OBSERVATORY ON MIGRATION

OBSERVATOIRE ACP SUR LES MIGRATIONS

O
OBSERVATRIO
ACP DAS MIGRAES

mobile money
services: A bank
in your pocket
Overview and
opportunities

Background
Note
An Initiative of the ACP Secretariat,
Funded by the European Union
Implemented by IOM and with the Financial Support of Switzerland,
IOM, the IOM Development Fund and UNFPA
International Organization for Migration (IOM)
Organisation internationale pour les migrations (OIM)
Organizao Internacional para as Migraes (OIM)

ACPOBS/2014/BN13

2014

ACP Observatory on Migration

The ACP Observatory on Migration is an initiative of the Secretariat of the African, Caribbean and
Pacific (ACP) Group of States, funded by the European Union, implemented by the International
Organization for Migration (IOM) in a Consortium with 15 partners and with the financial
support of Switzerland, IOM, the IOM Development Fund and UNFPA. Established in 2010, the
ACP Observatory is an institution designed to produce data on South-South ACP migration for
migrants, civil society and policymakers and enhance research capacities in ACP countries for the
improvement of the situation of migrants and the strengthening of the migrationdevelopment
nexus.
The Observatory was established to facilitate the creation of a network of research institutions
and experts on migration research. Activities are starting in 12 pilot countries and will be
progressively extended to other interested ACP countries. The 12 pilot countries are: Angola,
Cameroon, the Democratic Republic of the Congo, Haiti, Kenya, Lesotho, Nigeria, Papua New
Guinea, Senegal, TimorLeste, Trinidad and Tobago and the United Republic of Tanzania.
The Observatory has launched research and capacitybuilding activities on South-South migration
and development issues. Through these activities, the ACP Observatory aims to address many
issues that are becoming increasingly important for the ACP Group as part of the migrationdevelopment nexus. Documents and other research outputs and capacitybuilding manuals
can be accessed and downloaded free of charge through the Observatorys website (www.
acpmigrationobs.org). Other upcoming publications and information on the Observatorys
activities will be posted online.

2014 International Organization for Migration (IOM)

2014 ACP Observatory on Migration

Document prepared by Mara Paula Subia and Nicole Martinez, Junior Researchers, ACP
Observatory on Migration.
This publication has been produced with the financial assistance of the European Union. The
contents of this publication are the sole responsibility of the authors and can in no way be taken
to reflect the views of the Secretariat of the ACP Group of States, the European Union, the
International Organization for Migration (IOM) and other members of the Consortium of the ACP
Observatory on Migration, the Swiss Federation or UNFPA.
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system,
or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or
otherwise without the prior written permission of the publisher.
ACPOBS/2014/BN14

OBSERVATORY ON MIGRATION
OBSERVATOIRE ACP SUR LES MIGRATIONS
OBSERVATRIO ACP DAS MIGRAES
O

mobile money services:

A bank in your pocket
Overview and opportunities

Mobile money services: A bank in your pocket: An overview of trends and opportunities

1. Introduction
In a remarkably short period of time, internet and mobile technology have
become a part of everyday life for some in the emerging and developing world.
Cell phones, in particular, are almost omnipresent in many nations. People
around the world are using their cell phones for a variety of purposes, especially
for calling, texting and taking pictures, while smaller numbers also use their
phones to get political, consumer and health information (Pew Research
Center, 2013).
Mobile technologies are changing economic life in developing countries, where
many people are using cell phones for a range of financial transactions, such as
receiving and sending money transfers. Indeed, mobile money is already being
used by banks and mobile network operators to provide millions of unbanked
consumers a way to store and access money digitally. The limited information
available suggests that for millions of consumers in developing countries,
mobile money is transforming lives by providing access to financial services
and the ability to pay and be paid electronicallysometimes for the first
time in their lives. Mobile financial services, known as mobile money, allow
unbanked people to use their phones as a bank account: to deposit, withdraw
and transfer money with their handset. People can also use mobile systems to
pay utility bills and pay for goods in merchant shops.
Developing countries are severely constrained by limited infrastructure and
the difficulties of accessing financial institutions. Consequently, more than
2.5 billion adults about half of the worlds adult population are unbanked
(World Bank, 2014). The reasons behind the exclusion of such a large number of
people are related to barriers such as cost, travel distances and documentation
requirements for opening a bank account in developing countries. However,
of the worlds 7 billion people, there are now 6 billion phone subscribers: over
one billion of the unbanked people in the world have access to a mobile phone
(GSMA, 2013). Across UN-designated Least Developed Countries1 (LDCs),
including 40 African, Caribbean and Pacific (ACP) countries2, mobile phone
1 The worlds most impoverished and vulnerable countries. The least developed countries
(LDCs) are a group of countries that have been classified by the UN as least developed in
terms of their low gross national income (GNI), their weak human assets and their high degree
of economic vulnerability.Available from: www.nationsonline.org/oneworld/least_developed_
countries.htm.
2 Angola, Benin, Burkina Faso, Burundi, Central African Republic, Chad, Comoros, Democratic
Republic of the Congo, Djibouti, Equatorial Guinea, Ethiopia, the Gambia, Guinea,
Guinea-Bissau, Haiti, Kiribati, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania,
Mozambique, Niger, Rwanda, Samoa, Sao Tome et Principe, Senegal, Sierra Leone, Somalia,
Sudan, Timor-Leste, Togo, Tuvalu, United Republic of Tanzania, Vanuatu and Zambia.

