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The Future of Mobile Money in Afghanistan

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.

 

The Power of Mobile to Improve Women’s Health

During the month of May, IMPACT will be highlighting USAID’s work in Global Health. From May 1-10, we will be featuring the role that Science, Technology & Innovation plays in Global Health.

Last month, I had the chance to visit a clinic in Nigeria just outside of the Federal Capital Territory where approximately 70 pregnant women were waiting to receive prenatal care. Being a big fan of impromptu focus groups, I asked the women to raise their hands if they had a cell phone. Hands shot up around the outdoor meeting space, many of them proudly clutching mobiles phones of all shapes, sizes and varieties. This was an exciting moment for me, a clear representation of just how ubiquitous mobile technology has become in low-income countries. The GSM Association estimates that the mobile penetration rate in developing countries is now 89%.

There is no doubt that the pervasiveness of mobile technology has made possible innovative new ways to deliver health information and services. mHealth projects throughout  the world are harnessing the power of mobile to do everything from registering births to supporting health workers to raising awareness about disease prevention (and a great deal in between!). Mobile phones have also become valuable tools for empowering women: more than 1 billion women have access to a mobile phone in developing countries, and 9 out of 10 women who use mobile phones say they feel safer and more connected with friends and family.

With a mobile phone, this mother has access to health information and services. Photo credit: VillageReach

Women, as mothers and health workers, are commonly the beneficiaries of mHealth projects. But even as we acknowledge the potential power of mobile phones to improve their health and wellbeing, it’s important to recognize that they are rarely equal participants in the development of these interventions or the policies that govern access and use.

I believe firmly that mHealth projects, especially those related to reproductive, maternal, newborn and child health, must take into account social, cultural and gender norms in order to produce improved health outcomes. This belief led me to work with my colleague, Madhu Deshmukh, who is seconded to the mHealth Alliance from CARE – a leader in the movement to promote the empowerment of women and girls – to develop a Gender Analytical Framework (PDF). Through this framework, mHealth implementers can better understand the nuances and implications of gender issues, and then design or modify their projects accordingly.

When developing the framework, we interviewed a number of organizations working on mHealth projects, including VillageReach, one of our grantees bringing a toll-free maternal health hotline to scale in Malawi. What VillageReach told us is that they have experienced first-hand the challenges of taking gender into account when designing mHealth programs, for instance when they realized men were calling into the service on behalf of their families. By creating this framework, the mHealth Alliance is providing mHealth implementers like VillageReach with a powerful tool that will help ensure women and men not only have access to mobile technology but that it is being harnessed in a way that truly benefits the health of pregnant women and their families, as well as the male and female health workers that serve them.

Returning to my unofficial Nigerian focus group, my second question to the women was how many had used their phone to obtain some sort of health information. Remarkably about half of the hands went up. When I probed, many shared that they used their phones to either call a family member or a health worker to seek advice about their pregnancy, though it wasn’t necessarily through a formal service.

In Nigeria, the government has recognized this power of mobile phones to empower citizens, health workers, and the health system through the Saving One Million Lives initiative.  They have also highlighted equity and gender, specifically, as key to ensuring that the full potential of mobile is realized to reach targets for significant reductions in maternal and child deaths and improvement in health and wellbeing.

As more services to provide access to health information are implemented by programs such as VillageReach and the Mobile Alliance for Maternal Action (MAMA), I fully anticipate that more women will be empowered to better care for themselves and their children. On my next visit to Nigeria, I hope to see the number of raised hands rise dramatically, due in no small part to mHealth implementers and designers applying a gender lens to their work.

Follow USAID for Global Health (@USAIDGH) on Twitter and use #GHMatters to join in the conversation.

VIDEO: Twitter Chat on Mobile Money on May 9

Join Nandini Harihareswara on Thursday, May 9th at Noon EDT for an #AskUSAID Twitter Expert Hour.  She will answer all your questions about USAID’s work with mobile money and electronic payments. Tweet @MSolutionsUSAID your questions using the hashtag #AskUSAID.

