Mobile Money by M-Pesa: a need or a luxury?

In a recent post I noted the news about Safaricom’s profitability in the last year and exchanged some thoughts about the services, fair pricing and values provided by African mobile operators with Steve Song.

Eariler this week I came across the Round. The world. Connected. project of the Nokia Siemens Networks. In its Episode 2 finds Adrian Simpson visits Ethiopia and Kenya. Among the bonus features are an interview with Mr. Michael Joseph, CEO of Safaricom, interviews with users and providers of the M-Pesa service.

Mr. Michael Joseph introduces the needs and benefits of the M-Pesa service, emphasizing its value outside the main urban areas where banking infrastructure is rarely available. He recounts the origins of the M-Pesa service in 2006 within a microfinancing project and explains its current popularity. By saving users the hazards of carrying and transacting in cash M-Pesa allows its users greater degree of mobility and flexibility. Mr. Michael Joseph stresses that M-Pesa is a banking product. This complicates the service by imposing strict security requirements on the technology, five-year record keeping requirement, and customer rules.

Mr. Michael Joseph emphasises the importance of the distribution and support network for the M-Pesa service. He acknowledges that Safaricom’s ARPU is decreasing and explains Safaricom’s strategy to “lock-in” customers through the provision of a mobile banking service which can be perceived as a daily necessity. Furthermore, Safaricom counts 7500 franchises of M-Pesa stores where users of the service can receive personalised support and loyalty to Safaricom can develop as a result of the social capital exchanged in between the users and the representatives of the distribution network. Adrian Simpson gives faces to the M-Pesa distribution/ support network by interviewing an M-Pesa store owners.

In the video “The benefits of M-Pesa and mobile banking in Africa” Adrian Simpson shows documents used in the registration for use of the service and talks to an M-Pesa dealer who claims thousands of customers visiting his shop. The location seems fairly central and the customers appear “upmarket”. He mentions businesses and university students as his customers.

In “Interview with an M Pesa store owner in Africa” Adrian Simpson talks to Joseph, an M-Pesa agent working in somewhat more moderate surroundings. He emphasises customer service, technology assistance and personal attention as important considerations for keeping his customer base.

Towards the end of the interview with Mr. Michael Joseph the subject of regulation is brought up. Not surprisingly, Mr. Michael Josephs mentions that mobile operators in Africa are seen as “cash cows” and a reduced tax burden would help help their work. Still, I wonder how regulation can be used in order to provide mobile operators with the incentive to support, invest in and develop socially benefitial services. M-Pesa seems to facilitate the monetary transactions of socially excluded people and it appears to alleviate concerns related to security. As such, the service has required considerable investment in technology development and the set-up of a distribution network. With considerable set-up costs, the service has broken even only recently after subscribing 6 000 000 users in December 2008. Admittedly, Safaricom has invested in it with strategic self-interest, looking towards customer loyalty and “lock-in” opportunities. Still, I wonder how governments cound encourage mobile operators to behave in a similar way, rather than to follow more disruptive strategies. If we view mobile services like M-Pesa as social goods, rather than luxuries, how can regulation be used to have more of them?

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Talking about Movirtu’s MXShare

On Friday, 23 May Mr. Guy Collender  published through the Guardian, Society an opinion piece considering how mobile technology is benefiting some of the world’s poorest. Left at that, this is not a rare piece of writing to come by these days. But what made the story “Talking about a revolution” conspicuous for me was the fact that it featured Movirtu‘s MXShare — a fascinating technology I came across recently at the Africa Gathering in London.

Katine farmer Dan Ekongu with his mobile phone, which he uses to communicate about agriculture via Talking about a revolution. Photograph: Dan Chung.

I completely agree with Mr. Collender that, “At first glance it is a peculiar and nonsensical idea: owning a mobile phone number, but not a mobile phone.” And even though the immediate benefits of the idea are that it could enable the bottom billion (i.e. the 1 billion people living on less than $2 a day) “to enjoy the benefits associated with a mobile phone number, such as receiving messages and remittances,” I think it could have much wider and far-reaching consequences.

The MXShare concept, installed in the core of a mobile network, enables individuals to share a mobile phone while maintaining separate identities, including a phone number, list of contacts, etc. MXShare makes this possible by creating a virtual mobile system, embedded within an operator’s switching centre.

MXShare’s obvious caveat is that it is not operator agnostic. Many people working in development would consider this an insurmountable drawback, particularly because mobile phone information systems tend to be implemented on a fairly small scale, by NGOs and development organisation, who find it a challenge to get the interest and collaboration of large (read popular) GSM operators.