ACP Observatory on Migration

penetration in 2011 was at 30 percent while access to a formal bank account

was at 14 percent in average (UNCDF, 2013). Mobile money services have been
deployed in developing countries as a means of extending financial services to
the unbanked , but more robust research is needed on the direct link between
the use of mobile money services and easier access to finiancial services.
Mobile money services started in Kenya in 2007 through M-PESA (M for
mobile, pesa for money in Swahili), a popular mobile money service
offered by a local mobile network operator, Safaricom3. Since then, the mobile
money industry has rapidly expanded, particularly in developing economies
in Africa and South Asia such as India, Bangladesh, and Pakistan. It has been
optimistically described by policymakers, the media and above all mobile
phone companies as a prospective means to economic development and
poverty reduction, even without the support of an adequate evidence-base.
As the use of mobile phones for money transfer is relatively recent, there are
no comprehensive studies on the subject apart from for analysis focusing on
specific countries, sectors, and case studies. The present document is based on
existing publications on the subject. In particular, the case of Kenya receives a
specific attention. Sources combine academic publications with a majority of
non-academic documents covering this topic, including studies by the mobile
money industry. This Background Note will introduce the main concepts related
to mobile money and subsequently provide an overview of its main trends
and features in developing countries, drawing primarily on information from
the case of Kenya. Finally, this paper will present a preliminary assessment of
the impact of mobile money on human development, as well as some general
conclusions.

2. Definitions
The definition of mobile money varies across the communication industry
as it covers a wide scope of overlapping applications (Dermish et al., 2011;
GSMA, 2013). In general, mobile money is a term describing electronic financial
services performed via a mobile phone. There are three major mobile money
services: mobile banking, mobile payments and mobile transfers (see
the explanation below). It is worth noting that the term mobile banking is
often confused and used interchangeably with the overall category of mobile
money in research and literature. However, mobile banking is only one type
of mobile money service: it allows customers of a financial institution to access
3 http://www.safaricom.co.ke/.

Mobile money services: A bank in your pocket: An overview of trends and opportunities

their accounts and to perform transfers and payments. This service is therefore
only available to people who possess a formal bank account. Mobile banking
is a financial service often available in developed countries, but not in most
developing countries due to the low level of financial inclusion through official
financial systems/banks.
In the case of developing countries, other mobile money services are mostly
used by people who do not have personal bank accounts.Indeed, customers
often rather use mobile payment and mobile transfer services, which are
available from their mobile phones without the need for a bank account. In
practical terms, these two services are accessible from an electronic account,
linked to the SIM card in the mobile phone. This electronic account is known
as mobile wallet and is protected by a personal identification number (PIN),
with accounts debited or credited as soon as the transaction takes place. To
transact, mobile phone users need to deposit cash into their mobile wallet
at the outlet of an agent of a local mobile telecommunications company. The
agent will get the money from the customer and transmit it to the company
through his/her own mobile phone. If mobile phone users wish to withdraw
cash from their mobile wallet, they also need to go to a mobile money agent
outlet.
In the framework of these mobile money services, the senders and receivers
mobile wallets are not linked to their individual bank accounts but to their SIM
cards. The balances of all their mobile wallets are maintained by the mobile
network operator.
Mobile payment (also known as m-commerce) is a service allowing unbanked
people to purchase or sell goods and services at a merchant shop/store (or
remotely) using their mobile wallet through their mobile phone, instead of
cash. Unbanked mobile phone users can also pay utility bills via their mobile
wallet. In the case of a face-to-face payment at a merchant shop, mobile
financial transactions are done in the following manner: first, the customer
gives the merchant his mobile phone number. The merchant then requests
payment via the telephone service provider website or by SMS with the
customers mobile number. The telephone service provider then sends an SMS
to the customer with a Bill Reference Number. The customer authorizes the
payment by replying to the SMS with his customer6-digit Security PIN and the
Bill Reference Number. Finally, the telephone service provider sends a payment
notification with details to both the merchant and the customer.
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ACP Observatory on Migration