Video of the Week: Animating M-PESA

Public-private partnerships are a critical way that USAID is doing business differently and maximizing our impact.  USAID is a global leader in building public-private partnerships for development. In the past eleven years, USAID partnered with over 3,000 private sector entities to build over 1,600 alliances leveraging more than $19 billion in combined public and private resources. Across this portfolio, USAID on average leveraged $4 for every $1 of USAID funding.

And it’s more than just dollars leveraged, private sector partners provide expertise, technologies and innovations which, when combined with USAID’s technical expertise and in-country knowledge, can result in high-impact development projects that can be sustained long after public funding ends.

This month we are highlighting innovative public-private partnerships and this 6-minute animation tells the story of how M-PESA, the popular mobile money transfer program, came to be in Kenya. It’s narrated by Michael Joseph, the managing director of mobile money at Vodafone and the program’s founder. The animation was produced as part of a series of online courses designed and delivered by the USAID Mobile Solutions Team, QED, and TechChange, a DC based organization that specializes in online training for international development.

Charley Johnson is a former Presidential Management Fellow with the USAID Mobile Solutions Team. Nick Martin is Founder and President of TechChange.

Digitizing Education

This year’s Women’s History Month theme is “Women Inspiring Innovation Through Imagination: Celebrating Women in Science, Technology, Engineering and Mathematics”. In observance, USAID is spotlighting innovative women working in these fields. Below is an interview with Catherine Oliver Smith, COO and Co-Founder of Urban Planet Mobile.

How would you describe the work of Urban Planet?

Urban Planet Mobile develops and distributes digital education worldwide, primarily through basic mobile phones that provide English language education. The Urban English™ program design – simple SMS with an embedded audio file – creates the potential of reaching 95% of mobile phones worldwide with life-changing educational content. An English-speaking taxi driver in a tourism-based economy, for example, has the opportunity to earn a greater income than one who can’t speak English.

Students play a mobile game in Kenya. Photo credit: Ed Owles, Worldview

We believe access to quality education is a human right so our focus is to make education readily available to people, with little or no other access, on a device they already own and use. We also ensure affordability by charging micro-payments. Free programs are hard to scale and sustain because there is always a cost to developing and deploying the content. By providing quality, in demand content, people are more inclined to make the small investment for the tangible results education brings.

Urban Planet started with the goal of reaching the most basic phones and helping bring mobile education to the world. Today we are successfully reaching hundreds of thousands of people with our scalable and affordable technology. And this is only the beginning. Through the support of USAID, Urban Planet is testing and evaluating the effectiveness of MobiLiteracy, our 90-day mobile literacy program in Uganda. The intervention is an out of school supplemental program for pre-literate children. It introduces letters, sounds, and common words, and works on developing both listening comprehension and encouraging storytelling and sharing.

Why is language learning critical for development? Is there something about this modality of education that disproportionately benefits women?

Literacy is the basis for learning, but it’s more than that. According to the UNESCO (PDF), in the developing world, the children of literate mothers have a 50% greater chance of surviving past the age of five. Literate communities are generally healthier, less violent, more civically engaged, and more economically strong.

Mobile phones are very personal devices, more so than any other technology device. MobiLiteracy lessons are sent as a basic SMS daily lesson with an audio link. Mothers can open the audio lesson at a convenient time, which could also mean a safe and private time. The lesson can be deleted from the phone, saved, and also shared privately.

While the lessons are generally meant for children, mothers with limited or no literacy can certainly benefit. Parental involvement in education is a proven precursor to success but parents with limited education feel inadequate and ashamed. This program empowers mothers to take an active role.

Where do you see this technology ultimately going over the next several decades? 

The cost for tablets and smartphones will continue to decrease as the competition increases and the capacity of the technology expands. Also, areas with limited or no connection will get connected.

