M-Banking!

What I’m writing to tell you about is M-PESA! Usually it doesn’t have an exclamation point after it, but I put one there because every time I think about it, I get very excited. M-PESA!

Long story short, M stands for mobile and Pesa is Kiswahili for money. It’s a service that Safaricom, the most popular cell phone service in Kenya, offers (Zain, its largest competitor offers a similar service). Touted as a “branchless banking service” M-PESA users can deposit and withdraw money on their phone by utilizing a network of agents stationed throughout the country – mostly airtime vendors and phone salesman. Why might this be helpful?

Pretend you are John Asuke, the lone loan officer (I’ve been waiting months to write that) here at K-MET‘s Revolving Loan Fund. You’ve got a borrower base that stretches from the shores of Lake Victoria to the Indian Ocean (the whole country), a staff of one Kiva Fellow (that’s me!), large loads of small loans to process and businesses in communities that lack the infrastructure that encourages efficiency. Challenging conditions, but K-MET does a pretty good job of keeping costs down given these constraints. One strategy in particular, weekly group repayment and disbursal meetings instead of home visits, decreases costs significantly. Of course, group meetings are also inefficient. Watch this video (with sound if you have it) and you’ll see what I mean.

You may have noticed a few hundred borrowers sitting in a very hot church waiting to receive or pay back their loans. As I mentioned earlier, they must do this once a week – often walking many miles (sometimes through the rain) or spending as much as half a day’s wages on their transport. This is inefficient, dangerous, and frustrating. It is pretty easy to understand why having these borrowers repay their loans via mobile might vastly improve efficiency. And it is really easy to use. Watch my two colleagues, Nick and Debra exchange 10 shillings worth of air-time via mobile.

There are, of course obstacles for MFI’s that want to use mobile banking. Many loan officers (including Asuke) fear that borrowers will be less diligent in repaying their loans, groups lose their community aspect, in K-MET’s case, it would take away face time with the community health workers who make up the bulk of our borrowers — and because it’s a new service that utilizes both humans and technology – there’s going to be a bevy of issues. In addition, while some of the borrowers I talked to were thrilled with the idea, many do not own cell-phones and there was concern about borrowing phones to pay money. Still, Safaricom and the Small and Micro Enterprise Program just announced a new partnership that will allow customers of SMEP to use M-Pesa.

Now, beyond micro-finance, if there are any super-awesome-rich-entrepreneur types reading this (besides Peter Thiel, he’s already all over this…sort of), this better have your wheels churning. As far as I know, there are only a few other countries/companies that offer this service: Afghanistan, Tanzania, South Africa, a pilot program in Uganda and two very successful services in the Philippines. I read recently (on the BBC) that just a few years ago, there were $93 billion in remittances transferred from abroad to Africa every year. Think if you could tap into that market…while at the same time providing a much needed service!

In any case, if you want to read more about M-Banking, check out these articles and links (thanks to fellow Fellow Sarah Forbes for these!):
www.triplejump.eu/making-microfinance-mobile.html
www.mobile-money-transfer.com/africa/
www.valuablebits.com
http://mbanking.blogspot.com/

Brett Dobbs is in his 12th week of his posting as a Kiva Fellow with K-MET in Kisumu, Kenya. Check out the K-MET Lending Team here! If you’re interested in becoming a Kiva Fellow, click here!