MobileActive.org

Across developing countries, millions of people rely on informal economic activity and local level networks to earn their living. Most of these populations are from bottom of pyramid and they don’t have access to basic financial services/banks as access to them is costly and very limited. However, the outstanding growth of mobile sector worldwide has created a unique opportunity to provide social and financial services over the mobile network. With over 4 billion mobile cellular subscriptions worldwide, mobile network has the ability to immediately offer mobile banking to 61% of the world population. A study states the biggest share of mobile payment users will be in the Asia/Pacific region by 2012 (Gartner, 2008). In the context of being the most promising ICT market and the largest inbound remittance receiver, this region is expected to be the hub of m-banking transactions. 

The paper starts with an overview of existing models of m-banking and then examines the m-banking regulations in some South Asian countries and of the countries where (e.g. the Philippines, Kenya, South Africa) m-baking/payment systems are already in practice or a success. The concerns of financial regulators and policy measures taken so far are discussed.

The key questions this paper aims to answer:

⇒ What are the practiced models of m-banking/payment systems? 

⇒ What concerns are generally raised by financial regulators?  

⇒ Which m-banking/payment models have drafted or enacted in South Asia?  

⇒ Which m-banking/payment models have are enacted in the countries where it is a success?

⇒ What constitutes a proportionate regulatory approach?  

The answers to the above questions helps to identify a way forward which can expedite adoption of m-banking/ payments service in South Asia successfully and quickly.  

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 report was commissioned by the GSMA and undertaken by PricewaterhouseCoopers (PwC) to examine the link between regulation and the digital divide. The emphasis has been on Sub-Saharan Africa because of the region’s relatively low level of penetration and significant, unfulfilled demand. Mobile has clearly emerged as the main solution to providing communications for the world’s unconnected. Mobile has already brought significant benefits to economies and societies across much of the developing world, but much potential still exists in Africa, where fixed-line communication alternatives are extremely limited.

This report investigates how a move towards best-practice regulation would promote an increase in mobile investment and help to realise this potential. Specifically, the analysis explores the impact of regulatory policy and government intervention on the level of risk associated with operator investment decisions. In light of this, we examine how reduced regulatory risk could improve investment levels and reduce the cost of mobile ownership. We then consider the impact this could have on penetration levels, and the corresponding knock-on effect for GDP.

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.

Project ABC, implemented in collaboration with Catholic Relief Services in Niger and Christopher Ksoll (Oxford University) and Travis Lybbert (University of California-Davis), is an innovative, three-year pilot program to use cell phones as a platform for literacy in Niger. The purpose of the pilot program is to use information technology (mobile phones) as a complement to traditional literacy training, providing households with the opportunity to practice their literacy skills via SMS.

This paper presents the results from a quantitative impact study of the Grameen/MTN Village Phone in Rwanda, which was conducted between June 2006 and August 2007. We find that the introduction of a Village Phone had a substantial impact on reported access to telecommunications for local entrepreneurs.

While the introduction of phones did not follow the intended randomized design, we compare the changes observed in 94 study communities that received the phones to the 284 that did not. We find that the placement of a Village Phone in a community was associated with both an increased use of phones to transmit news and a greater propensity for farmers to arrange their own transit.

Despite this improvement in access to telephony, the actual prices received by farmers were not affected. Impacts at the household level were muted by the relatively small size of Village Phone businesses and airtime usage rates, implying that profits must be transferred from other sources to pay off the phone in six months. Reported labor time in household enterprise increased dramatically for Village Phone operators, but positive impacts on consumption or overall business profits were not found.

The SME sector has an important role to play in the present and future economic development, poverty reduction and employment creation in developing economies (Hallberg, 2000). Stern (2002) stresses that the SME sector is the sector in which most of the world's poor people work. SME sector growth largely exceeds the average economic growth of national economies in many countries and contributes significantly to employment creation. Accordingly, governments and donors alike have recognised the important role of the SME sector for overall development. As a result, many government policies are geared towards supporting their growth through a variety of programmes that range from tax incentives to technical assistance; from regulatory provisions to policy interventions; training and other types of business development services (O'Shea & Stevens, 1998).

Arising from this, one of the key issues is to identify the current information practices and needs, as well as the obstacles that SMEs face in their daily business activities, and to provide guidance in creating relevant policy initiatives that will lead to more economic growth and employment. The SME e-Access and Usage survey was carried out by the Research ICT Africa! (RIA!) network in 14 African countries between the last quarter of 2005 and the first quarter of 2006. Its primary objective is to understand the impact of ICTs on private sector development, and how ICTs can contribute to a vibrant SME sector and economic growth in the context of developing economies.

