How mobile money can shut down state graft



MOBILE money systems not only lift people out of poverty, they can also aid in closing down opportunities for state corruption, improving the lives of all.

The World Bank estimates that more than 2-billion adults globally do not have a bank account and remain outside the formal financial sector. In developing economies, only 41 percent of adults have bank accounts.

Being “banked” offers people certain protection. It enables them to save more effectively, distribute money to dependants more efficiently and across distance, and can be a path to accessing regulated, affordable credit and employment in the formal economy.

It is often a major stepping stone in the transition out of poverty, making it a primary goal for many philanthropic organisations.

Digital payment systems allow for a saving of up to 90 percent on the cost of transactions, according to Sacha Polverini, a Gates Foundation senior programme officer and a panellist at the MasterCard Innovation Forum in Kuala Lumpur, Malaysia, last month.

MasterCard’s divisional president for sub-Saharan Africa, Daniel Monehin, says digital payment systems are not only a gateway to financial inclusion but are a solution to two of Africa’s most notorious problems: corruption and inefficient state administrative systems.

The Kenyan government recently rolled out a system that allows citizens and businesses to apply and pay for certain services and licences through a mobile-ready website (, taking much cash out of the system. Visitors to the country can also prepay for their visas on the site.

“We suggested that this is how (the Kenyan government) can close all the loopholes — and those loopholes were like black holes, massive and with a life of their own,” Monehin says.

“If you (go digital), you can address that, and they jumped on it. The solution was already in the market; we just plugged them into it. All of those payments are now driven off that platform and it is card-agnostic.”

In Nigeria, identity cards are now linked to a mobile wallet system backed by a financial institution. “Everybody 16 and above who now gets a national ID, gets the electronic wallet,” explains Monehin. “It is often difficult for a solution to survive from one administration to another, but this one has.

“President (Muhammadu) Buhari has been enrolled in the programme and said everyone should get this. A lot of what the government has promised to do, they found that this is a platform to deliver it. It is a platform to fight corruption, for transparency and accountability.”

This top-down approach could help in mainstreaming digital payment systems (which have traditionally been consumer-or individual-focused products driven by small start-ups), while increasing financial inclusion.

“In terms of financial inclusion, I would start my thinking from the government, and then SMEs (small and medium-sized enterprises), and then the individual,” Monehin argues. “If you are able to convert those first two entities, which are 90 percent-95 percent cash — similar to the individual — if they disburse benefits electronically, they will now drive electronic behaviour down the pipe.

“You cannot solve the one in isolation, while the government doesn’t change its behaviour. And governments are willing to change.”

Mass digital payment adoption also has significant implications for businesses, SMEs, mobile network operators and mobile money operators.

According to the Pew Research Centre, in 2013, 29 percent of South Africans and 68 percent of Kenyans polled reported that they “regularly make or receive payments” on phones.

In Ivory Coast — a project driven by the government, MasterCard, the Gates Foundation and the Omidyar Network — saw school-registration fees move to a digital payment system. According to the case study report on the initiative, published by GMSA, in 2014-15, “99 percent of school-registration fee payments (were) made digitally; 94 percent of which are made via mobile money”.

The benefits were considerable but, in particular, schools saw fees collections increase and early payments increase; while mobile money operators saw a boost in the volume of transactions, lifting an existing seasonal revenue stream, and, in some cases, creating a new revenue stream.

The number of registered and active users of mobile money accounts also grew considerably. The report says the move to a digital payment system contributed to “drastically reduced lost payments, fraud and theft”.

In Cameroon, Kenya, Mauritius, the Philippines, Rwanda, Tanzania and Uganda, governments accept certain tax payments through mobile money systems.

Although digital payments and mobile point-of-sale devices do incur small fees — that are largely absorbed by businesses or end-users, unlike cash — these are often considerably lower than those charged by traditional banking-backed point-of-sale options.

Increased acceptance of digital payments could help formalise the informal sector and bring small vendors into the financial fold.

As the cost of point-of-sale ownership drops, adoption increases and businesses reap the benefits, such as access to larger and more remote markets.

Monehin acknowledges that a “cashless” Africa is a long way off, but doesn’t doubt the role that digital payment and mobile money will play in the market. — BDLive


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