Page 1. ICT4D Annotated Bibliography Mobile Banking in Sub Saharan Africa

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1 Page 1 ICT4D Annotated Bibliography Mobile Banking in Sub Saharan Africa Mobile banking has recently risen to the forefront of development agendas in Sub Saharan Africa as many countries pioneer this new technology. The ownership of mobile phones has exploded in developing countries to such an extent that the gap with the developed world is closing. This widespread phenomenon means that the rural and income poor have become increasingly linked, with applications such as mobile banking now available to all with a phone. The advantages of mobile banking are numerous, overcoming previous problems around access and affordability, with new mobile money partnerships that offer not only basic banking services but also access to loans and savings accounts. It is such opportunities that can provide a route out of poverty, providing financial security for education or medicine and insurance on businesses. The references below illustrate these advantages using a range of materials. The references are varied, including examples of services in African countries, including M- Pesa, M- Kosho, MTN, Zap and WIZZIT, as well as papers from mobile phone networks. All technology has its limitations and these are illustrated. Such disadvantages including access to the most income poor, issues of trust in adopting mobile banking technology and further developments that need to be implemented to ensure the illiterate and vulnerable are included in this new culture of banking. Having used a range of audio, visual, academic and media sources it is possible to see the extensive impact mobile phone technology is having on developing countries in Sub Saharan Africa. The references show unique services that have been set up different countries and although there remains a continental divide in investment by banks and mobile phone companies, the practice of mobile banking is expanding. Despite limitations, correct management could provide service with the potential to reduce poverty worldwide.

2 Page 2 References 1. Anderson J (2010) M- banking in developing markets: competitive and regulatory implications Info, 12, p.18 25, Emerald Group Publishing Limited Discusses how mobile banking has been made possible by widespread adoption of phones in low income countries. Research from Kenya and the Philippines is used to debate the existence of an M- banking platform and whether there exists a two- sided market. It identifies that consumers are attracted to platforms with highest number of consumers with whom they can transfer airtime or by the number of consumers registered. An example used is Safaricom, who holds an 80% consumer market share. As such problems are highlighted as they therefore control a monopoly on profits and rivals cannot compete. The solution therefore is for governments to find a balance between reducing the numbers of unbanked and minimizing the impact of monopoly control. 2. Birch D, updated 18 Aug 2005 Upwardly Mobile, (Visited 1 Nov 2010) Mobile phones represent revolution, a revolution in which a scratch card and airtime can be used as monetary bribes, in which money can be transferred hundreds of miles in a matter of seconds, in which the developing world has transformed the movement and exchange of money. The key message the author is trying to convey is that not only can the mobile phone provide a means of communication, but it can provide, for even the most rural, connectivity. Connectivity can provide access where previously there was none and the article uses examples to demonstrate how mobile banking and integration into the wider economy have become essential for daily life. 3. Cook T, updated 1 Nov 2010, Efforts by Banks. Part 1. Mobile Money - Mobile Banking, Microfinance Podcast. (Visited 5 Nov 2010) Here the key challenges of branch banking are identified as cost and access. Branches have used automated machines, ATMs and internet banking to cut costs in the past, as well as high minimum payments, all of which restrict access for the income poor. Post offices represented the first attempt at agent banking and Equity bank took trucks out to rural areas, however such options were inefficient. The usage and connectivity mobile phones enabled the creation of M- Pesa in Kenya, which made use of phone network Safaricom to set up basic services. Other examples include Zap, also launched in Tanzania and Uganda. Partnership with mobile money has since led to the development of extensive banking services in the form of M- Kosho, created by Equity Bank and Safaricom.

