Steve Rynecki serves as Mobile Money Adviser at USAID. Below is a follow-up to his June 2012 blog.

Afghanistan is a fascinating place to introduce new technology. The country is leap frogging in the mobile technology space and capturing the world’s imagination with its success with mobile money. Where there were no mobile phones in Afghanistan in 2000, there are now 18 million and growing. Competition in the voice market is fierce in Afghanistan, as it is in much of the world today. In fact, anyone arriving at Kabul International Airport is immediately struck by the numerous advertisements for mobile services. It’s truly an amazing development in the market and has people taking notice.

Afghans are finding new ways of using this technology for public benefit. They’re sharing health advice and commodity price information. They’re creating security and traffic alerts and innovating in ways unimaginable even 5 years ago. When I was here in 2008, Roshan just began the use and promotion of the M-PAISA mobile money service. Over these past five years, I’ve seen remarkable progress in the mobile money space here and globally. Back then, Roshan was the only mobile provider in Afghanistan and optimism for the benefits of mobile money was high. Fast forward to 2013 and we see the picture has changed significantly. Roshan is now competing with three, and soon to be four, other mobile operators, each offering their own mobile money product (Etisalat, MTN, AWCC and AfTel).

Afghanistan is leap frogging with mobile technology. Photo credit: USAID

These products include mobile wallet technology, where customers can store their money digitally as opposed to using cash. They can exchange the digital value for in-store purchases and in transferring funds anywhere a corresponding agent is located. Mobile money can be used to pay utility bills, top up mobile phone minutes and pay school fees. It’s also a great way to distribute salaries and social service benefits like pensions and public assistance. Under the right conditions, it could even be used for cross border Customs duty payments. The possibilities are limited only by our imagination.

To truly understand the mechanics of this technology, I tried it myself. In about 10 minutes I had an M-PAISA account set-up with a local agent in Kabul. I loaded my mobile wallet with the Afghan equivalent of $700.00. Since I can’t live in Afghanistan without buying carpets, I used M-PAISA to pay a carpet dealer in Herat and a friend in Mazar-i-Sharif who lent me cash to purchase another carpet. I was able to pay them both with mobile money in less than 5 minutes. There I was, standing in Kabul, sending money to two different people in two different cities. Each person received a text message from M-PAISA telling them how much I sent. The carpet dealer and my friend simply went to their local Roshan shop and cashed-out. It worked for me. The transfer fee for $700.00 came out to $3.00. But if you add the $6.00 I paid to withdraw $700.00 from the Afghanistan International Bank ATM, we’re looking at closer to $10.00 to transfer the funds. Still, it was worth for me.

So why isn’t everyone using mobile money in Afghanistan? What’s keeping this great service from taking off? As mobile money continues to evolve here, USAID and our partners have identified the following opportunities to help scale the uptake and use of mobile money by:

  • Pricing that allows for rural inclusion
  • Providing interoperability between banks, mobile operators and merchants
  • Exploring new branchless banking laws to help mobile money flourish
  • Better understand consumer preferences for informal money transfers (Hawala)
  • Strategies to ensure rural market liquidity (enough cash in the till for payouts)
  • Business models for mobile operators and agents to ensure their sustainability, as well as challenges on agent recruitment and management
  • Increasing caps on mobile money transactions for Customs duty payments and government salaries

The challenging conditions facing the mobile money industry here are not insurmountable, but they do hinder the uptake of mobile money and need to be carefully taken into consideration. With some 70% of Afghan adults using mobile phones, many local technology and business experts believe there’s a case for operators to offer mobile money. And, I would surmise, the lack of convenient bank branches would be reason enough for Afghans to seek out mobile transfers for their funds.

Consumer behavior is challenging in a country where cash is often salted away in tin cans hidden in walls, etc. And, where assets are often converted into precious metals like gold, savings accounts are rare. Rural Afghans often barter goods and cash is seen as an inconvenience, or even irrelevant when basic needs are met by subsistence farming. Given this environment, USAID and our Afghan partners are working in the following areas to help scale the use of mobile money. Here are a few of the activities we’ve completed or are currently underway for 2013-14:

  • Assisted Afghanistan in becoming a member of the Better Than Cash Alliance
  • Helped establish the Afghan Association of Mobile Money Operators (AMMOA)
  • Working with regional leaders of bank-led branchless banking practices to share knowledge with Afghan counterparts
  • Funding monitoring and evaluation on the utility and teacher salary payment pilots
  • Exploring interim and long-term interoperability solutions to link banks, mobile operators and merchants with international payment systems
  • Working closely with the Afghan government in scaling mobile money pilots for salary and utility payments
  • Designing public-private consumer awareness campaigns
  • Exploring possible regulatory reforms that encourage formal financial transactions

I’ve seen firsthand, for several years now, that mobile technology continues to scale. We’re getting a better understanding of market forces and figuring out how to bring interoperability into this burgeoning market. Who would have believed that in this once shattered country millions of ordinary people would be communicating almost daily on mobile phones. The future is indeed bright and the opportunities are limited only by our imagination.