The countries covered included Botswana, Cameroon, Ethiopia, Ghana, Kenya, Mozambique, Namibia, Nigeria, Rwanda, South Africa, Tanzania, Uganda, Zambia and Zimbabwe. To this end, the SME e-Access and Usage survey was motivated by the lack of clarity about the impact of ICTs on small businesses. The literature to date has failed to create a tight link between the use of ICTs and issues such as profitability and labour productivity. There are so many competing claims against government resources and time that a vague link between ICTs and economic growth and employment creation is not convincing enough evidence for governments to commit their resources. This survey aims to change that perception by providing solid empirical evidence of the link between ICTs and business performance based on firm-level evidence.

A major contribution of this survey to the existing understanding of SMEs in Africa is its use of a formality index to categorise SMEs. Past studies have treated formal, semi-formal and informal businesses uniformly, reducing the applicability of their analysis. A formal business is fundamentally different from an informal business in Africa. A formal business pays its taxes, is more likely to export and often is included in official census of SMEs. In contrast, the primary survival strategy of an informal business is to remain below the radar screen, not to pay taxes and not to form part of any official data. Apart from the obvious survey difficulties this presents, there is a more mundane business difference: informal businesses are also more likely to sell or produce anything that might make money, in contrast to more formal businesses that have a tendency to concentrate on a single product or set of products. The implication of this is that a Cobb-Douglas production function, for example, cannot be used to analyse SMEs, unless there is a declared interest only in formal SMEs.

Of course, suveying only formal businesses would be telling half the story since about two-third of non-resource-driven GDP generation is derived from SMEs, and a large share of that from informal ones. The establishment of the link between ICTs and profitability and labour productivity creates another set of policy imperatives for governments across the continent. ICTs are only useful if they can easily be acquired and used. The key obstacle identified by SMEs towards greater possession and use of ICTs is their cost. The high cost of ICTs in Africa has been attributed to policy choices that have limited competition, and the absence of regulatory capacity to regulate abuse of market dominance in wholesale and retail pricing (Gillwald, 2005 and Gillwald & Esselaar, 2004). This requires greater regulatory capacity, something that is missing from nearly all countries included in the survey. To illustrate this, most governments are exclusively focused on the direct contribution of ICTs towards the economy in terms of profits and staff complements of major telecommunications operators.

However, as this report makes clear, it is the indirect contribution of ICTs towards economic growth that is truly transformative: “ICTs have the largest beneficial impact in conjunction with other changes, including a new set of ICT skills/training, structural changes within business models and the economy, and institutional and regulatory adjustments” (ITU, 2006: 39). This means that ICTs have to be looked at from a perspective that considers all causes of economic growth and attempts to provide a catalytic environment that uses ICTs to generate economic growth rather than the ICT sector's specific contribution towards GDP.

In the context of the rapid growth of mobile phone penetration in developing countries, mobile telephony is currently considered to be particularly important for development. Yet, until recently, very little systematic evidence was available that shed light on the developmental impacts of mobile telecommunication.

The Information and Communication Technology for Development (ICT4D) program of the International Development Research Centre (IDRC), Canada, has played a critical role in filling some of the research gaps through its partnerships with several key actors in this area.

The objective of this paper is to evaluate the case of mobile phones as a tool in solving development problems drawing from the evidence of IDRC supported projects. IDRC has supported around 20 projects that cut across several themes such as livelihoods, poverty reduction, health, education, the environment and disasters. The projects will be analyzed by theme in order to provide a thematic overview as well as a comparative analysis of the development role of mobile phones. In exploring the evidence from completed projects as well as the foci of new projects, the paper summarizes and critically assesses the key findings and suggests possible avenues for future research.

When information is limited or costly, agents are unable to engage in optimal arbitrage. Excess price dispersion across markets can arise, and goods may not be allocated efficiently. In this setting, information technologies may improve market performance and increase welfare.

Between 1997 and 2001, mobile phone service was introduced throughout Kerala, a state in India with a large fishing industry. Using microlevel survey data, we show that the adoption of mobile phones by fishermen and wholesalers was associated with a dramatic reduction in price dispersion, the complete elimination of waste, and near-perfect adherence to the Law of One Price. Both consumer and producer welfare increased.

