One year ago, USAID joined the Bill & Melinda Gates Foundation, Citi, Ford Foundation, Omidyar Network, United Nations Capital Development Fund and Visa Inc. to launch the Better Than Cash Alliance.
This summer, the Government of Malawi joined those organizations in their work to lift millions out of poverty through electronic payments. Citing opportunities for transparency and reduced costs, the Government will begin by shifting $3 million of its existing payment streams away from cash. That may sound modest, but it’s a truly dramatic shift for Malawi.
Just a few days ago on September 13, Malawi Budget Director Paul Mphwiyo was shot because of his leadership to fight graft in the public sector by replacing cash payments with electronic, and thus transparent, payment methods. It is a sobering but incredibly important reminder of just how much this work matters.
A customer checks the details of a text message received after transferring funds via mobile money. Photo credit: Manpreet Romana/AFP
When I first learned about mobile money, many people were working on it in Malawi but no one was doing it well. The mobile network operators, banks, government, and donors were focused on their own incentives rather than supporting the ecosystem in a coordinated way that would accelerate the creation of products Malawians could use. But to me coordination was critically important because I believe mobile money can have significant impact on the people we target in our programs in agriculture, education, health, and governance.
In Malawi, roads don’t reach many areas and are often in rough shape. Poor access to electricity and low incomes make brick-and-mortar banking too expensive to deliver to rural areas. However in just 10 years, more than half of Malawi has obtained access to a mobile network. In this expansion, we saw an opportunity for reaching financially excluded groups. But Malawi isn’t a country where we could immediately start using mobile money. So what did we do?
We started simple. We started with a demand assessment. This helped us understand the local champions, people’s needs, and how USAID could help bring mobile money to scale.
Our stakeholders were interested in mobile money, but they were fragmented, and no one could do it on their own. So we created a working group of mobile network operators, banks, the government, and donors. The working group allowed us to hear and understand each other. Through the group, we are solving common challenges and compromising where incentives conflict. For example, mobile network operator Airtel used this foundation to launch its mobile money platform in 2012 with its competitor TNM following in 2013.
Though we are a small country, and maybe because we are a small country, we have made great progress since we started. We’ve learned a lot, and I want to share a few of these lessons. I hope they will help any champion in any country or organization to think about supporting mobile money in your country.
- Plan for sustainability: We don’t want the working group to depend on donor funding or leadership, so we’ve institutionalized it as a subcommittee under the National Payments Council to encourage local ownership. By doing so, we are convinced it will continue to exist beyond USAID’s involvement.
- Maximize coordination: USAID’s ability to convene different partners taps into one of its unique strengths. For example, the World Bank is working on an access to finance project and targeting financial regulations. With the working group, USAID has also helped them understand the regulatory challenges with mobile money, and they’re taking on policy work that they’re best positioned to do.
- Prove your case: Mobile money is still a young technology. Many people haven’t used it and don’t see its value, so USAID is helping organizations transition from cash to electronic payments. When they see increases in accountability and find cost and time savings, we gain adopters that help us get to scale.
So, what’s next? This technology could be expanded to help government fulfill its obligations to pay civil servants in a timely manner by giving it a simple vehicle for payroll transaction; it could help public utilities increase the proportion of customers who pay their bills on time; and it can provide a mechanism for simplifying the management and operation of social cash transfer programs. Most importantly, though, it can provide the means for millions of poor Malawians to participate more fully in the economic life of the country. Sometimes, revolutions start small.