine it continuously. Our model is cash less and minimum paper work, which means we depend heavily on the technology. It’s got to work all the time, otherwise we are in chaos.

MMU: What advice would you give other MFIs integrating mobile money to their systems?

Musoni: We’ve learned a number of lessons over the past 3 years which could be beneficial to other MFIs willing to use mobile money:

• Rather than start with brick and mortar, why not leverage mobile? Setting up systems may be challenging, but the rewards are worth the trouble.
• It’s critical to establish trust, particularly through face to face interactions. Cashless can never mean doing away with loan officers/relationship officers!
• Mobile money is a game changer; it streamlines the process and all other processes need to be adjusted accordingly.
• You must conduct market research to ensure that you are meeting customers’ needs by offering loans through mobile money.
• Customers value reliability and convenience. As you establish your back end systems, you got to aim at 100% uptime.
• Customers want to know what you will charge for any transaction. Be transparent about any fees.
• Customers will take advantage of the flexibility to pay after working hours so you better be ready for that.
• A well trained customer makes things easier for the MFI, more so if you introduce technology

In addition, Musoni is now looking to license its innovative IT platform to non-Musoni MFIs, thus greatly increasing its potential outreach and social impact.

M-PESA continues to make headlines, increasing revealing insights on the economics of mobile money. Recently released financial statements from Safaricom indicate that M-PESA contributed 15.8% of Safaricom’s total revenue (compared to 12.5% the previous year), making it the company’s second largest revenue stream after voice. Most strikingly, M-PESA revenues increased 43% with only a 6% growth in registered customers from the previous year (now at 14.9M). This suggests that most of the revenue growth was driven by a large increase in the number of fee-based transactions (e.g., peer-to-peer transfers) per customer.

In addition to fee-based revenues, M-PESA generates cost savings for Safaricom’s airtime business: 29% of Safaricom’s pre-paid airtime top-ups are now conducted electronically through M-PESA rather than through paper-based scratch cards, which are more costly to distribute. M-PESA also appears to help reduce churn on Safaricom’s core airtime business: Safaricom’s customers increased by 11% to 19.1M from 17.2M recorded in FY2011, despite raising its airtime tariffs above its competitors in early 2012.

Though we can glean M-PESA’s revenue contributions and indirect benefits derived, direct profit contributions are undisclosed and sensitive to cost assumptions. Large costs associated with building and maintaining a mobile money deployment include agent network management, marketing, and platform licensing fees. Remarkably, M-PESA’s agent network grew by 46% (to 36,700 agents) over the last fiscal year. At this scale, commissions paid to agents for each cash-in/cash-out transaction they conduct, as well as for signing up new customers, is substantial.

Nevertheless, M-PESA’s continued revenue growth in Kenya is good news for the industry, as it may encourage other providers to invest more heavily in building out mobile money systems that serve poor and rural customers. While Safaricom’s M-PESA has been an anomaly to date, accounting for nearly 70% of all mobile money transactions globally, according to MMU’s Global Mobile Money Adoption Survey, we are now seeing mobile money gain traction in other markets. Notably, M-PESA now accounts for 8.5% of Vodacom’s service revenue in Tanzania, compared to 2.8% the previous year.

Despite our optimism regarding the growing importance of mobile money as a business driver for mobile operators, we recognize that the business case for mobile money in developing markets is undermined by the high on-going cost of converting cash to electronic value (and vice-versa). This underscores the pressing need to enhance the range of use-cases (beyond p2p transfers) that can be performed electronically. Increased experimentation on revenue models through fee structure changes and new product offerings may help to boost the proportion of electronic transactions conducted relative to cash-based transactions. Particularly from a financial inclusion perspective, getting the economics right is critical to enable new partnership models that can yield a range of affordable mobile-enabled financial services for low-income segments.

Nearly everybody working in payments or development is aware of M-PESA and its success: the service provided by Safaricom is now used by 15 million Kenyans, facilitates an incredible US$1.4 billion in payments per month, and, for good reason, has become a darling of the Economist and subject of countless case studies.

Omwansa and Sullivan’s ambitious new book is a must-read for anybody with an interest in this space: it chronicles the development of M-PESA from its original conception as a tool for microfinance customers to make loan repayments to the current day, along the way describing in impressive detail how the service actually works at an operational level and the way that it changes lives. Of course, its impossible to tell the story of M-PESA without mentioning the wave of innovation that has ensued since the service launched, and the authors do spend considerable time describing Musoni, Jipange Kusave, Kopo Kopo, Bima, and other ground-breaking services.

Perhaps the most powerful (and entertaining) parts of the book are the first hand perspectives shared by the team who brought the service to market: the journey taken by Nick Hughes, Susie Lonie, Pauline Vaughan, Michael Joseph and others is well documented, and their personal insights and lessons learned are invaluable. Thousands of people have already paid to attend global conferences to gain access to these insights, and now they can be yours for the low price of $3.99.

