Mobile money has been lauded by everyone from the GSM Association and the ITU to World Bank as being a crucial tool for banking the unbanked and consequently spurring economic development in emerging markets. And while there are plenty of inspiring success stories in mobile money services, the reality of mobile money in such markets is more complicated than you might think.
A recent article in Businessweek summed up the findings of several reports about how mobile money is used in different countries. One report from the nonprofit Consultative Group to Assist the Poor covering three African countries found that most mobile money users were people who already spend money, and already have bank accounts. Adoption amongst the rural poor – the very demographic mobile money is supposed to help – is still quite low.
More interesting, however, are two reports funded by the Institute for Money, Technology and Financial Inclusion (IMFTI), which found that in countries like Ethiopia and Kenya, there are strong social rituals involved with how money is viewed and spent in cash-poor communities, and that is impacting how mobile money services are used. As Business Week reports, mobile money “is not as straightforward as substituting a phone account for cash in a jar”:
Developing countries don’t necessarily have a cash economy to begin with. Cash, where it exists, is freighted with social meaning. People who have never had access to banks develop credit and income smoothing without them, through social custom and family ties. A person in Kenya with a brand-new mobile banking account can’t just immediately begin a personal credit history and build equity, the way a young adult would expect to in the U.S. or Europe. You can’t suddenly stop financing through your family or abandon the social rituals attached to gifts, just because you’ve bought a phone.
I recommend reading the whole thing.
None of this means that mobile money is a failure, or has no potential to boost developing economies or empower the poor. What is does mean is that mobile money service providers need to design services that work within those social constructs and, perhaps, help them to evolve:
[Woldmariam] Mesfin leaves mobile money firms with an explicit message: They are not designing products for individuals, but for communities. A banking application might need a digital book, to record contributions from different members of a mutual savings group. Or it might need to reserve some money in a separate account, to be paid back to someone else over time. If you grow up in a group that establishes social credit and insurance, you can’t just start keeping virtual cash in your own account and call it your net worth. Bits and pieces of your net worth have meaning. Cash is not necessarily a commodity.