Right now, simple programs that provide for supplemental education make a tremendous impact, but the future is more robust educational programs, widely accessible and available to people currently limited from such programs due to lack of technology and the requisite infrastructure. More and more formal curricula will be created for this digital world.

While censorship and repression inhibit the spread of certain ideas, information, and education, through the use of mobile technologies, marginalized members of society will have unprecedented access to education. It is through education that a more peaceful, healthier, and better world will emerge.

USAID wins ‘Best Government Policy for Mobile Development’ Award

There is a good chance you are reading this blog on your mobile device.  If you are in a developing country, the chances are even greater. That’s because across the developing world, people are leapfrogging the need for computers and are accessing the Internet straight from their more affordable smart phone or tablet.  In fact, the International Telecommunications Union (ITU) recently reported that twice as many people access the Internet through a mobile device than through a fixed line.

USAID harnesses the power of mobile phones to achieve results Credit: USAID

But it doesn’t end there.  The near ubiquity of mobiles in the developing world – on pace to soon surpass population numbers – has allowed citizens to engage in formal economies and tap into global networks in a manner that was unheard of just a few years ago.  Even the most basic mobile phones are becoming important channels for people to conduct financial transactions and access key information on healthcare, education, and entrepreneurial opportunities.

The mobile phone will indeed transform development outcomes. For this reason, we were the first bilateral development agency to launch a dedicated Mobile Solutions team, as part of our Office of Innovation and Development Alliances.  We created it to help us do business better and expand opportunities for individuals, families and communities around the world.  Our efforts began both organically and deliberately.  Across USAID’s Bureaus and Missions, mobiles were springing up. We were inspired by our pioneering colleagues who saw a need, an opportunity, and seized the moment.

After the Haiti earthquake in 2010, when most people’s savings lay buried under mountains of rubble, Priya Jaisinghani and I visited and imagined how to get a whole new, mobile-based financial system up and running as quickly as possible.  Kay McGowan saw an opportunity to reduce corruption in Afghanistan by allowing more police officers and government employees to be paid via their phones. Christopher Burns saw the huge gender gap in mobile phone ownership among the world’s poor and initiated conversations with the mobile operators’ association, GSMA, and the Cherie Blair Foundation for Women to ensure women weren’t left behind in the mobile revolution.

Sandhya Rao and Richard Greene knew that too many mothers and children still were dying during childbirth.  Working with Johnson & Johnson, they conceived a way for pregnant or new mothers in the developing world to receive simple health text and voice messages.  Understanding that many poor farmers own a phone, Judy Payne realized this meant that helpful information like market pricing on inputs and commodities, delivered via mobile, could help raise their incomes.

From the beginning, we designed for global scale, realizing that these collective pieces had the power to be truly transformational.  With mobile phone ownership exploding in the developing world, we knew we had the opportunity to rethink how we use mobile technology to achieve faster, cheaper and more sustainable development results.

Today, the Mobile Solutions team is tackling policy and regulatory issues, addressing access and affordability, and boasts an internal mobile enthusiast group and is busy recruiting partners from the private and donor sectors.  That is why I’m incredibly proud to announce that today USAID received the ‘Best Government Policy for Mobile Development’ award at GSMA’s Mobile World Congress 2013.

This award not only recognizes the critical global leadership role USAID is playing in this arena, it emphasizes the important role mobile phones play in international development.  We see it as a symbol to push new boundaries and dedicate ourselves to scale some of our current initiatives, including:

  • The Better Than Cash Alliance, launched in September 2012, is accelerating the move towards electronic payments, particularly mobile, in order to enhance efficiency, accountability and transparency.  The governments of the Philippines, Afghanistan, Kenya, Peru and Colombia have made public commitments to achieving this shift.  Internally, USAID has led the U.S. government by issuing an agency-wide order to move away from the use of cash and by working with our implementing partners to drive millions of dollars toward mobile payments.
  • To broaden mobile access, USAID has strengthened its GSMA mWomen partnership to close the mobile phone gender gap in the developing world.  We have helped build the business case for mobile network operators to design products and services that meet the needs of women and their families.   And we’re encouraged by the work Asiacell has done in Iraq, launching a new product line designed for women that includes the freedom to choose off-peak hours, a free service to block any number from calling or texting, and discounts on female-focused value added services.  In less than 9 months, 1.2 million new female subscribers joined the service, an increase of 25% over the total female subscriber base.
  • We’ve even held a Design Challenge with GSMA, AusAID and the Qtel Group, to make the smartphone user experience more intuitive for technically illiterate populations, particularly women. Given the pace of smartphone growth in the developing world, we’re hoping to get ahead of the curve by encouraging the mobile industry to design more compelling interfaces that address fundamental access issues.  The winners of this challenge were announced today.
  • The Mobile Alliance for Maternal Action (MAMA) has ramped up since its launch in 2011.  Our work with private and public sector partners to deliver timely health messages via mobile phones to expectant and new mothers has sparked quick adoption in Bangladesh and South Africa.  Over 140,000 women have been reached, with a target of over two million mothers in Bangladesh alone by 2015.  To date, mHealth providers in 111 organizations have applied to download MAMA adaptable messages in 49 countries.

These are just a few examples of the incredible work USAID and our partners are doing to advance mobile policy, and a true testament that we remain on the cutting edge of development.  As we continue to utilize technology to maximize our impact, we invite public and private partners to join us in tackling the global issues that affect us all.

Video of the Week: Women Mobile Phone Users in Indonesia

Todaythe United States Agency for International Development (USAID), with partners Qtel Group and AusAID, announced the winners of the GSMA mWomen Design Challenge, which aims to redefine the smartphone user experience for resource-poor women in emerging markets.

The GSMA mWomen Design Challenge was created to simplify the smartphone user interface to help overcome reading and technical literacy barriers for women. Twenty-two per cent of women surveyed in Egypt, India, Papua New Guinea and Uganda who do not use mobile phones say it is because they do not know how to use them. Watch this video with women mobile phone users in Indonesia review the winning submissions to the GSMA mWomen Design Challenge.

Empowering Women with Mobile Money: The Tanzania Report

This originally appeared on Mobile Payments Today

Tanzania’s first mobile money service, M-PESA, was launched less than a year after it started in neighbouring Kenya, but adoption has been much slower in Tanzania. Consumers, especially women, face a myriad of barriers to mobile money uptake and regular usage.  During my fieldwork in Tanzania, I met with a number of women, both mobile money non-users and users, to learn more about these barriers. I also explored opportunities for the mobile money industry to overcome these challenges and develop a compelling case for women to use mobile financial services.

A message confirms the deposit of a new customer who is signing up for mobile banking. Photo credit: Kendra Helmer/USAID

The women users I spoke with were using mobile money mainly for remittances of under TSH 20,000 (approximately US$13). Some used the service for business, but most transactions were personal.  Many of the women who reported receiving remittances had married men from other towns or villages and had thus moved, and were receiving money from family at home. The frequency of mobile money usage varied from every two months to as many as seven times a month.

The women I spoke with suggested that using mobile money has improved their lives because of its ease and convenience. However, they also shared stories about agents charging more than the commission rates set by the operators, forcing users to pay more than they should to withdraw and deposit their money.  For some, this extra cost was acceptable because it was still lower than the costs of travelling to obtain the money by other means; for others, they did not have agents nearby so they incurred this fee on top of the time and cost to reach the closest agent.

In rural areas, respondents suggested that families live so close together that there is less need for remittances. However, learning more about women’s lifestyles and money management practices still highlights the potential role of mobile money in this context. For example, nearly three quarters of the population relies on agriculture-related activities for income; people keep crops such as maize as savings, liquidating only when there is an immediate financial need. One group of women acknowledged that they may not get the best price when they sell their crops like this, but they also feared the money would be misspent if they sold sooner.