Although I can see MXShare’s operator dependance as a hindrance to its adoption, I personally am much more intrigued by the possibilities and challenges which the technology concept opens up.

The possibilities stem from the prospect of attaching a fixed identity to mobile phone users. Identifying people is still a challenge in the online world of the Internet but increasingly users of various online services are identified only by their email address and a password. Movitu’s MXShare opens the door to similar solutions to the identification problem in the world of mobiles, a world which is currently hyping about mobile-Web integrated services. Besides allowing people who live on less than $2 a day to receive remittances, the technology can be used as a gateway for the introduction of mobile-Web enabled devices in the developing world. And needless to say, alongside the better devices will come the better services — better m-health, better m-learning, and last but not least, better m-commerce.

For mobile market information services, particularly ones relying on user-generated content, the possibilities offered by identification are considerable. The ability to trace back to its author content of the “classified ad” style, submitted to user-generated content services will increase their appeal. Moreover, it could lead to improvements in the legal framework which would give legitimacy to agreements reached via mobile phone.

Kenya’s Safaricom takes a pasting. Has economic contagion finally reached the booming markets of Africa?

Below I am reprinting a news report by Martyn Warwick , published at TelecomTV | News on 22 May 2009. The report covers thereduction of profits by 23%, announced by Kenya’s and Africa’s biggest mobile operator Safaricom. Alongside with the reduction in profits, the story mentions the significant annual growth in the number of registered users for Safaricom’s M-Pesa mobile money transfer service. The number of registered users for M-Pesa increased from 2.1 million to 6.1 million. Both of these news from Safaricom in Kenya indicate the relevance and timeliness of the revenue opportunities offered to African mobile operators by mobile market services.

safaricomlogoMore evidence today that the recession is a truly global phenomenon. While in the developed economies of North America, Europe, Japan and Australasia ARPU has been falling and sales of handsets are in decline, over in the burgeoning markets of Africa, (Egypt, Nigeria, South Africa and Kenya, for example) the mobile industry has continued to roar ahead -until today. Martyn Warwick reports.

But today comes news that, for one carrier at least, the economic downturn has now hit home and profitability is on the wane at Safaricom of Kenya, Africa’s biggest mobile carrier.

Mobile penetration in Africa has roared ahead in recent ayears and some industry observers had opined that companies like Safaricom might continue to grow despite the recession. It seems now that this has more to do with wishful thinking than dispassionate analysis.

Figures released this morning show that Safaricom’s full-year profits slid by 23 per cent – mainly because of the prevailing economic conditions but increased competition and increased costs of servicing debt have also played their part.

For the financial year ended 31 March Safaricom made a profit of 15.3 billion Kenyan Shillings – that’s about £126 million Sterling. For the previous year ended march 31, 2008, the company made 19.9 billion Shillings in profit.

Perhaps more worrying is that although the operator’s total revenues were up 15 per cent year on year, ARPU (globally accepted as being a major indicator of performance) is in serious decline have fallen by a massive 23 per cent to 475 Shillings a month.

Over the past 12 months Kenya has suffered remarkably high inflation as the national currency has weakened and the costs of basic foodstuffs, fuel and transport have rocketed. Kenyan consumers, the vast majority of whom are far from wealthy, have less disposable discretionary income than they did 12 months ago and they are using their phones less.

Confidence was also severely dented by the ethnic violence that followed the results of the disputed 2008 general election and that has had a long-term effect on the economy.

Safaricom has been one of Africa’s great success stories. It is the biggest company in East Africa, is valued at in excess of £1 billion, has 2,300 employees and 13 million subscribers. The company is 40 per cent owned by Vodafone, 25 per cent by both private and institutional investors and 35 per cent owned by the Kenyan state.

It has a market share of 79 per cent and has increased its customer base by 31 per cent over the course of 18 months.

However, the market is changing and Safaricom faces increased competition from a raft of rivals including Essar telecom’s “Yu”, Zain of Kuwait and the Orange network of the incumbent, Telkom Kenya. As a result of this intense competition mobile tariffs have fallen by 40 per cent in just a year.

mpesaCommenting on the results, Safaricom’s CEO, the amiable and approachable Michael Joseph said, “It was probably our most challenging year in terms of operating environment. But it’s not all gloom, we have delivered strong results despite the difficult economic conditions and there has been strong growth in the popular M-Pesa money transfer services, with 6.2 million registered users now compared to the 2.1 million of the previous year.”

The CEO added that Safaricom will continue to invest in its network and will also look to acquisitions to maintain its strategy for consistent growth. Mr. Joseph said, “Our capital expenditure is expected to remain high over the next few years as we continue the roll out of our data infrastructure and continue to invest in the capacity, coverage and quality of our network.”