3 Page 3 4. Cook T, updated 1 Nov 2010, Efforts by Banks. Part 2. Mobile Money - Mobile Banking, Microfinance Podcast. (Visited 5 Nov 2010) The clip takes the case study of Malawi, looking at Opportunity International Bank of Malawi, it identifies the stages that the bank has been through to reduce costs and access more people. Taking trucks out to rural areas remained an expensive solution, solved by the implementation of branch services into local post offices. With nearly every family within 20km of an agro- dealer, services later moved, for example the partnership of the bank with Kulima Gold. Mobile banking has recently taken off with studies into the use of Zain s Zap service and implementation with their cash merchants. Banks have an important role with the mobile phone as an enabler. 5. DFID (2007) Mobile phones and development p. 5 This article highlights the need to extend financial services to the income poor. Addressing the impracticality of sending only small sums of money long distances, the partnership between telecommunication providers and banks provides an easy and practical solution. The three key benefits identified are the ability to convert cash in and out of stored value though mobile phone accounts, to use stored value to pay for goods and services and to transfer such stored value to other accounts. Unlike airtime is illustrates the next step towards actual currency transfers. There still remain limitations with illiteracy, shared handsets and the regulatory environment that services operate in to eliminate problems such as money laundering 6. DFID (2006) The Enabling Environment for Mobile Banking in Africa, Bankable Frontier Associates The report addresses the development of m- banking, in general terms and looks in closer detail at African countries to analyse the future possibilities of increasing access to mobile banking. It then progresses to look at what is needed to enable such development in the sector, if anything. Many banks across Africa are adding m- banking to the list of available services and there are a number of plans in place to expand financial services to those who are currently unbanked. However with the speed of technological development set at such a rapid place, both policy and a regulatory environment need to be firmly established to ensure that mobile banking can reach its full potential. 7. Donner J, Tellez C A (2008) Mobile banking and economic development: Linking adoption, impact, and use Asian Journal of Communication, 18, p , Routledge

4 Page 4 The article explores the impact of mobile banking, illustrating the importance of mobile banking in informal cash economies where more handsets are owned than bank accounts. Highlighted in the article is the convenience, but for more importantly the access and affordability mobile banking provides, allowing users the ability to store, convert and transfer money. However, using the example of the Philippines, South Africa, Kenya and in more detail India, the article assess the importance of social, economic and cultural aspects surrounding effective adoption and the impact of this technology. Looking at mistrust and unawareness and the change to invisible money, as well as social links to finance, the article illustrates the complicated nature of bringing the developing world into formal banking. 8. Edwin S (2010) Towards a faultless mobile commerce implementation in Malawi Journal of Internet Banking & Commerce, 15, 1, 1eaf- 4f0d c66f62d9447%40sessionmgr111&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db =bth&an= The paper first comments on how e- commerce has been slow in African countries, due to a lack of banking and telecommunications and high illiteracy levels. However mobile technology provides an opportunity for developing countries to compete equally with developed countries. The paper defines M- commerce, commercial transactions via wireless networks and devices, developed through the same principle of e- commerce, but using mobile communication technologies. The case study of Malawi is used to demonstrate the demand for such technologies and it is banks, mobile phone operators and the government that can command such implementation. The paper goes on to discuss the relative problems and solutions to providing such technologies, mobile banking representing just a part of an expanding mobile economy. 9. Emmanuel A (2007) Mobile Banking in Developing Countries: Secure Framework for Delivery of SMS- banking Services, Radboud University Nijmegen, The Netherlands. bank- in- developing- countries.pdf Internet banking services have proved invaluable to the developed world; however in developing countries, however where infrastructure hinders (namely due to bandwidth), it is the mobile phone and the SMS that provide a low cost and secure service. The issue of integrity however is one that stands. Banks and customers benefit from the convenience and accessibility of remote banking. With only a single message needed for a transaction, security is maintained and communication costs are minimal. SMS represents an economically viable means of banking and the GSM security system provides identity confidentiality and authentication and well as data confidentiality. 10. Esselaar S, n.d., Supportive payment systems: mobile banking,

5 Page 5 article.asp?articleid=1268&typ=features (Visited 3 Nov 2010) Addresses previous disparities, where irregular income and informal business has always equalled informal finance, restricting possibilities for example getting a bank loan without collateral. Without accounting, cash- based businesses often fail to develop. Identified is the role of the mobile phone as an additional channel to operate an existing bank account, however it is the bank account that needs to be added to an existing phone, one example being the phone number as an account number. The paper identifies airtime as a method of payment, other than a cash substitute, to act as a currency for salaries and payments. Limitations include loss of value, taxes and the inability to convert back to cash. Identified is the need for a co- operation between banks and mobile operators for a paradigm shift to occur. 11. Global envision, updated 3 Aug 2007 Microfinance Goes Mobile: Cell phone banking revolutionizes financial services for the poor, The article talks on how mobile phones have begun to bridge the technological gap between developed and developing countries. It states that 80 percent of people in least developed countries are unbanked and they are limited by proximity and fees, but also education and illiteracy. Previous informal cash economies have left them vulnerable, but mobile banking provides away to invest, transfer and pay that removes this risk. The Bill and Melinda Gates Foundation identified this method as six times cheaper than traditional banking methods. WIZZIT, the mobile banking service for South Africa, can link a debit or credit card to the account which means purchases can also be made through the mobile phone. Customers are only just comprehending the full value of this service. 12. Greenwood L, updated 12 Aug 2009, Africa s mobile banking revolution, (Visited 4 Nov 2010) Identified in this article is the huge gap between mobile phone owners and those who have a bank account. Africa has the fastest- growing phone market in the world, with a number of handsets that now tops 15million in Kenya alone. Mobile banking is a huge opportunity, providing transfer services and security from carrying large amounts of money. Where banks charge high handling fees, mobile banking does not. Although cash amounts are tiny, this is compensated for by the sheer volume of users. Disparities are identified in mobile ownership on the African continent, with South Africa, North Africa and Kenya all excelling, central African countries are left behind. With the instability that remains prevalent, in governance and economies, mobile phone companies see the risk of investment as too high. However charitable backing and expansion projects from established companies are slowly taking place drawing in other African countries.

