Mobile money for financial inclusion?

Nora Lindstrom, Lilongwe Community Manager
Lilongwe, 9 December 2014

Leapfrogging technologies is nothing new in developing countries, with novel opportunities offered by the mobile phone epitomising the phenomenon. In Malawi, where only around a quarter of the population is estimated to be formally banked, residents have over the past couple of years gained access to mobile money services, even on the most basic Nokia brick.

Theoretically, mobile money services offer many opportunities for the unbanked urban poor. The new services enable urban dwellers to handle money more securely, pay for goods and services, as well as send money home to relatives in the countryside. When Airtel Money launched in 2012 as the first mobile money service in the country, the then Minister of Finance Ken Lipenga hailed it as a way for both banked and unbanked customers to "enjoy the benefits of affordable, fast, and secure financial transactions."

According to recent reports, Airtel now has over 700,000 mobile money customers. Rival telecom TNM has also entered the sector, launching Mpamba Mobile Money Service in 2013. Nevertheless, introducing the service to Malawi has not been without its challenges: it is estimated that only around 10 percent of mobile phone users in Malawi currently have mobile money accounts. And there are reasons for that.

When Lilongwe resident Yusuf Meya earlier this year wanted to send money to his sick mother in the countryside, he chose to send it through the Post Office, paying 10 percent of the sum wired in transfer fees. This wasn't a decision he made due to ignorance of mobile money or lack of access to a mobile phone. He simply had no other choice: in his mother's village there are no reliable mobile money agents from which his mother could claim the cash. "I needed to make sure that my mother received the money the same day," Meya says. "If I had used mobile money, it might have taken her three days to get access to the cash, because the agent might not have had the money immediately."

This problem, known as agent illiquidity, is a recognised challenge in Malawi. So while mobile money could offer an inexpensive means for higher earning urban residents to send money to their rural relatives, lack of extensive agent networks with liquidity is holding them back.

Another use of mobile money promoted by the two companies is to pay for goods and services. Both Airtel and TNM's services allow customers to pay their utility bills using mobile money, and TNM has partnered with more than 1000 commercial businesses, including satellite TV company DSTv, 'luxury' bus service provider AXA, and fast-food chains Steers and Debonairs.

Again, however, the services offered fail to provide widespread benefits to the urban poor; few of the urban poor have direct utility connections, and even fewer are likely to fork out 4000 Malawi kwacha (around US$10) for a Debonair's pizza.

Two years on and mobile money has failed to make major inroads among Malawians. Even the urban poor have been slow on the uptake, despite having significantly better access to mobile money agents with liquidity (as well as access to a higher amount of agents more generally) and more use for the payment options offered compared to their rural counterparts.

The opportunities offered by mobile money however remain. Ongoing advertising campaigns by both Airtel and TNM highlighting the financial ease and security of mobile money combined with improvements in accessibility, such as Airtel's recently announced partnership with Total petrol stations, could over the next few years lead to wider use. Still, in a traditionally cash-reliant society convincing people to go mobile with their money is going to remain a challenge.

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