Key questions we are continuing to probe include: How could mobile savings impact the families in these areas? What would be the best way to structure such services and how could mobile operators best communicate about the service to potential users? The answers to these questions – and more – will be reflected in the final report to be released later this month.

Kristy Bohling, an associate with Bankable Frontier Associates, conducted qualitative fieldwork in Tanzania. A video of Ms. Bohling discussing her research is also available.

Empowering Women One Mobile Phone At a Time

This originally appeared on Mobile Payments Today

Today, half the world’s adult population — 2.5 billion people — lacks access to basic financial services and the majority of them are women. Being financially excluded means relying on cash, where a simple task like paying a bill or receiving money from a family member can be risky, costly and time consuming. This exclusion from financial services also reinforces the cycle of poverty and slows economic growth.

From Kenya to Haiti to Indonesia, mobile phones already have begun playing an important role in expanding access to financial services, including ways to send, receive and save money. At the end of 2012, an estimated 1.7 billion people in the world will have a mobile phone but not a bank account, but thanks to advances in mobile banking technology, these are no longer mutually exclusive.

Mobile banking saves women time and money. With mobile services, women no longer have to make all-day treks to and from the bank. Photo credit: USAID

Mobile technology in the hands of women can help enable entry into the financial mainstream and provide access to life-enhancing services such as savings, payments, healthcare, education, and entrepreneurship. But as research has shown, there’s a gender gap in mobile phone ownership and usage, in part because of the lack of products designed for the wants and needs of women. In order to achieve the full potential of the role mobile technology can play in women’s empowerment globally, it is critical that service providers understand what women need and design products that effectively reach this audience.

Toward that goal, the GSMA mWomen Programme and Visa Inc. have partnered with Bankable Frontier Associates (BFA) to conduct groundbreaking research in five key countries: Indonesia, Kenya, Pakistan, Papua New Guinea, and Tanzania. Building on the results of GSMA mWomen’s Striving and Surviving, which was prepared as part of Visa and GSMA’s partnership with USAID and AusAID, the BFA research will provide a deeper dive into how best to reach these women and what services and products will directly meet their needs – offering important lessons for mobile operators, financial institutions, governments, and other partners.

Consider Pakistan, where field work already is underway. In Pakistan, only 12 percent of the total population has a bank account — and those who do are primarily men. However, mobile phone penetration hovers around 70 percent, offering a unique opportunity to provide access to more formalized financial services via mobile phone. Our early field work indicates that while Pakistani women are remarkably sophisticated and adept at managing their household finances, they don’t have access to formal financial tools. Instead, they save in money boxes in their homes or via savings groups, both of which can carry significant risk. Given the increasing presence of mobile phones in the country, mobile financial services – if designed properly – can provide an accessible and convenient avenue for women to enter the financial mainstream.

To hear more about the work underway in Pakistan, please click here to view a video from one of the field researchers, the first in a series that will highlight the work being done in all five countries.

“Through this research, we aim to uncover the challenges women face in their daily and longer term financial management and to suggest ways of easing those burdens with mobile money,” says Daryl Collins, co-author of the seminal work, Portfolios of the Poor, and a director at BFA. “Poor people of both genders manage their money with a complex portfolio of financial instruments. However, the evidence suggests that women are doubly burdened, given that they are often responsible for making ends meet, yet are less empowered to make full use of the options available.”

Our hope in this effort is to help women realize the promise of mobile financial services. In order to do that, we need to learn more about women’s attitudes towards mobile services, including barriers to frequent use and whether mobile financial services offer an entry for women who previously did not value or know how to use mobile technologies.

As our research continues over the next few months, we look forward to sharing with you the voices of these women from around the world.

Aletha Ling is chief operating officer for Fundamo, a Visa company. Chris Locke is managing director of GSMA Mobile for Development Department.

Better Than Cash: Project Update

Through foreign aid, the United States helps to lift millions out of poverty, creating a path to prosperity through education and training, and supporting American interests here at home. But because half of the world operates without a formal banking system, assistance often reaches farmers, employees, and families as cash-in-hand. Cash is messy. It puts people at risk of theft, enables graft, and takes time (and additional money) to transport. We can do better.