Mobile transfer (also known as money transfer person-to-person - P2P- or

mobile remittances) is a service that allows unbanked people to send or
receive small sums of money to/from any other mobile phone user (even
if they are subscribed to different telephone service providers) across the
country, from urban to remote rural areas, and across international borders.
In practical terms, the customer must first deposit cash into his mobile wallet.
Then, on the phone menu, the customer selects the option Send Money, and
enters the recipients phone number, the amount he wishes to send and his
6-digit Security PIN. The sender can confirm that all the information entered is
correct. The receiver will get a text message that he can show to a local mobile
company agent to receive the money in cash.
Remittances:
Money or material
goods sent from
one private entity to
another. Remittances
include any informal
credit and debt
repayments between
family members
or friends who live
elsewhere, any
repayment of debts, or
payments for goods
and services.
Informal remittances:
All monetary and
in-kind transfers
of goods through
channels other than
banks and other
financial institutions
(such as micro-finance
institutions; MFIs,
and postal offices)
captured in national
balances of payments.

Until now, mobile money services were mainly used

to send or receive remittances to provide financial
support to family members living in different
households. Yet, unexpected and innovative uses
of mobile money services have also emerged, such
as paying school fees, public transportation, taxi
drives, paying for social events such as funerals and
weddings, and making informal loans repayments
(Omwansa, 2009). Another innovative extension of
the mobile wallet is the use of the prepaid airtime4
scratch cards (also known as e-vouchers) as a sort
of virtual currency, in the rural areas of Nigeria,
Kenya and the Philippines (Omwansa, 2009). For
instance, prepaid airtime can be used as a means
of exchange with local merchants instead of paying
with cash. Another example is the case of workers
who are given a part of their salary in cash and the
rest in the form of a prepaid scratch card that can
be traded for cash with local merchants or others.

Source: InterMedia, 2013.

4 Prepaid airtime is the amount of time that can be spent talking on a mobile.

Mobile money services: A bank in your pocket: An overview of trends and opportunities

Figure 1: A mobile money agent in rural Tanzania for MMT M-PESA

Source: USAID, 2012.

3. Data and facts

a. History of mobile money
Mobile money was initially made popular by Safaricom and Vodafones M-Pesa
(M for mobile, pesa for money in Swahili) in Kenya, which started in
2007. The M-Pesa application is installed on the SIM cards of customers and
works on all handset brands. It is free to register and the user does not need
to have a bank account. Safaricom receives fees for withdrawals and transfers,
but keeps deposits into the mobile wallets free. The transfer service was
quickly picked up for use as an informal savings account system and electronic
payment mechanism for bills, goods and services.
With M-Pesa, Kenya is at the forefront of the mobile money revolution: the
number of agents across the country increased by 40 percent in 2013. It is
now estimated that24.8 million subscribers use mobile money services, like
M-Pesa, in Kenya (Communication Commission of Kenya, 2013). According to
the Pew Research Centers 2013 survey report, the number of Kenyans using
mobile wallets to make or receive payments is higher than any of the other 24
countries surveyed: 50 per cent of the Kenyan adult population uses mobile
money services (Pew Research Center, 2013).
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ACP Observatory on Migration

Mobile money services have spread rapidly in many developing countries.