Ready to start reading? You can download a copy on iTunes or Amazon.

The following is a guest post by Billy Jack from Georgetown University’s Economics Department and Tavneet Suri from MIT’s Sloan School of Management.

New data from the fourth round of a survey of Kenyan households confirm what every visitor to this East African nation knows: the spread of mobile technology and its adoption by broad swathes of the population continues.  Probably the most successful of all the innovative mobile solutions is M-PESA, Safaricom’s mobile banking product that allows users to send money across the country (and recently, beyond) in an instant, as well as providing a safe and secure savings instrument, and a convenient bill payment capacity.

Launched in March 2007, M-PESA was originally going to be “banking for the unbanked” and “financial services for the poor.”  While members of the economically marginalized population did adopt the service early on, the first rounds of our survey showed that up-take was nonetheless concentrated amongst those who were relatively better off.  It was natural to ask whether M-PESA would show the same pattern of adoption as so many other promising technologies in the developing world – from hybrid seed to insecticide-treated bed nets, from seat belts to solar panels – with those at the bottom of the pyramid struggling to exploit the potential benefits.

Through technological efficiency, user-friendly design, marketing acumen, an explosion of cash-in/cash-out agents, regulatory largesse, and perhaps some luck, M-PESA is now used by 86 percent of households outside Nairobi.  Of particular importance however is the changing pattern of utilization, as adoption spreads to the lower strata of the socio-economic ladder.

Our data, which is representative of most of Kenya outside the capital (where M-PESA is ubiquitous), shows a growing share of lower income households using M-PESA.  For this population, median per capita consumption is low, a few cents less than $2 per day; and the bottom 25 percent of the population live on $1.10 per day or less.  Our survey, which tracked the same households over a four-year period, found that in 2008, households with consumption above the median were nearly three times as likely to use M-PESA as those in the bottom quartile.  In particular, half of those in the top half used M-PESA, while only 18% of those in the bottom quarter did so.  Utilization among those in the second poorest quartile was intermediate, about a third (see Figure 1).

M-PESA has grown in all strata of the population, and while those at the top remain more likely to use the service, the gap between the top and bottom has narrowed substantially, partly due to the steady increase among the poor, and partly due to saturation among the better off.  But concentrating on the gap between rich and poor is less informative than focusing on the simple fact that nearly three-quarters of the bottom quartile have adopted a service that five years ago did not exist.  If anything, high rates of adoption by the better off have helped sustain the product, thereby facilitating access by the poor, as the pricing structure does not distinguish between services provided in cosmopolitan Nairobi and remote Turkana, or between remittances sent across the street or across the country.

Similarly, because of the correlation between income and bank access, M-PESA was initially used more by the banked population than the unbanked.   Indeed, in 2008 just one-in-five of the unbanked population used M-PESA, but since then while the number of households with bank accounts has remained relatively stationary, the share of this unbanked population who use M-PESA has shot up to 75 percent (see Figure 2).  Again, focusing on the divergence between the unbanked and the banked populations (fully 96% of the latter are now M-PESA users) is of limited utility: the fact that so many of the unbanked population have access to a modern electronic financial tool is what’s important.

Finally, very recently Safaricom has revised the M-PESA tariff schedule.  Until now, the cost to the sender of sending money was a fixed 30 shillings (about 40 cents), plus the cost of withdrawing the money, if the recipient wished.  This made small transfers of a few dollars relatively uneconomic, while apparently benefiting those who could send larger amounts.  The fee structure has however been revised, with users able to send up to 50 shillings for a charge of just 3 shillings, and from 50 to 100 shillings for 5 (see http://www.safaricom.co.ke/index.php?id=255 for a complete listing).  This reform could well expand the benefits accessible by those at the bottom of Kenya’s pyramid even further.

Fraud

Several of the women had lost money to fraud. The M-PESA staff acknowledged the women’s concerns and highlighted that reported cases were always investigated. They emphasized several tips to prevent M-PESA fraud including:

• Calling M-PESA to confirm the request prior to responding to a text message regarding their account (the phone number, which would require a small fee, was provided)
• Checking to see if the text message is actually from M-PESA – if it was it would have the M-PESA logo and/or name)
• Being aware of their account balance
• Ensuring their pin number is always kept safe

It was also brought to the groups’ attention that M-PESA has introduced a new Safaricom SIM card which allows individuals to save the phone numbers used for M-PESA transactions. This enables the individual to just scroll and pick the accurate number instead of having to retype the number every time it is used. This reduces the problem of sending money to the wrong number. The M-PESA staff provided the SIM card service at the workshop and many of the women paid for the service and got their old SIM cards replaced. The women expressed gratitude for the service.