We need to find ways to help the 2.5 billion adults who manage their money primarily as cash to leapfrog into a cashless marketplace.

Afghan men listen as a representative from M-Paisa, or mobile money, describes how mobile bill pay works. Photo credit: FAIDA

To accelerate the replacement of cash with inclusive electronic payments, the US Agency for International Development (USAID) created the Better Than Cash Alliance, a group of countries and private companies all over the world committed to solving the “messy cash” problem. In keeping with this effort to accelerate the replacement of cash with inclusive electronic payments, our White House-supported Presidential Innovation Fellow (PIF) decided to focus on Afghanistan; a country dominated by a cash economy.  In Afghanistan, the cost of building out a traditional banking structure is prohibitive in the largely rural, often insecure country. But almost all Afghans now have cell phones. The near-ubiquity of mobile phone coverage offers a tantalizing opportunity to connect millions of Afghans to the economy and move both public and private sector payments into efficient, transparent “cash” channels.

However, expansion of mobile money was running into two problems. One was getting critical mass adoption. Think about the early days when few had cell phones and there was no one to call. And the second problem was interoperability. Mobile money would catch on like wildfire, if only you could send or receive cash electronically no matter which mobile operator you subscribed to.

Mobile payment services were first introduced to the Afghan market in 2009 by the largest mobile network operator, Roshan, who launched a product that essentially tried to replicate Safaricom’s phenomenally successful M-Pesa mobile money transfer service in Kenya.  Though operationally successful and a proven tool for reducing corruption (as demonstrated by a pilot program to pay police by mobile instead of cash that netted a 30% increase in received salary for the officers), getting more government ministries to pay their employees was proving too slow.

USAID, through an innovation fund of public-private partnerships, addressed the adoption problem; we decided to simultaneously take on the interoperability problem. Today, phone companies in Afghanistan don’t typically function cooperatively—they don’t provide “roaming” services, for example— and aren’t equipped to share user minutes across networks. The same problem will hinder the growth of the broader mobile money sector if each phone company’s mobile money service develops in a silo, and customers are unable to transact with peers and businesses using other networks. We also know that a mobile-money ecosystem can only grow if managers on the ground can effectively track and evaluate cash-flow to employees. In the United States, Federal employees are paid electronically every month, in full, and on time. We want to work with our Afghan government partners to ensure that Afghan public employees receive the same—and this will require tools to better evaluate and manage information.

Today, 100,000 Afghan teachers still receive their salaries in cash, a cumbersome process that often results in delayed and incomplete payments. That’s why we created a text-message survey tool which ministries and program officers can use to ask employees whether they have been paid correctly, and begin building a database of phone numbers as employees transition to mobile paychecks. We’ve also worked on solutions to drive broad adoption of mobile phone-based financial services. Getting paid by mobile phone is great, but if basic life necessities can only be bought with cash—then a cashless marketplace will not flourish. USAID’s on-the-ground mission in Afghanistan enables Afghans to sign up to pay their electric bills via mobile phone, vastly improving convenience for customers and beginning to improve revenue collection, a critical requirement for maintain and expanding access to the electrical grid. So far, more than 100,000 individuals have joined the program.

Many countries around the world could benefit from an enhanced mobile-money marketplace.  In fact, Tanzania and Indonesia (PDF) are already working to build their own electronic payment ecosystems. There is much more work to be done. As we continue to lay a framework and accelerate progress in Afghanistan, we plan to share lessons learned with other countries and work toward a more efficient foreign aid system that is, in many ways, better than cash.

Karl Mehta is a Presidential Innovation Fellow working on Better Than Cash at USAID.

Seth Wainer is a Program Analyst at the White House Office of Science and Technology Policy.

Learn more about or apply for the Presidential Innovation Fellows program. 

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