This article was originally written for CNN International.
What happens when you mix 11 budding startups with Google executives, Stanford professors, a Nobel Peace Laureate and 600 college students and put them on a ship to circumnavigate the world?
An experiment launched this month called Unreasonable at Sea hopes that this eclectic group will unleash global entrepreneurship.
Last week, as part of their Mobile Economy Project, the Brookings Institution invited me to participate in panel discussing the universal impact of mobile technology. The event highlighted how mobile technology is affecting economies, politics, education, and healthcare, and only just getting started. In my remarks, I argued three main points: Continue reading
After months of research, data collection and interviews with almost 30 of India’s leading financial institutions, colleagues and I released a report this month titled “From Social Banking to Financial Inclusion: Understanding the Potential for Financial Services Innovation In India“.
I was excited to see that The Wall Street Journal wrote up a nice summary of some of the takeaways from the research here: “Why So Few Indians Have Bank Accounts” along with the social enterprise blog, Next Billion: “Innovative Banking Strategies for the BOP in India“.
I’ve been excited by the recent recognition and support shown for a project a colleague and I have been working on in our free time called MOOLAH, which is a mobile application that seeks to empower low-income individuals with personalized financial information and services (more details in the press release below). Last week, the App design won an award in the US Treasury’s MyMoneyAppUp Challenge and also got some airtime in the White House’s “West Wing Week” Video.
(The press release below was originally posted on The Ladder)
This post was originally written for The Guardian.
When it comes to real-time data on the behavior of emerging markets, mobile phones might offer the best glimpse into this unpredictable and rapidly changing demographic, says Eric Tyler.
Three quarters of the world’s more than six billion mobile phones are located in the developing world, and the ubiquity of these devices in under-served areas provides valuable digital traces of activity that have never existed before.
In particular, there is an unprecedented and largely overlooked opportunity to harness this digital data for global development efforts. From tracking the outbreak of diseases to better understanding unrepresented populations, a few promising examples are coming to light, and this mobile phone data is even proving to offer lifesavings insights.
In the aftermath of the Haiti earthquake two years ago, the largest mobile phone network in Haiti provided anonymized mobile phone data to help coordinate relief efforts and quantify displaced populations.
I recently participated in a panel hosted by The Atlantic and National Journal to discuss how technology is transforming the economy and the way individuals interact with companies and institutions. Clive Crook from The Atlantic who was moderating the panel (and did a great job) put me on the spot right at the start by asking how I saw technology disrupting the norm in my work and research. See the video of my panel below: Continue reading
This article was originally written for NextBillion.net to launch the report “Savings for the Poor in Kenya” along with the event “Tracking Progress Toward Financial Access“
Kenya’s financial market has caught the world’s attention. The rise of mobile money in Kenya has become the interest of financial inclusion experts, the excitement of mobile network operators, and an opportunity for financial institutions to rethink their products and services. Last year alone, mobile phones transferred over 900 billion KSh (US $10 billion) representing almost 30 percent of the country’s GDP. However, the implications and transformative impact of mobile money and other breakthroughs on the bottom of the pyramid are often much less understood.
Our new research study examines how Kenya’s rapidly evolving market has opened up to a wide range of new and dynamic players and looks at what this means for savings products available at the bottom of the pyramid.
The research compiles data on over 100 products from commercial banks, microfinance institutions, cooperatives, insurance and asset management companies, and digs into the details of interest rates, fees, and delivery methods to learn what is really going on in the financial market. In particular, three main findings surfaced:
First, mobile financial products are here to stay. Of the institutions surveyed in our research, 75 percent now use mobile phones to deliver their services. Financial institutions initially viewed the rise of mobile money as a threat, but as these services have solidified themselves in the financial landscape, savings providers are increasingly adapting to link and leverage mobile money services with their financial products. However, as further partnership occurs between mobile money services and banking services, technological integration and regulatory issues will become more relevant and central to progressing forward product offerings.
Second, commercial banks are paying attention and starting to make moves down market. Over the past five years, the number of deposit accounts with balances below KSh 100,000 (US $1,000) grew dramatically faster than those accounts with balances above KSh 100,000. Equity Bank, the largest bank by clients in Kenya, was at the forefront of this trend; of the 4.4 million accounts opened since 2006, 97 percent were smaller volume savings accounts.
