Reaching the Unreachable: How NGOs in Africa are Embracing Mobile Payments

Africa is the fastest growing region in the world for mobile network penetration. Non-government organisations (NGOs) in Africa need to demonstrate financial best practices to maximise the impact of their on-the-ground work and to be assured of future funding. Embracing mobile payments is one way of doing this. Leveraging mobile innovation is making a significant difference by improving control and efficiency, and reducing the reliance on cash and the related costs and risks.

Initiating and receiving payments by a mobile phone, without the need for a traditional bank account, is a groundbreaking development in Africa. NGOs are now beginning to use online banking services to send money directly to mobile wallets to support their staff and projects in remote areas as a quicker, safer and cheaper alternative to physical cash payments.

Africa is the highest recipient of aid globally. The Organisation for Economic Cooperation and Development (OECD) countries and multilateral agencies gave US$47.6 bn to African countries in 2009, 37% of the global total. This was despite the fact that much of the developed world was in recession, as well as having to cope with big budgetary deficits and public sector debts.

However, it is a fact that only around 20% of the African continent has a traditional bank account, which is why cash is such a dominant and necessary form of payment, but over 50% of the continent has a mobile phone. Therefore, NGOs, particularly those working in more remote areas, are beginning to move away from cash and leverage the ubiquitous mobile phone as a ‘virtual’ bank account as much as possible. A mobile ‘payment’ is different from mobile ‘banking’ in that the latter is only one step removed from online banking, and requires the user to have a bank account. Mobile payments which are also referred to as ‘m-payments’ or ‘e-money’ is another step further, where the phone becomes a ‘store of value’ wallet as money is transmitted from one phone to another, and users do not need a bank account.

NGOs Strive For Financial Efficiency

Aid donors these days are demanding greater financial accountability, efficiencies and comprehensive reporting from aid recipients to ensure the maximum allocation of funds with minimum operational risk. In this respect, NGOs have been learning from the corporate sector on how to become more efficient with their finances and ‘do more with the same’ (or ‘with less’ in some cases).

As a priority, NGOs are looking at new, more efficient ways of facilitating disbursements. Electronic banking (e-banking) has replaced cheques to a large extent, but cash is still widely used for smaller payments to the large number of unbanked and under-banked populations in Africa. Transporting physical cash, often over long distances, is risky, with a high chance of loss, theft or fraud, and more importantly, it can be difficult to prove that cash has been received by those for whom it was intended. The challenge, therefore, is for NGOs to harness the power and the scale of the mobile phone network to make payments to payees’ mobile phone ‘wallets’ and replace cash wherever possible.

Citi’s Role in Mobile Payments

Mobile payments are expected to prove a major catalyst in Africa’s economic development, delivering quick, convenient and secure transaction services, particularly to those in the lowest income strata who have little or no access to formal financial services. Of the 5 billion mobile subscribers worldwide, 500 million are in Africa, which is half the continent’s population, according to research published by AfricaCom Daily News in November 2010.

In East Africa specifically, mobile payment services are run by mobile network operators (MNOs) which provide the core infrastructure, technology and processes, and work in conjunction with agents and banks. The agents including corner shops, petrol stations, chemists, mobile phone dealers and other retail outlets are a crucial part of the ecosystem as they earn commission for cash-in and cash-out services for subscribers. In addition, their wide coverage across the country provide the unbanked and under-banked access to basic payment services.

Kenya is at the forefront of mobile payments on the continent, and indeed the world. Today, about 70% of Kenya adults are registered with an MNO to manage their fund transfer needs via their mobile phones. Since the first mobile phone money transfer service was launched by a leading MNO in 2007, the country’s three other MNOs have followed suit. Between them they have enrolled 15.4 million customers (out of a population of 39 million) and enlisted 39,499 agents. Total transactions are running at Ksh76bn (US$890m) a month, or Ksh912bn (US$10.7bn) a year.

“Mobile phone technology has in a few years of its existence demonstrated how financial inclusion can be leapfrogged on a major scale and in a short time span using appropriate technological platforms,” said Professor Njuguna Ndung’u, governor of the central bank of Kenya at the launch of a new money transfer service in January that operates across all four mobile networks.

Empowering the Underprivileged

Citi’s presence in Africa stretches back more than 50 years, with a broad and deep understanding of NGO requirements. Helping NGOs reach the unreachable – such as Africa’s large unbanked and underbanked populations – with mobile money, will help improve financial inclusion on the continent. Empowering the underprivileged with financial services, even at the simplest level, will be an important step in Africa’s economic and social development.

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