East Africa & India: Using Mobile Money

By Keya Madhvani on December 16, 2013

Keya is the Innovation Associate at Acumen in the New York office. She recently visited several of Acumen’s investee companies on a trip to East Africa, and discusses her experience below.

Africa is a continent of colors; the deep blue of the sky, the brown roads snaking through oceans of dense green like rivulets, and the red dirt blankets everything. As you travel through Uganda and Kenya, you can’t help but feel immersed immediately, as I did on my trip there this past October.

As an Indian, it felt familiar to me. The same small houses, though with different looking inhabitants, the same signs populated tiny villages and towns even if in different languages, the same vehicles clogged the arteries of the towns with different license plates, and the same friendly smiles were ready and eager to greet me.

During my first two years working with Acumen in India, I was lucky to travel around the country. I visited LifeSpring Hospitals where I learned about the critical need of affordable maternal healthcare. I saw the impact Edubridge has helping young unemployed adults secure jobs in urban centers. I learned how Husk Power Systems transformed the communities by giving them access to energy.

I carried these experiences with me when I visited East Africa, which faces many of the same challenges, and indeed a lot of the same opportunities as well. However, one area where a gaping divergence is clear is in the use of mobile money and mobile payments. In Kenya, it is estimated that two-thirds of the adult population use M-PESA for transactions ranging from paying their bills to taxi rides, and 25% of Kenya’s Gross National Product flows through it.

mobile money

The advantages of mobile money are clear. Most of the poorest people in the world are unbanked, they live in far to reach places, with minimal access. Mobile money provides access to cash without needing to get your hands on the physical currency. And all you need is your mobile phone, a device that most people already have. Mobile payments are convenient, inexpensive to transmit, and efficient.

IMG_3297

Weighing tea leaves at Virtual City

We traveled north to the lush tea fields of Kenya to visit Virtual City’s operations at the Iriaini Tea Factory. As we entered the plant, the aroma of tea leaves took me back to my childhood days spent at my relative’s home on the tea-fields of Munnar, in Southern India. Virtual City provides mobile solutions to tea-sellers in Kenya. Once the tea leaves are accurately weighed, data is transmitted to farmers on their mobile phones, and receive their payments through mobile money services. Furthermore, because they now have an account of their transactions, these tea-pickers are gradually building credit histories and are steadily being equipped to get loans from banks.

Further North-West of the Iriaini Tea Factory, we visited Juhudi Kilimo’s operations in Kitale. Juhudi offers asset backed loans to farmers across Kenya. These farmers now have access to their loans through the ease of their mobile phones, saving a substantial amount in transportation costs to and from the closest branch – money that can in fact go to paying back their Juhudi loan.

Juhudi Kilimo watermelon cow

Smallholder farmers use Juhudi Kilimo’s financing products to acquire assets like dairy cows

Another Acumen investee, M-KOPA, is a partnership between d.light and Safaricom. M-KOPA sells a unique solar household lighting system produced by d.light, which allows people to pay their ‘utility’ bill with an easy top-up system through M-PESA. While this may not seem revolutionary at first thought, off-grid families now have the ability to pay for affordable, clean, and renewable energy at their convenience, as and when they earn income.

M-Kopa provides financing for solar home systems

M-Kopa provides financing for solar home systems

Undoubtedly, there are many ways that mobile money could transform the lives of the poorest Indians. The Economist tells the story of an individual who wanted to transfer money to his mother for medicines as she was deathly ill. His mother lived in a village with no banks nearby, and so by the time the money arrived it was too late. This scenario is all too common. Customers of Husk Power Systems, Edubridge, LifeSpring, and countless other social enterprises could all benefit from the use of mobile money, and indeed, perhaps the companies could too.

A New York Times article recently reported that ‘India is probably the most exciting market for mobile money in the world’. It is interesting that the mobile money phenomenon has not caught on quite as yet in India. A recent study by Deloitte claims the reason is all the stakeholders involved in an effective mobile payment service – financial services players, regulators, telecom and technology players – have not managed to collaborate effectively. Thanks to India’s massive population, high levels of cell phone penetration (it is estimated that India has 870M subscribers, almost three times the population of the United States) and low airtime rates, even a modest conversion to mobile money could make the South Asian region the largest market in the world – and more importantly benefit the 350M below the poverty line.

Mobile money has the potential to solve many problems faced by the poorest of the poor in India, and it’s exciting to see that is starting to be recognized. The benefit that a simple technology like mobile payments can afford the poor is more than financial inclusion; it’s a matter of improving choice – it’s a matter of dignity.

It is clear to me on my recent visit that the gap between India and East Africa was not wide, and in fact the similarities are striking – but in the realm of mobile money, India has a lot to learn from its neighbors across the sparkling blue Indian Ocean.

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