Third, Kenya’s commitment to fostering and opening up financial data is paving the way not only for Africa, but proving to be a role-model for developing and developed countries alike. Kenya is the first country in Africa to launch a national open data initiative called the Kenya Open Data Initiative, and the Central Bank of Kenya is leading efforts for the country’s transparent development. These types of demand and supply side data are at the heart of identifying and addressing issues for the bottom of the pyramid and are fundamental to creating a comprehensive strategy for financial inclusion.
This article was originally written by Eric Tyler & Anjana Ravi for Foreign Policy.
Last week, Afghan president Hamid Karzai surprised U.S. and coalition officials by announcingthe creation of a special tribunal and prosecutor to seek redress for the almost two year old Kabul Bank scandal. And earlier this month, the Afghan House of Representatives rejected the proposed federal budget in part because of the allocation of U.S. $80 million to Kabul Bank. Already, the Central Bank has poured $450 million into the beleaguered bank after it lost almost a billiondollars in the 2010 financial scandal. This money has been traced to interest-free loans given to Mahmoud Karzai, brother of President Karzai, to buy shares in the bank itself, and also to former CEO Khalil Frozi, who used bank funds to finance the President’s 2009 election campaign.
Though Afghan authorities arrested Frozi and Kabul Bank founder Sherkhan Farnood approximately nine months after the crisis, it was recently reported that neither can be found in their jail cells, and both are collecting rent from tenants occupying Dubai villas bought with illegally obtained loans. A year after the debacle, only 10% of the missing money had been recovered.
Kabul Bank is more than a symbol of the pervasive corruption plaguing Afghanistan’s government, it is the largest private financial institution in the country and an integral piece of infrastructure that has direct consequences for the country’s security and financial stability. If Afghanistan is to have any chance at a legitimate economy and stable future, it will need an efficient and trustworthy financial system.
In particular, Kabul Bank is a conduit for government payments to Afghan soldiers, police, and teachers. The United States aims to reduce American troop presence by 2013 and shift security duties to the Afghan military and police force. Absolutely vital to a “successful” drawdown is the establishment of a reliable and transparent payment system. The rampant corruption plaguing Kabul Bank shows that traditional banking systems may not be suitable for the Afghan economy at all. However, the United States Agency for International Development (USAID) is working with Afghan companies to provide an alternate solution – mobile money.
In the past year, mobile phone-based money transfers have taken off in Afghanistan. Three out of the four largest mobile network operators now offer mobile money services, two of which were launched in the last six months. Roshan, the telecommunication company that deployed the country’s first mobile money product in 2008, M-Paisa (“paisa” meaning money in Dari), has grown to 1.2 million registered customers that can receive salaries, pay bills, and make domestic financial transactions over their mobile phones. Last month, the company announced a partnership with Western Union to allow these customers to receive transfers from around the world directly to their mobile phones.
USAID has made mobile money central to Afghanistan’s financial development. According toUSAID, while less than five percent of Afghans have access to a bank account, more than 60 percent of the population has access to a mobile phone. To accelerate the pace of its development, USAID has allocated more than $2 million to mobile network operators as part of itsMobile Money Innovation Grant Fund, and spearheaded the forming of the Afghan MobileMoney Operators Association. Currently, there are five USAID mobile phone payment projects underway, which range from the payments of teacher stipends to police force salaries, and 14 more mobile transfer projects in planning, according to a USAID official who spoke off-the-record. With the scaling of mobile money, an estimated $60 million annually could be retrieved that had been lost to corruption and fees.
Although promising, mobile money is not entirely immune to the harsh realities on the ground. In 2009, the Afghan government worked with Roshan to pilot a mobile phone-based salary payment system to 54 officers of the Afghan National Police Force who had previously received cash from their superiors. When the policemen took their SIM cards to the local M-Paisa offices to directly collect their entire salaries, they thought they had received a 36 percent raise, while what they were really seeing was a full salary untouched by crooked officials, according to a U.S. Air ForceColonel overseeing the project.
However, a confidential State Department cable released by Wikileaks revealed that a corrupt Afghan commander, frustrated that he was no longer able to skim off the top, fraudulently registered phones and collected his officers’ salaries. In a separate incident, the same commander ordered subordinates to handover their SIM cards and attempted to retrieve the salaries himself. Though the local M-Paisa employee refused to hand over the salaries to the commander, he was forced to go into hiding for fear of retribution. Despite direct reports to the Ministry of Interior and pressure from the U.S. Government, no one has been prosecuted.
