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The Mobile Financial Services Development Report 2011 assesses the development of the mobile financial services (MFS) ecosystem in twenty countries. Its purpose is to provide a tool for decision makers to identify relative areas of strength and weakness and to prioritize opportunities for collaborative action to build scale in mobile financial services. The Report defines mobile financial services development in terms of the key drivers across the institutional, market and end-user environments that lead to adoption and scale. Measures of mobile financial services development are captured across seven pillars:

1. Regulatory proportionality

2. Consumer protection

3. Market competitiveness

4. Market catalysts

5. End-user empowerment and access

6. Distribution and agent network

7. Adoption and availability

The Report thus takes a comprehensive view in assessing the factors that contribute to the long-term development of mobile financial services. It includes mobile payments and transfers within its scope but also the development of other vital financial services such as savings, credit, and insurance.

Excitement around branchless banking is rapidly turning into action by the private sector. Of the 79 live mobile money deployments tracked by the GSM Association (GSMA), two-thirds have launched in 2009 and 2010. Nokia and Paypal are investing in mobile payment platforms available to any client regardless of his or her mobile network or bank, a development that could shake up markets. And early branchless banking leaders are launching out in new directions. Brazilian banks are increasingly eager to use agents equipped with point-of-sale (POS) devices to originate loans. In Kenya, Safaricom has teamed up with Equity Bank, the country’s largest bank, to offer M-Kesho, a service that uses M-PESA’s mobile payments platform to offer a full range of Equity’s bank products.

Will these sizeable investments pay off? Many in the private sector believe reaching large numbers of mass market clients is a precondition to large-scale profits, but at the same time, they are uncertain about how quickly branchless banking will gain traction with the unbanked, low-income clients who make up the mass market. In other words, the prospects of branchless banking are still unclear.

This Focus Note evaluates the evidence from 18 branchless banking providers with a collective total of more than 50 million customers (see Table 1) to answer three questions: 

• Does branchless banking reach large numbers of low-income and unbanked clients?
• Are prices for branchless banking lower than prices for traditional banking for the kinds of transactions low-income and unbanked people want to do?
• What other services do these customers want from branchless banking? 

The answers to these questions have implications for the business case, customers, and those who hope that branchless banking can boost financial inclusion. 

The data offer some answers. On the question of scale, branchless banking  can reach large numbers of the unbanked relatively quickly. CGAP looked at the outreach of eight providers globally for which good data were available by drawing on 13 studies that surveyed 16,708 branchless banking clients. The eight providers average 3.73 million active registered users, of which 37 percent or 1.39 million were previously unbanked.Five of the providers reach more previously unbanked clients than the largest microfinance institution (MFI) in the provider’s country—on average, 79 percent more. 

These five branchless banking providers grew quickly, surpassing the largest MFI in number of customers within three years. This is not to suggest branchless banking is replacing or eclipsing MFIs. The services branchless banking typically provides (payments) are complimentary to MFI microloans: both meet a widespread need for which clients are willing to pay.

This compendium of articles (available at a cost) attempts to critically investigate the use and utility of mobile phones in Africa. Contributors include Nathan Eagle who writes about ‘Economics and power within the African telecommunication industry’,  Amanda Atwood’s report on Kubatana’s experiences in Zimbabwe setting up mobiles as a means of sharing news outside of government propaganda, to Bukeni Waruzi’s essay on collecting data on children’s rights violations in the Democratic Republic of Congo in 2004.  SMS Uprising is published by Fahamu, a British-based organization with a focus on information services for Africa. For a critique of the book see our aticle here.

The Freedom from Fistula Foundation (FFF) in Kenya and Comprehensive Community Based Rehabilitation in Tanzania (CCBRT) have taken great strides in reducing these barriers. Using a combination of mobile banking, public information, and free treatment, they have helped make fistula repair a reality for women who were previously excluded from care.

