This is part of our FrontLines Year in Review series. This originally appeared in FrontLines September/October 2012 issue.

With a recent explosion in mobile phones, USAID engages Afghanistan’s best and brightest to grow mobile money.

Just a decade ago, Afghans had to travel to Pakistan to make international calls. The landline phone infrastructure had completely fallen into disarray during the civil war, and there were no mobile phone operators. The first American diplomats and U.N. workers to return to Kabul after the fall of the Taliban carried backpacks full of costly satellite phones for the new Afghan emergency government.

But smart, early regulatory decisions by Afghan lawmakers, based on technical assistance from USAID and other donors, engendered the rapid growth of a profitable and competitive sector, pushing down airtime prices well within reach of normal Afghans. Today, Afghanistan is awash in mobile phones, with more than 18 million active subscriptions in a country of 28 million.

This explosion of mobile users has created a network that bridges the country’s formidable urban-rural divide while transcending gaps in physical infrastructure, low literacy rates and pervasive insecurity.

An Afghan youth uses his mobile phone to take pictures in Musa Qala. Photo credit: Dmitry Kostyukov, AFP

The near-ubiquity of mobile phone coverage has allowed Afghanistan to join the vanguard of countries experimenting with innovative new uses for the mobile channel, using the networks to extend services and information cheaply to populations lacking access through other means. Among the most promising is mobile money—the ability to safely store and transfer “e-money” via SMS, avoiding the expense and danger associated with moving cash, while extending the reach of basic financial services from the 5 percent of the population with accounts in brick-and-mortar banks to the 65 percent of Afghans who use mobile phones.

Already, m-money trials facilitated by the U.S. Government, such as paying government salaries by mobile instead of cash, are demonstrating startling benefits: In Wardak province, police deployed in unbanked communities report “raises” of 30 percent when paid via mobile; cash payments of salaries in Afghanistan are exceedingly vulnerable to corruption. Equally promising applications to extend and repay micro loans and pay household electricity bills are beginning to roll out, delivering dramatic increases in efficiency.

As the mobile network operators increasingly focus on scaling their mobile money products and agent networks, USAID is working in partnership with the private sector to aggregate demand and provide consumer education to Afghans, most of whom are unfamiliar with or mistrustful of the formal banking system. In one novel approach, the Agency is working with the Association of Mobile Money Operators of Afghanistan to harness the creativity and energy of Afghanistan’s best and brightest to develop mobile money applications to address pressing problems faced daily by Afghans.

An Afghan Avalanche of Ideas

The overwhelming response to an app design competition this year among Afghan university students illustrated just how compelling up-and-coming young Afghans find mobile money—more than 5,000 students across the country submitted ideas, many of which focused on how mobile money on how mobile money could improve the Afghan Government’s ability to provide basic services transparently and efficiently.

Others put forward ways in which mobile money could help empower individuals by giving them tools to manage their own finances, a particular boon for women, who often rely on male relatives to conduct financial transactions on their behalf.

Such competitions can trigger a network effect, drawing students into the design process and drawing in new mobile money users—and expanding the mobile technology sector.

Afghan officials say the enthusiasm generated by the contest and subsequent avalanche of ideas bodes well for future uptake of mobile money in Afghanistan given the country’s demographics. With two-thirds of Afghans age 25 years or younger, Afghanistan is truly a land of potential early adopters…[continued]

Read the rest of the article in FrontLines.

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