Network/Connectivity Problems

Why some areas face network problems was explained by the M-PESA staff. The company recognizes that network coverage is a problem in some rural areas. A key challenge for M-PESA is the platform or technology has faced limitations in keeping up with the demand, as the users of the service continue to increase across the country. The women were encouraged to report coverage issues to an M-PESA outlet, if there is one in their area, rather than an agent. They were also given a number to call or text, when they have access to service, to report these complaints to give the service provider the opportunity to rectify the problems. Again, this would require a small fee.

Cost

The challenge of cost for service was discussed; even though the service was deemed very useful by users, sometimes the costs involved proved challenging for them. The M-PESA staff explained their service costs, what they entail and how they have worked to keep them affordable for Kenyans. There was mutual agreement that M-PESA has tried to be fair in terms of pricing. In fact, it came out in the conversation that one of the reasons it was being used by all 21 women’s groups was because it was the most competitive in the mobile money market.

Services for Special Populations

In relation to services for special populations, such as the elderly, illiterate or visually impaired, there were no easy answers. M-PESA staff suggested that they would look into the possibilities of programs that might assist special populations to have positive experiences with their service.

Group Communication and Dynamics

On one hand, mobile money allows for money to be sent to facilitate planning at meetings, even if a member needs to be absent. However, some groups argued this can perpetuate the lack of meeting attendance, thus limiting the social aspects of the group meeting and affecting the socio-psychological support that comes from face-to-face group interactions. Since this issue relates more to the training and capacity building carried out by those running women’s groups, it was not addressed by the M-PESA in detail. However, representatives of the organization running the women’s groups encouraged members not to allow the use of technology to erode or limit their face-to-face communication by not attending meetings. The groups were encouraged to continue reminding members that a key part of their mission is being a support system for one another which require face to face communication.

Summary

Overall, despite the numerous challenges mentioned, the groups made it clear that the benefits of using mobile money services outweighed the disadvantages. In addition, bringing together M-PESA staff and their end users was mutually beneficial. The women’s groups were able to gain information, knowledge and services that will continue to help them with their poverty reduction activities. The M-PESA staff were able to garner insights and understanding that may contribute to framing policies and practice for mobile money services.

This is the second part of  the guest post by Dr Ndunge Kiiti of Houghton College, New York and the GSMA mWomen programme on the ’Benefits and challenges of using Mobile Money to reduce poverty for women in Kenya.’ To read the first part, click here.

Understandably, both quickly become distressed. Recent headlines have brought attention to this problem, but to be clear, it’s neither new, nor limited in scope to a couple of deployments: for years, the world has read about M-PESA’s downtime in Kenya on Twitter, and countless other services have faced similar challenges to varying degrees that, because they are smaller, haven’t attracted the same headlines.

Why is it so difficult to install and operate a reliable mobile money technology platform? This is not a question that can be answered in a blog post, but I’d like to highlight some key issues and invite readers to contribute in the comments.

Throughput and reliability

To begin, it’s worth clarifying the complexity of the problem at hand. A mobile money technology platform must meet the performance objectives of disparate industries: telecom systems that are optimised for throughput, and financial systems that are optimised for reliability. So “mobile” suggests throughput, and “money’ suggests reliability: operating a platform that delivers both is anything but straightforward.

Customization

In many cases, operators have a specific set of business requirements and aren’t willing to settle for a vendor’s off-the-shelf platform: they want a customized solution. Vendors that routinely concede to operators’ requests for customization are left with the daunting task of managing multiple versions of their platform. To put this in context, imagine every one of Visa’s member banks demanded a solution that would allow them to implement a unique purchase process and feature-set: it would be chaos. Mobile money technology vendors who find themselves in this situation, albeit at a much smaller scale, are faced with a difficult task – and it’s often compounded by their scarcity of resources.

Planning for the peak is costly

Some of the technology challenges faced by operators today have their roots in decisions made years ago, before it was clear what scale mobile money might achieve. In one prominent case, a software application and system configuration that was designed for a limited pilot made a rapid pivot and was rolled out nationwide. Inevitably, there were scale issues.

But even with time to plan, coping with scale is tough. Operators must anticipate the peak transaction volume their platform must be capable of processing (this is significantly different from a monthly transaction forecast) and design, invest, and manage accordingly.  To be clear: this is expensive, and if scale is never actually achieved (remember that for most mobile operators, mobile money is still a much more speculative play than their core business), investment will have been wasted.

Dependencies

No money platform operates entirely in isolation. Every platform has dependencies, and this can cause reliability issues. As an example, if a mobile operator’s SMSC has insufficient capacity at a given second, messages cannot be delivered and transactions cannot be completed.

People

Finally, it’s worth noting that technology is ultimately administered by people (at minimum, people still get to control the on/off switch!) We’ve written at length about the challenges of attempting to scale with a small team, and these challenges are equally relevant when it comes to technology: small problems are multiplied when operators do not have a skilled and experienced hand to liaise with vendors in case of an issue.

* http://observer.ug/index.php?option=com_content&task=view&id=16106&Itemid=68