Meanwhile, Richard Hurst, a senior telecoms analyst at research house IDC commented, “In the past, Safaricom has been quite a solid operator, usually coming up with some decent numbers, so it is a bit of a surprise,” and added that Safaricom will have to spend big money on enhancing and expanding its infrastructure if it is to fend off competition and maintain its Number One position.

Hurst believes though that the overall African telecoms will continue to grow at rates higher than in other markets. He says, “We’ve still got some quite substantial growth to go, it’s [the African market] not as saturated as the European, North American or even Asian markets. I think this is just a blip.”

Let’s hope so. New figures from Nigeria expected to be published in the coming weeks may show whether this is indeed a “blip” confined to one company in one country or if the malaise is spreading across Africa.

Market Information System for Ethiopia

News regarding current work on the implementation of a market information systems in Ethiopia, released by Wageningen University and Research Centre (Wagenigen UR – LEI) on 24 Feb 2009.

From 24 to 31 January, Olga van der Valk and Monika Sopov (Wageningen International) visited Ziway and Meki, two villages in the Rift Valley south of Addis Ababa, Ethiopia. Their goal was to develop a Market Information System (MIS) for small-scale outgrowers of green beans, whose production is contracted by an exporter to Europe. The design of an MIS was requested by a project with CFC funding aiming at promoting small-scale growers’ participation in exports. In a workshop with local stakeholders, the findings of an earlier assessment on market information sources and communication lines were discussed.

An MIS is an instrument to reduce market insecurity by providing more transparency in the market. Other instruments are the implementation of (innovative) technology and horizontal and vertical market coordination to strengthen market position and to combat seasonality. To further define the MIS, stakeholders were asked to prioritise their demand for information: whether related to export or domestic markets; whether on daily-changing information such as prices and supply or on market-technical data for the development of marketing strategies.

Neither stakeholders nor farmers currently work with or have a view on long-term marketing strategies to develop the small-scale horticulture sector. This makes it difficult to prioritise the marketing information needed to design and operate an MIS. The proposal by the workshop stakeholders was to enter into dialogue with the Ethiopian government to improve its centralised MIS used for statistical purposes, and to make it more accessible to farmers. The recommendation by the Dutch experts was to set up a business service centre to collect available historical data, including surveys and statistical information, and use this information in the development of marketing planning skills among small-scale farmers and governmental officers. This will enable farmers to efficiently use and sustain the technology currently in development.

Mobile Use Behaviour in Liberia

During my work with ITC on Liberia, I was in touch with field contacts and I had the opportunity to discuss the state of the mobile telephony sector there, the available services and their prices. One of my reliable contacts there shared with me the following information. She said, that the average amount spent on pre-paid mobile phone cards (aka scratch cards) in Liberia is $5 per month. Apparently, most of the $5 of airtime credit  is used up within a few days of scratching the card. How could we possibly account for such behaviour? I’ve been thinking up hypotheses about it:

  1. One obvious suggestion would be that people go into the trouble and expense of getting the scratch card because they have some particular significant information need, or emergency which requires conversations at considerable length. Then the question becomes, how is it that these events re-occcur with considerable regularity, approximately every month?
  2. A variant of the same scenario would be the use of the airtime for a short but expensive conversation. For example, parents in Liberia calling their children overseas.
  3. A completely differnet way of looking at it, would relate to the nature of the social networks people are part of. Say, for example, if someone has enough money to buy credit then he/she is expected to get in touch with many people in order to re-affirm their identity as part of a group.
  4. Yet another scenario would be that once someone had airtime credit on their phone, the airtime credit is considered communal. So the people in their immediate surrounding feel entitled to use the phone.

What do you think? Any suggestions on the matter?

Collaboration@Rural in South Africa

Collaboration and Rural (C@R) is an EU project aimed at enabling the participation of European rural dwellers in the knowledge society. The methodology of the project involves the testing new technologies developed by the C@R consotium within 7 Living Labs, including the Sekhukhune Living Lab in South Africa.

Below is a video material presenting the technology developed by SAP to the benefit of SMEs and micro enterprises, within the C@R project. The featured procurement technology is focused on realising benefits through the aggregation of rural demand for manufactured goods andprocessed foodstuffs. The savings are realised due to the lower prices, achieved by a coallition of buyers who manage to order together greater quantities via mobile communication.

The main beneficiaries of the system are Spaza shops which are scattered all over the area and ensure the supply to the rural community of bread and other items such as soap, detergent, clothes etc. Stock replendishment is a challenge to Spaza shop owners because goods need to be sourced from the nearest town, which involves a transportation cost and the opportunity cost of day’s work. Ms. Sesina Mabuza, a Spaza shop owner recounts the financial constraints she faces in re-stocking her shop. Ms. Christina Zikhali, a Spaza shop owner in a very remote village explains the variability of the transportation costs incurred by using shared taxi services.