6 Page InfoDev & CGAP (2006), Expanding Financial Services to the Poor: The Role of ICT in Report from a Joint InfoDev and CGAP Workshop, IFC Headquarters, Washington DC. (Visited 8 Nov 2010) The paper represents the main conclusions drawn from a workshop, in which a number of case studies relating to financial services in developing countries are discussed. WIZZIT is identified as a popular South African mobile banking service, which uses post offices to reach customers. It discusses experience of mobile banking in Sub- Saharan Africa and the complex environment associated to finance services. In the Kenyan context, issues of consumer protection, payment systems and competition are discussed. Mobile technology is yet to reach its full potential in accessing a wider market. 14. Itano N, updated Aug , Africa s cellphone boom creates a base for low- cost banking, Correspondent of The Christian Science Monitor, woaf.html (Visited 30 Oct 2010) Described as a personal piggy bank, it is this digital technology that recognizes few disparities and has accelerated development into rural areas. Major mobile networks and banks are working together to provide an affordable and accessible service that will benefit the income poor. The article gives the example of MTN, where a phone call and security number makes applications simple and easy and the person is then able to make nationwide deposits or withdrawals. In countries where corruption and crime are prevalent, mobile banking is a secure system for the most vulnerable. Despite only having a low income, it is emphasized that it is such small investors that can benefit the most from the ability to save money. 15. Ivatury G & Pickens M (2006) Mobile Phone Banking and Low Income Customers Consultative Group to Assist the Poor/ The World Bank and United Nations Foundation globalsolutions- files.org/unf_website/pdf/mobile_phone_bank_low_income_customers.pdf This paper talks on making banking accessible to the millions and with more mobile phone users in developing than developed countries, m- banking provides this opportunity. Where time and money are scare, services are accessible to the poor where they have not been in the past. The paper analyses how the income poor view m- banking in South Africa. Many use WIZZIT and rate it for convenience, accessibility and affordability, but it has not reached the most income- poor. It suggests a balance is needed between technology and human interaction, perceptions are important in the adoption of m- banking technology, especially for the income poor. 16. Luo X, Li H, Zhang J & Shim J (2008) Examining multi- dimensional trust and multi- faceted risk in initial acceptance of emerging technologies: An empirical study of mobile banking services, Elsevier

7 Page 7 4YG7JPJ- 2- K&_cdi=5878&_user=122871&_pii=S X&_origin=search&_coverD ate=05%2f31%2f2010&_sk= &view=c&wchp=dglzvzz- zskzv&md5=f dd2b83d592b6550c88d056c&ie=/sdarticle.pdf The paper illustrates a change over the last decade, in the convergence of the internet, wi- fi and mobile phone technology, allowing for the creation of m- commerce. The paper looks at behavior associated with the adoption of these technologies. It identifies trust as a central part in the exchange and transfer of money with unknown risks and risk perception as another. Alongside self- efficiency and performance expectancy, the paper highlights factors that should be considered in the early adoption of mobile banking technology. 17. Mahajan V (2009) Africa rising: how 900 million African consumers offer more than you think, Pearson Education, Inc. p This section of the book investigates the banking opportunities available to various countries in Africa, with a focus towards the unbanked. K- Rep is identified as a leading innovator in Kenya and Barclays in Nairobi and Ghana, demonstrating earlier efforts in banking, for example Standard Bank dropping money by plane by Uganda s Lake Victoria. It is however the rapidly expanding penetration of cell phones, which has allowed African countries to be pioneers in mobile banking. Use of mobile airtime as currency is acknowledged and examples of further development provided such as the Union Bank of Cameroon, which has set up payment cards with an acoustic chip to increase validity. Mobile banking puts a branch into the hands of every individual with a cell phone. 18. Medhi M, Gautama S & Toyama K (2009) A Comparison of Mobile Money- Transfer UIs for Non- Literate and Semi- Literate Users, ACM The paper looks at whether mobile phone based access is enough to reach the unbanked and the impact of user interfaces on the adoption of the technology. By looking at illiterate or semi- literate users, information on a highly prevalent problem can be gathered. Such user interfaces have only reached as far as ATMs where biometric and voice recognition systems have been used. The results illustrated that text based systems were useless on the illiterate and voice- based interfaces were far more effective. The research highlights an important gap in mobile banking, especially when trying to reach the most uneducated of the income poor. 19. Milbrandt J, updated 17 Jan 2008, The Rise of Mobile Phone Banking, rise- of- mob.html (Visited 8 Nov 2010)