The authors explore the impact of access to information on poor farmers' consumption. The analysis combines spatially coded data on mobile phone coverage with household panel data on farmers from some of the poorest areas of the Philippines.

Both the ordinary least squares and instrumental variable estimates indicate that purchasing a mobile phone has a large, positive impact on the household-level growth rate of per capita consumption. Estimates range from 11 to 17 percent, depending on the sample and the specification chosen.

The authors perform a range of reliability tests, the results of which all suggest that the instruments are valid. They also present evidence consistent with the argument that easier access to information allows farmers to strike better price deals within their existing trading relationships and to make better choices in terms of where they choose to sell their goods.

Due partly to costly information, price dispersion across markets is common in developed and
developing countries. Between 2001 and 2006, cell phone service was phased in throughout Niger, providing an alternative and cheaper search technology to grain traders and other market actors. We construct a novel theoretical model of sequential search, in which traders engage in optimal search for the maximum sales price, net transport costs. 

The model predicts that cell phones will increase traders’ reservation sales prices and the number of markets over which they search, leading to a reduction in price dispersion across markets.  To test the predictions of the theoretical model, we usea unique market and trader dataset from Niger that combines data on prices, transport costs, rainfall and grain production with cell phone access and trader behavior.  We first exploit the quasi-experimental nature of cell phone coverage to estimate the impact of the staggered introduction of information technology on market performance. 

The results provide evidence that cell phones reduce grain price dispersion across markets by a minimum of 6.4 percent and reduce intra-annual price variation by 10 percent.  Cell phones have a greater impact on price dispersion for market pairs that are farther away, and for those with lower road quality. This effect becomes larger as a higher percentage of markets have cell phone coverage.  We provide empirical evidence in support of specific mechanisms that partially explain the impact of cell phones on market performance. 

Robustness checks suggest that the results are not driven by selection on unobservables, nor are they solely a result of general equilibrium effects.  Calculations of the four-firm concentration index suggest that the grain market structure is competitive, so the observed reductions in price dispersion are not due to greater market collusion.  The primary mechanism by which cell phones affect market-level outcomes appears to be a reduction in search costs, as grain traders operating in markets with cell phone coverage search over a greater number of markets and sell in more markets.  The results suggest that cell phones improved consumer and trader welfare in Niger, perhaps averting an even worse outcome during the 2005 food crisis.

With globalization, small rural producers must compete in a competitive economic market. Due to their small size and limited financial capacity, they face significant challenges in doing so. We discuss the design and evaluation of two mobile phone based tools to help small producers achieve economies of scale and a quality premium.

These tools were developed using CAM, a camera-based mobile phone application framework specifically designed for the rural developing world. CAM DPS (Delivery Processing System) efficiently captures transactions between producers and cooperatives, in order to monitor remote inventory levels, and document the price paid to the producer. CAM RANDI (Representation AND Inspection tool) allows local inspectors to digitally capture the condition of farm parcels, using a combination of paper, text, audio and images. Using this data, rural producer cooperatives can improve their efficiency and monitoring, and ensure conformance with quality and certification standards. A preliminary evaluation suggests that these applications are accessible to target users and will serve a significant need.

Informational challenges—absence, uncertainty, asymmetry—shape the working of markets and commerce in many developing countries. For developing country micro-enterprises, which form the bulk of all enterprises worldwide, these challenges shape the characteristics of their supply chains. They reduce the chances that business and trade will emerge. They keep supply chains localized and intermediated. They make trade within those supply chains slow, costly, and risky.

Mobile telephony may provide an opportunity to address the informational challenges and, hence, to alter the characteristics of trade within micro-enterprise supply chains. However, mobile telephony has only recently penetrated.

This paper, therefore, presents one of the first case studies of the impact of mobile telephony on the numerically-dominant form of enterprise, based around a case study of the cloth-weaving sector in Nigeria. It finds that there are ways in which costs and risks are being reduced and time is saved, often by substitution of journeys.

But it also finds a continuing need for journeys and physical meetings due to issues of trust, design, intensity, physical inspection and exchange, and interaction complexity. As a result, there are few signs of the de-localization or disintermediation predicted by some commentators. An economizing effect of mobile phones on supply chain processes may therefore co-exist with the entrenchment of supply chain structures and a growing “competitive divide” between those with and without access to mobile telephony.