Vodpod videos no longer available.

Consistent with New Institutional Economics, C@R seeks to reduce transaction costs through vertical integration. The system implemented by SAP facilitates the establishment of virtual buying cooperatives, consisting of a number of Spaza shops and coordinated by local information service providers, known as “nfopreneurs”. The video presents the example of bread supply. Retail shop owners are enabled to order the bread they need via SMS. The messages retailers send to the “infopreneurs” consist of the name of their shop, a PIN number verifying their identity, the amount they are ordering and the code of the product. The SMS messages are aggregated by the “infopreneurs”, they are bundled and transmitted to the suppliers of the product. The system is of benefit to the suppliers by allowing them higher visibility of the market for their product. Mr. Hansie du Plessis, Manager of Tubatse Bakery in Sasko testifies to the benefit to suppliers. The savings realised are used for the delivery of the products to the Spaza shops.

The video suggests that in the future the entire basket of items carried by Spaza shops might be available through the C@R procurement system implemented by SAP in the Sekhukhune Living Lab. I think that this is a truely exciting prospect.

Nokia maintains its leadership in bringing the Internet to emerging markets

May 18, 2009

Espoo, Finland – Nokia brings the Internet in emerging markets closer to reality with the announcement of three new mobile phones that open the door to information, entertainment, family and friends. The Nokia 2730 classic, Nokia 2720 fold and Nokia 7020 each come Internet-ready, and work with Nokia’s range of emerging market services such as Nokia Life Tools and Ovi Mail, creating solutions that help people get ahead.

“The power of the internet is undeniable,” says Alex Lambeek, Vice President at Nokia. “We’ve seen mobile technologies catalyze the growth of the informal sector across the world, empowering local entrepreneurs and having an immediate and lasting impact on people’s lives. Services like Nokia Life Tools and Ovi Mail, combined with the mobile phones we’re launching today, bring powerful solutions that can be the gateway to knowledge, entertainment and people, without the need for a PC.”

According to extensive Nokia consumer research, nearly half of emerging market customers state that they would rather connect to the Internet over a mobile phone than a PC. As a result, Nokia has developed locally relevant solutions that consist of affordable mobile phones and applications, designed and built from the ground up to meet the specific needs of customers in the developing world. Lambeek continues, “Whilst many people are still primarily using voice and text, the Internet does offer a whole new range of opportunities.”

Nokia Life Tools is a service that enables people to make better informed decisions, find timely and relevant information, access learning opportunities and enjoy entertainment regardless of time or place. In a pilot study in India, results showed that the services had high appeal for livelihood and life improvement services. Another service aimed at the developing world is Ovi Mail, which has the potential to be the first digital identity for many people in emerging markets. Unlike most other email services, an Ovi Mail account can be created and used directly on a Nokia device without ever having to use a PC. Since the launch of the beta service in December 2008, around 90 per cent of the accounts have been created on a Nokia phone.
Nokia 2730 classic

Competetively priced and equipped at EUR 80, the Nokia 2730 classic is Nokia’s most affordable 3G phone offering faster access to the internet and a richer browsing experience. With the steady spread of 3G data networks across the developing world, the Nokia 2730 classic is ideal for staying connected with friends and family, and sharing one’s life with others. The Nokia 2730 classic is expected to start shipping in the third quarter of 2009.


Nokia 2720 fold

The Nokia 2720 fold is a compact fold phone with an exciting mirror-effect design, which helps people stay organized with easy access to email, calendar, Internet connectivity and file sharing applications. Email can be activated by completing a simple three step set-up process, and in select markets will be offered with Nokia Life Tools. The Nokia 2720 fold is expected to begin shipping in the third quarter of 2009 for an estimated retail price of EUR 55 before subsidies and taxes.

Nokia 7020

A fashionable fold phone that uses light, color and metal finishes to convey personal style, you will never miss a thing with the stardust effect when you get a call or message, or tap twice to have the cover light up. Connect to social networks, and share pictures taken with the 2 mega pixel camera and shown on the bright display. The Nokia 7020 is expected to beging shipping in the fourth quarter of 2009 for an estimated retail price of EUR 90 before subsidies and taxes.
Lambeek concludes, “With our longstanding commitment to emerging markets, a Nokia customer can be confident that any product we offer meets a strict and consistent set of high-quality standards.  This is particularly important in markets where technical assistance and repair shops are not easily accessible.”

via Nokia – ShowPressRelease.

Mobile Market Design for Development