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June 15, 2007

The Mobile Imperative

Because of its unique geography (which is vast) and its lack of fixed wire telecommunications infrastructure, many experts think that Africa is in prime position to leapfrog over landlines and become a leader in wireless. What most experts don’t know, however, is that Africa has already done it.

In Kenya, the GIO bore witness to the first killer application for mobiles in rural areas. Safaricom, Kenya’s leading wireless provider (and a ubiquitous presence throughout the country), recently launched a mobile money transfer service called M-Pesa. By sending a simple text message, Safaricom subscribers can send money to friends, family, and business acquaintances. The money is then stored in a virtual account until the recipient cashes it in at a local Safaricom office.

So what does it mean? For one thing, it revolutionizes banking for developing areas. Traditional banks have historically ignored the rural poor. In fact, 38 percent of Kenyans do not even have access to banking facilities. They are called “the unbanked.” But well over half the population either owns or has access to a mobile phone. In the past, Kenyans would send money through the mail, Western Union, or more informal means. But those money transfer systems were expensive (sometimes as much as 10 percent of the transaction) or lacked security. M-Pesa costs about $2.50 per transaction, and can transfer as much as $525 at a time. And subscribers are required to enter a password to transfer or access received funds.

This means that the cost of doing business in these areas is reduced. It also brings some of the aforementioned informal economy into a more structured, formalized world. Kenyans are signing up for the service at a rate of 1,000 per day. And it’s not hard to imagine the next steps for a service like this: digital wallets, in which the mobile phone becomes a means of payment not just between individuals, but also between local merchants. It’s a vision the developed world has been talking about for decades. And Africa is leapfrogging the world to get there first.

It all arises from Africa’s socio-economic makeup and geography. Remarkably, the infrastructure is already in place. Even in the most remote areas, like a Masai village on the Western boarder between Kenya and Tanzania, the wireless signal is strong and true. And mobile money transfer was already happening, as Africans bartered with their mobile phone minutes on pre-paid calling plans, as a form of makeshift mobile currency. Safaricom just formalized it.

There were a few topics that we fully expected to be a focus of attention in our Africa dives. And the role of mobile phones and networks was one of them. Our deep dive participants have not disappointed. Not twenty minutes into our student deep dive last week in Nairobi, an idea that came out of our last focus area, media and content, resurfaced. A lecturer from the University of Nairobi reiterated the power of mobile phones for integrating the rural poor into the broader economy. He even articulated the need for some kind of language service to address the issue of illiteracy. It was like déjà vu all over again, the exact idea a participant surfaced in our Mumbai dive on media and content. And the discussion of the power of the mobile platform has not let up since.

But some people, mostly cynics, have questioned the usefulness of mobile services for rural villages. We’ve heard a lot of questions about what kind of applications these people would use. On some level, we’ve been taking it on faith that, if given a powerful mobile platform, rural people would develop their own uses, some of which we can’t yet conceive. Mobile money transfer is a perfect example.

Pretty amazing stuff. Innovative, ground-breaking, totally cutting edge stuff. And 100 percent African. Safaricom is already working to extend the service internationally through its close ties to Vodafone. What other applications would be available on this platform? I encourage you to speculate on this blog. Send me comments and we’ll probe them further throughout the Africa deep dives around the world.

June 15, 2007 in Africa | Permalink

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Comments

A concern the must have surfaced by now is the bandwidth limitation associated with radio transmission.

This would imply that Radio-space (allocation of available transmission bands) will be a very precious resource on the African continent, and one would hope that the nations of Africa have planned for this with a strong, centralized international congress to address this issue.

Does any such international body exist? Is it strong enough for the challenges ahead?

Also, just an opinion:

My sense is that radio transmission and routing technology will continue to progress, and that Africa is likely to end up with what amounts to a hybrid Wireless/Land-Line network as the backbone of information transfer and communications.

Posted by: Tim Raisbeck | Jun 15, 2007 11:36:58 AM

Another mobile phone application that has become very successful recently here in South Africa is Mxit (www.mxit.co.za). It is essentially a mobile version of GTalk or MSN on the mobile handset used mostly by teenagers as an alternative to SMS. The cost of the data transmission over GPRS or EDGE is far cheaper per message than SMS.

The service is also now tied into JABBER and other standard chat applications, so that people can keep in contact across chat tools. They hasve been exploring ecommerce recently with trade rooms and virtual currency, similar I guess to SecondLife, only it's on your mobile. Worth taking a look at.

Posted by: Chris Verwey | Jun 22, 2007 9:22:56 PM

Great comment, Chris. I'll check it out and report back on it later. There's a lot of good stuff going on in South Africa in the mobile space. So be sure to check back and see what else we come up with.

Dan Briody

Posted by: Dan Briody | Jun 26, 2007 12:15:09 PM

With m-pesa a success story,coming up with mobile to mobile adverts i.e agricultural produce e.t.c through the 3G will greatly improve the lives of the rural poor,where mobile firms can innovate a section of the menu to adverts,where subscribers can mobile shop for anything and anywhere,millions will be reached surpassing the radio and t.v adverts.

Posted by: Dan Biwott | Sep 1, 2008 1:12:25 PM

Its great achievement for Africa.

Posted by: phone recycle | Oct 30, 2008 4:36:41 AM

Sounds good.

Posted by: recycling | Oct 30, 2008 4:42:04 AM

Blogs are so informative where we get lots of information on any topic. Nice job keep it up!!

Posted by: Sociology Dissertation | Oct 24, 2009 12:37:02 AM

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