8 Page 8 The article illustrates how the mobile phone has become bank for the poor. Explosions in the mobile phone industry makes it an accessible medium for the majority of people and study statistics show that there is in fact a correlation between mobile phone ownership and increases in GDP. M- banking can utilize the mobile phone to act as a credit card, allowing access to small loans for bill payments, or as a debit card to pay for transactions. Mobiles have acted as a platform for microfinance programs and from a social stance, it is the first time that the income poor have had fair access to banking without being shunned. On the downside, it is pointed out that those without basic knowledge of microfinance could still be left behind. 20. Morawezynsik, O., & Miscione, G. (2008) Examining trust in mobile banking transactions: The case of M- PESA in Kenya, in C. Avgerou, M. L. Smith, & P. van der Besselaar (Eds.), Social Dimensions of Information and Communication Technology Policy, p Boston: Springer. This chapter focuses on the importance of trust in facilitating mobile banking as a development strategy. Mobile phones are already integrated to such an extent that they have been coupled to numerous applications designed to alleviate poverty. The paper enforces the empowerment that the poor can gain from formal financial services and presents a case of M- Pesa in the Kibera, Kenya. As a slum with no formal financial services, there is a large demand for a secure banking service. Trust or mistrust in handling money is a common cause of concern and although affiliations with Safaricom means that many do trust the M- Pesa system, there remains issues in establishing a new culture of mobile banking. 21. Mwakugu N, updated 3 April 2007, Money Transfer Service Wows Kenya, (Visited 4 Nov 2010) The case study of M- Pesa represents a pioneer in terms of mobile banking in Africa. Created by Safaricom, most of its 500 million Kenyan users are or expect to be connected, with a formal pilot taking place in Afghanistan. The article underlines the ease in which the system can be used and despite insecurities, customers have recognised the benefits of such a system. Protected by pins and individual accounts, the transfer of money has been revolutionised, both in terms of speed and safety. One example is used in which urban dwellers send money home to families living in rural locations, which up to now has been a risky and time consuming process. Efforts to introduce international transfer services are also underway. 22. Oxford Business Group (2008) The Report: South Africa 2008, Oxford Business Group, p Acknowledgment is made to the divide that has remained since apartheid, where half adult population unbanked. Conventional banking services are inaccessible or inappropriate, due

9 Page 9 to high costs and insufficient networks. A brief history illustrated the move from the Standard Bank s E- plan in the 1990s, to the Mzani account scheme in A target of providing affordable banking to 80% of the population by 2008 was set. First National Bank and Absa identified as the most popular m- banking services, with other examples including the partnerships of MTN with Standard Bank and WIZZIT with the Bank of Athens. High crime rates make trust and credibility the main challenges. 23. Rosenberg J, updated 10 Nov 2009, Mobile banking in Africa - a path to savings or not? /MicheleScanlon.mp3 (Visited 25 Oct 2010) This interview talks of how mobile banking is the next big thing for emerging markets, right now mobile banking is at the tip of a market about to explode. Driven through business regulation and by the trust, pricing and convenience involved for customers, all inclusive and proactive principles need to be put in place by central banks, both regional and national. It also explains the need to account for a flow of money from urban to rural, where there will be large outputs, but less investment. Branchless banking is evolving into a convenience factor, where the future of bill payments and insurance represents the biggest gap in the market. Although many still repeatedly put all their money in and then take it all out, a culture of saving is slowly being generated. 24. UKDFID, updated 18 Jun 2009, Leading the UK Government's fight against world poverty, (Visited 28 Oct 2010) Mobile Banking can provide an opportunity to reach the lowest of the income poor and groups not taken care of. Prior to mobile banking there was huge difficulty associated with getting an account, with lack of identification proving impossible for all but the wealthy to gain access. Identification cards and biometric IDs were created in areas and the banks finally began reaching out to people. Without an account common man cannot send a child to school, buy medicine and was trapped in the vicious cycle of poverty. He clip identifies the recent credit crunch and realises a need to have a country that is self- sustaining, where hand- out repayments can no longer be met. Mobile banking offers such an opportunity to develop the economy. 25. Unwin T (2009), ICT4D: Information and Communication Technology for Development, Cambridge, p This section of the book identifies the need for financial services targeted at the income poor. Such services as provided by mobile banking are pro poor and work t reduce poverty as they can provide secure saving opportunities and access to credit that are critical in the development on income poor communities. It highlights the importance of mobile banking for cutting time and costs involved in travelling to a bank. Survey results show that the convenience of having a mobile phone and specifically banking can help further business