There is something profound taking place in emerging markets with mobile money movement... it is now a “Mobile Money Movement” with the potential to substantially alter the economic paths of the poor and emerging economies at large. For this reason private and public sectors alike are now taking notice of this industry. Mobile finance is becoming an increasingly important topic for The World Economic Forum and for the G20 summit. Nearly 2/3 of the world’s population lives in poverty: four billion people live on less than $8.00 USD per day. Most do not have bank accounts, but do have mobile phones (1.7 billion people by 2012.)

Mobile money provides an opportunity for financial inclusion to the unbanked base of the economic pyramid - the majority of the global population who has lived in the informal financial sector and who has relied on cash to conduct all financial transactions. As such, they lack access to credit, insurance, and savings. This wave of mobile money momentum, if not slowed down by other challenges inherent in these markets, will undoubtedly positively impact the course of economic growth in emerging markets for a number of reasons that are inherent within mobile money itself.

Mobile money will spur economic growth in emerging markets because of the forces inherent to mobile money itself. Specifically, these forces include:
1. the ubiquity of data transmission that mobile provides;
2. mobile money as a new industry;
3. mobile money as an infrastructure supporting new businesses and other industries;
4. the infusion of new capital from the informal sector; and
5. the efficiency gains that digitization of money enables.

The paper suggests that research on the role of mobile telephony for socioeconomic development (M4D) draws on two frames. One frame stresses the relative freedom of telephone users to do whatever they choose. The other stresses how technologies and technology-led interventions are embedded in recursive, context specific relationships with user communities. Together these frames support M4D’s “dual heritage”. After detailing current M4D archetypes representing each heritage, the paper introduces a conceptual and practical synthesis, that is, large-scale platforms for distributed, semi-constrained interaction.

This paper considers two examples of such platforms—MXit, South Africa’s mobile social networking service and M-PESA, Kenya’s mobile money transfer system—including both anticipated and unanticipated consequences of operating “at scale” and beyond the confines of a controlled M4D intervention. Finally, this paper introduces implications of the dual heritage and of the rise of hybrid platforms for research and practice.

In this comprehensive analysis, CGAP assessed whether branchless banking or mobile money services are more cost effective or cheaper for low income people than formal banking. The authors, McKay and Pickens, compared pricing of 16 leading branchless banking services across eight ways that customers use branchless banking. They subsequently compared the pricing of these services against 10 formal banks and other informal money transfers options.

The eight use cases refer to: 1) sending money transfer, 2) receiving money transfer, 3)short-term safekeeping, 4) medium term savings, 5) bill payments, 6) high usage, 7) m-PESA customer, and 8) kenya bank customer.

The results say that branchless banking is 19% cheaper than banks, and have a lower transaction value. Additionally, branchless banking is 54% cheaper than informal options formoney transfer.They also discuss in detail how pricing influences customer usage.

The electronic delivery of cash can be achieved through a variety of mechanisms - debit card, smart card or cellphone, using a range of financial infrastructure -banks, automated teller machines (ATMs) and point-of-sale (POS) devices. This brief outlines recent experiences from across Africa, with a focus on Kenya, Malawi, Namibia and Swaziland.

The benefits of electronic delivery systems to both governments and recipients are well known in terms of improved cost efficiency and flexibility of access, so this brief emphasises issues that are relevant to private sector partners, who are vital to the introduction of such systems.

The rapid penetration of cellphones in Africa, including both signal coverage and handset ownership, makes distribution of cash transfers by cellphone an increasingly viable proposition, as shown in Kenya through the M-PESA mechanism. Additionally the availability of cellphone signal has been instrumental in facilitating use of ofline smart cards for electronic delivery of cash transfers in Malawi and Namibia.

The growth of financial infrastructure and opportunity for banks to increase their market share has increased the favourability with which banks view potential participation in government-to-person cash transfers.