The ability to efficiently pay Afghanistan’s security apparatus is critical to any post-war strategy, especially in the face of a U.S. drawdown and the ousting of private security firms. It is especially important for USAID efforts because $899 million worth of development programs they administer are in jeopardy without a functioning security force, according to a recent letter from Steven Trent, the acting Special Inspector General for Afghanistan Reconstruction. Though USAID says this claim is exaggerated, it still highlights the significance of dealing with the systemic corruption within Afghanistan’s financial system and in particular Kabul Bank, given its central role in government payments to soldiers.
Despite the importance of anti-corruption measures to security efforts, a clear disconnect between Afghan and U.S. officials gives reason to believe that Karzai’s recent announcement to prosecute those involved in the Kabul Bank crisis will not amount to much. As Afghans rushed to withdraw$800 million in deposits in the two weeks following the scandal’s breaking, Mahmoud Karzaiinsisted the bank was stable and not in danger of collapse while simultaneously asking the U.S. Treasury for monetary help in averting a crisis. When the U.S. refused a direct injection of capital, President Karzai publicly blamed the collapse on a lack of foreign technical support rather than the illegal activities of the bank’s leadership. A few months later, he banned U.S. government advisers from working with the country’s central bank, as they attempted to assist Afghan officials in regulating the financial system and tracking foreign aid, both of which were conditions for releasing$1.8 billion of donor funds.
While the ideal situation for USAID is an end to corruption’s hold on financial infrastructure, the reality is that they are working within a delicate political climate. According to a NYT/CBS Newspoll released this month, almost 70% of American respondents want an end to U.S. military efforts in Afghanistan. With this dramatic fall in American public opinion and election year politics putting the focus on a swift withdrawal of U.S. troops and transition to Afghan forces, the Obama administration is loath to engage in a battle with the Karzai government over corruption that is almost guaranteed to fail. Yet there are still ways for USAID to recognize the restraints of corruption and push forward; one of the promising solutions involves integrating mobile money to build a stronger financial system and more transparent post-transition payment system.
After all, the reality is also this: the results of development projects will have significant bearing on America’s legacy in a country where it has spent over 10 years, half a trillion dollars, and countless lives. USAID’s success, and ultimately that of the entire U.S. mission in Afghanistan, will depend on our ability to acknowledge that “success” is not an all or nothing proposition. Corruption exists but that doesn’t mean that the development community cannot adapt to work within its confinements.
This article was originally written by Eric Tyler for Next Billion.
The excitement of mobile money has been dampened by an inability of deployments to take hold outside a handful of successful markets. Driving the enthusiasm forward is the opportunity to bridge the gap between one billion people in emerging markets who have mobile phones but no bank account. On Tuesday, McKinsey & Company released a report “Mobile money: Getting to scale in emerging markets” seeking to cut through this excitement and identify critical success factors for implementation.
Through interviews and workshops with 40 mobile money providers, the report stresses three important elements as critical for a successful mobile money enterprise post launch:
(1) Pay close attention to managing the agent network;
(2) Create a compelling product offering;
(3) Maintain a corporate commitment.
The report also rightfully acknowledges other pre-launch factors like regulation, market structure, technology execution, and partnerships, as being central to a mobile money deployments’ success.
There is also a clear need to answer the important questions before launching a product. After comparing developed mobile money environments with the developing environments of Brazil, Nigeria, Sri Lanka, and Thailand, the IFC has worked to develop a framework to assess a country’s potential for a successful mobile money deployment, including demand and user perception surveys and current regulatory and financial services assessments.
As part of the SPINNAKER project, we have focused our research in Kenya and the Philippines on two of the leading mobile money environments in the world. And in a report being released next month, we examine the regulatory framework and financial management behind the growth of agent networks in Kenya and early examples beyond mobile transfers of integrated mobile money and financial products.
With 130 mobile money deployments underway and 93 in planning according to the GSMA, it’s helpful to evaluate what lesson we have learned so far, and the McKinsey findings and IFC framework help to refocus the excitement of the field. But what is also needed is a re-evaluation of the end goal of mobile money, which is an opportunity to progress mobile money beyond money transfers into mobile banking and deeper financial inclusion for the next billion.