10 Page 10 needs and productivity, providing savings and insurance. Limitations identified suggest that advanced use of e- commerce, which includes mobile banking, remains concentrated. 26. Vodaphone, n.d., Access to communications in emerging markets, ging_markets/m- transactions.html (Visited 6 Nov 2010) Vodaphone has launched services in Kenya, Tanzania and Afghanistan with future plans in South Africa. The example of M- Pesa is used, emphasising the security, affordability and speed of transfers. The article then gives detail on the progress from a purely cash in cash out service, to the expanded M- Kosho service that provides access to aid, loans and bill payments. One use described in the article included the option for migrants to send money home. Such international transfers are still expensive and complicated. Illustrates potential for a Western Union partnership for Vodaphone and Safaricom with would provide a global network of agents for such transfers. 27. Vodaphone, n.d., Vodaphone Global Enterprise Financial Services p , (Visited 29 Oct 2010) The presentation looks at mobile contactless payments where, across the world, payments are becoming more isolated from human interaction. Cashless payment cards are already widely utilised, however development goals go one further, payment by mobile. Moving on from this it is explained that such complicated technology can be used in a simple way to change lives. By providing access where banks are scarce and giving security to the transferral of cash, the quarter of Kenya s population who use M- Pesa can now receive low- cost services, receive a salary and pay bills all through their mobile phone. Other examples included are M- paisa in Afghanistan, where an interactive voice- response service has been installed for those who are illiterate. 28. Wakefield J, updated 28 May 2010, Mobile Banking Closes Poverty Gap, (Visited 30 Oct 2010) Emphasis is placed again on the importance of mobile money services as an enabler for money transfers; however it develops on this using the transformation of M- Pesa into M- Kesho as an example. It discusses the importance of virtual bank accounts that will allow users to invest and save, giving them access to credit, interest and insurance. This cell phone bank account is a way to reach millions who prior to mobile banking, did not have access to a bank account and the confidence of mobile phone usage gives m- banking a huge market. Issues with this new system are highlighted, mentioning liquidity and fraud, especially in rural areas where literacy levels are low. The article most importantly emphasises that mobile banking has the potential to lift even the most income poor out of poverty. With mobile banking overcoming issues of access, anyone can have the ability to save and borrow money, which in turn will provide essential support in times of need.

11 Page World Bank (2009), Banking the Poor: measuring banking access in 54 economies, The International Bank for Reconstruction and Development / The World Bank p In this book section, conclusions are drawn as to the benefits of opening an account in branch, versus the option of branchless banking. In 10 of 35 African countries, it was agreed that correspondent branches could not open bank accounts, and very few will open an account over the internet of phone. However it these draw insignificant in relation to the number of accounts opened under the option of electronic banking. Internet provides some advantages, however access to a computer is still required, the ability of the already established mobile phone opens banking to a whole new market. Infrastructural, technological and legal problems must still be dealt with before mobile banking can be fully integrated. 30. World Bank, updated 28 Oct 2007, World Bank - WIZZIT: Banking the Unbanked in South Africa, (Visited 6 Nov 2010) The unbanked today represent a source that once invested can play an important role in the economy of a country. A rethinking is required. It is not about getting people to the bank, but about getting the bank to the people. The challenge from here is finding the technology that could work from the lowest common denominator, from any phone. WIZZIT is used across South Africa, for example in the payment of bills; transfer of money or to buy electricity. The operation also employs the unemployed as WIZZKids who work to sell and extend this service, particularly in rural areas. Seasonal workers can benefit as accounts will not close and there is no minimum balance. It provides a service that is about more than just money and goes towards reducing poverty and improving lives.