Evidence from Malawi and Swaziland shows that cash transfer recipients who are provided with bank accounts to receive their cash transfers tend to then use them to save money and to receive person-to-person transfers (e.g. remittances) – thus making further use of financial infrastructure and services.
In terms of scalability of electronic delivery systems, the time- and cost-intensive nature of the payment mechanism setup relative to the operating costs means that the incentive for private sector partners to engage is much greater for long-term programmes than short-term pilots.

Undertaking cash transfer programme registration formalities concurrently with private sector partner registration procedures (in terms of opening bank accounts or distributing SIM cards or smart cards) thus makes sense, wherever possible. It is also imperative that contractual obligations for the government implementer and private sector partner be agreed upfront, smart cards) thus makes sense, wherever possible. It is also imperative that contractual obligations for the government implementer and private sector partner be agreed upfront, desmart cards) thus makes sense, wherever possible. It is also imperative that contractual obligations for the government implementer and private sector partner be agreed upfront, defining respective roles and responsibilities, together with a grievance procedure in case of non-compliance.

As well as the growing base of evidence from projects and programmes in Kenya, Malawi, Namibia and Swaziland, other countries that have expressed interest in the use of electronic delivery systems include Ghana, Lesotho and Mozambique.

M‐PESA is a small‐value electronic payment and store of value system that is accessible from ordinary mobile phones. It has seen exceptional growth since its introduction by mobile phone operator Safaricom in Kenya in March 2007: it has already been adopted by 9 million customers (corresponding to 40% of Kenya’s adult population) and processes more transactions domestically than Western Union does globally. M‐PESA’s market success can be interpreted as the interplay of three sets of factors: (i) pre‐existing country conditions that made Kenya a conducive environment for a successful mobile money deployment; (ii) a clever service design that facilitated rapid adoption and early capturing of network effects; and (iii) a business execution strategy that helped M‐PESA rapidly reach a critical mass of customers, thereby avoiding the adverse chicken‐and‐egg (two‐sided market) problems that afflict new payment systems.

M-PESA an agent-assisted, mobile phone-based, person-to-person payment and money transfer system, was launched in Kenya on March 6, 2007. This study is the first of its kind to explore the economic effects of M-PESA in Kenya at the community level.

The findings from the first stage of the study indicate that M-PESA affects the economic outcomes of community members, both users and non-users of M-PESA, through direct and externality effects, and identify 11 economic effects within the broad categories of local economic expansion, security, capital accumulation and business environment after 2.5 years of M-PESA’s use in these communities. The research also shows that effects were not visible in all the study communities and among all the population segments within the communities; they tended to be influenced by gender and geographic location of the communities.

Also, the effects were not always perceived as mutually exclusive, but as interwoven with each other to produce overall community effects.

Kenya was one of the first countries to use mobile phones for cash transfers; through a service called M‐PESA, developed by Safaricom Limited. Concern Worldwide has pioneered the use of M‐PESA for emergency cash transfers in Kenya. This paper highlights Concern’s experience, which shows that despite initial software and logistical challenges, mobile phone technology offers a unique and empowering approach to efficiently deliver assistance to the most vulnerable people living in insecure and remote rural areas.

Experience also shows that cash transfers are a better option than food distributions in areas where adequate supplies of food are locally available. In addition, the partnership between Concern and Safaricom demonstrates that the private sector has significant and unique abilities to enhance the effectiveness of emergency response, and more importantly they can do so while maintaining their core business principles. The case study also demonstrates how technology can empower poor, marginalised and vulnerable people.

There was a time when the adoption of mobile phones was expected to be limited to the wealthy and early mobile phone designs included a number of features that supported shared use on the assumption that few people would be able to afford one of their own. 4 billion plus cellular subscribers later and it’s the mobile phone owning residents of Accra or Cairo that are more likely to use multiple devices than the residents of London or Tokyo.

The first billion mobile phones were sold in about twenty years, the second billion took four years, and the third billion were sold in just two. That the mobile phone has had a positive qualitative and quantitative impact on many of the world’s poor is no longer an issue for debate, and the simple fact that many invest in a few months salary to purchasing one suggests that it continues to meet a broad spectrum of base user needs from directly creating revenue generating opportunities to indirectly supporting survival. As a personally carried, connected device the mobile phone is in a prime position to bring mobile money services to the world’s unbanked, and today there is much activity, debate and not a little hype on its potential (Ramussen, 2009).

This paper discusses the factors that will affect whether recently established mobile money services such as M-PESA can also achieve success in other markets, and whether new services and business models will fly or fail? What can we learn from previous research into mobile phone behaviours and practices?

The ‘dual system’ thesis has been used to describe the continuing commitment of urban migrants to the village in various African countries. According to literature, urban workers maintain strong ties with the rural area, even after spending a substantial amount of time in the city. One way in which these ties are maintained is through urban‐to‐rural remittances.

In March of 2007, an m‐banking application called M‐PESA was introduced into the Kenyan market. This application allows for person‐to‐person (P2P) transfers of e-money via mobile phone, and facilitates urban‐to‐rural remittances.  This study will use ethnographic data collected in a Kenyan slum to show that M‐PESA is becoming a tool for the maintenance of urban-rural relations. It will further assert that because it is helping migrants to maintain such relations, it is facilitating survival in the ‘dual system’.

This review considers the differences between the adoption rates of M-PESA in Kenya and Tanzania and tries to highlight some of the reasons that the same service launched in seemingly similar countries has yielded such different results. This paper is intended as a discussion document for mobile network operators considering launching a mobile money service.

Safaricom launched M-PESA in Kenya in March 2007 and has since become the most famous and probably the most successful implementation of mobile money service to date. In May 2008, 14 months after the launch, M-PESA in Kenya had 2.7 million users and almost 3,000 agents. Today, over two years since its launch, M-PESA has gained 7 million registered customers and has 10,000 agents spread across the country. This exceeds the reach of any other financial service in Kenya.

Finaccess 2009 showed that M-PESA has become the most popular method of money transfer in Kenya with 40% of all adults using the service. The same Kenyan survey also shows a dramatic increase in national remittances; from 17% in 2006 to 52% in 2009, which may be attributed to the ease of money transfer through ubiquitous M-PESA agents. Many mobile network operators have been eager to repeat M-PESA’s success in Kenya, but the formula for this success is not yet clear. One year after the Kenyan launch, Vodacom launched M-PESA in April 2008 in Tanzania. The user uptake of the service in Tanzania has been much slower compared to its northern neighbour. In June 2009, 14 months after the launch, M-PESA in Tanzania had 280,000 users and 1,000 agents (Rasmussen 2009).

This paper puts forward explanations and backgrounds to the remarkable difference in user uptake of the m-banking service M-PESA in Tanzania compared to the same service in Kenya. Data gathered from user and industry interviews, conducted during a field study in Tanzania between March-May 2009 is together with literature from Kenya used to compare the m-banking environment in the two countries.

M-PESA is provided by mobile network operators (MNOs), Safaricom in Kenya and Vodacom in Tanzania. Both are the leading MNO in their respective country although Vodacom has a substantially lower market share and turnover compared to Safaricom. This simple fact resonates in many areas affecting M-PESA, such as: size of marketing budget, M-PESA's priority within the organization and the company's ability to quickly sign up agents and attract initial customers. Differences in the general economic situation, the geography and political history are also put forward. Kenya has a stronger economy, a higher GDP and a more developed banking system. This has contributed to the financial literacy in the country which is an important factor when communicating a service like M-PESA.

Among the differences between the two implementations, we suggest that the three most influential factors to the user uptake have been the two companies ability to transform their airtime distribution into an agent network, the marketing strategy which needed to be adopted to the specific settings in each country, and the geographical and demographic conditions.