However, only a handful of these initiatives have reached a sustainable scale,
in particular GCASHandSmart Moneyin the Philippines; Wizzit, MTN Mobile
Money and FNB in South Africa; MTN Mobile Money in Uganda; Vodacom
M-PESA and Airtel in Tanzania; Celpay Holdings in Zambia and MTN Mobile
Money, Orange Money in Cte dIvoire.
The Philippines was one of the earliest adopters of mobile money services
when SMART Communications launched SMART Money in 2001. The service,
which uses SIM Tool-Kits, enables customers to buy airtime, send and receive
money domestically and internationally via mobile, and pay for goods using a
card. In 2004, Globe Telecom launched GCASH. This service provides a cashless
method for facilitating money remittances, settle loans, disburse salaries or
commissions and pay bills, products and services via text message.
In South Africa, MTN Mobile Money was launched in 2005 as a joint venture
between the countrys second largest network operator MTN and a large
commercial bank, Standard Bank.
In Uganda, MTN was the first operator to launch mobile money services in 2009
and remains, by far, the market leader (Intermedia, 2012). By law, each mobile
money provider has to partner with a bank. However, users do not need a bank
account to use mobile money services.
In Tanzania, Airtel was the first mobile network operator to introduce a
phone-to-phone airtime credit transfer service, Me2U, in 2005 (Intermedia,
2013). Airtel partners with Citigroup and Standard Chartered Bank to provide
m-money services, including bill payments, payments for goods and services,
phone-to-phone and phone-to-bank money transfers, and mobile wallets. In
2008, Vodacom Tanzania launched the second East African implementation of
the Vodafone m-money transfer platform, M-Pesa.
Finally, in Cte dIvoire two mobile operators, Orange and MTN, are competing
head to head in the mobile money market (CGAP, 2012). Orange Money was
launched in 2008 by Orange in partnership with BICICI (BNP Paribas), and
MTN Mobile Money was launched in 2009 by MTN in partnership with SGBCI
(Socit Gnrale) (GSMA, 2014).
b. A quick overview in figures
There are 2.5 billion unbanked adults in the world. While in developed
countries between 80 and 90 per cent of adults have formal bank accounts,
the percentage drops to between 39 and 20 per cent in developing countries
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Mobile money services: A bank in your pocket: An overview of trends and opportunities

(see figure 2). The difference is even wider when it comes to credit cards: half
of adults have them in developed countries while only 7 percent in developing
countries (World Bank, 2014).
By contrast, mobile money is now available in most developing countries. At
the end of 2013, there were 219 mobile money services operating in the world.
Eighty-four countries have mobile money services (see figure 3), which accounts
for about 40 percent of all countries in the world. It is worth noting that 52
percent of mobile money services are located in Sub-Saharan Africa. In 2013,
mobile money services significantly expanded outside Sub-Saharan Africa and
expanded in nine new markets: the Plurinational State of Bolivia, Brazil, Egypt,
Ethiopia, Guyana, Jamaica, Tajikistan, Togo and Vietnam. Moreover, 19 mobile
money services launches are expected to be launched in Latin America in 2014
(GSMA, 2013).
Figure 2: Percentage of people older than 15 years old with an account at a
formal financial institution in the world (2014)

More than 81.23

50.36 to 81.23
28.27 to 50.36
15.34 to 28.27
Less than 15.34
No data

Source: Adapted from World Bank, 2014.

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ACP Observatory on Migration

Figure 2: Number of live mobile money services for the unbanked by

country (December 2013)

Two or more
mobile money
services
One mobile
money service
Planned mobile
money service
Source: Adapted from GSMA, 2013.

4. Opportunities and challenges

Mobile money transfer services can be seen as having an impact at the
micro-economic and macro-economic levels with related effects and
opportunities.
a. Micro-economic level
Mobile money services are highly accessible to all segments of society for three
reasons: they are faster, more convenient and cheaper than formal financial
services.
Making money transfers faster and more convenient through a wide
territorial outreach
Mobile phones are introducing financial services in remote areas where
conventional banks have been physically absent or remain too expensive.
The formal financial sector in developing countries suffers from structural
weaknesses and restrictive conditions (prices, documentation required) that
practically exclude rural and low-income populations from accessing it. The
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Mobile money services: A bank in your pocket: An overview of trends and opportunities

main reason why banks do not offer their services to the majority of people
in developing countries, and especially in rural areas, is related to the high
transaction costs faced by banks to set up branches or ATM machines in areas
with low infrastructure levels. The unprecedented growth and popularity of
mobile money in many ACP countries is due to the affordability of mobile
phone systems compared to formal banking costs. Indeed, according to an
analysis in ten countries carried out by the Consultative Group to Assist the
Poor (CGAP)5, on average, mobile money services are at least 19 percent
cheaper than traditional banks. The cost of formal banking in many African
countries is especially high: in some countries the minimum deposit can be
as high as 50 per cent of GDP per capita. Consequently, unbanked people in
the ACP countries often use informal financial services. For instance, when a
factory worker needs to send money to his or her relatives in a remote village,
the affordable option is to send it with bus or taxi drivers through letters and
parcels.
Moreover, in LDCs, where basic infrastructure like electricity, roads and
telephone lines is sorely lacking, modern technologies like mobile phones
have powerful potential to improve the standard of living of the poorest
populations.Unlike banks, mobile money services are accessible anytime and
from/to anywhere. They remove the need for physicaloffices for depositing
or withdrawing money. Senders and recipients do not have to commute to a
money transfer company (such as MoneyGram or Western Union) office, they
do not have to fill out forms, and do not have to wait in lines to complete the
transaction or to receive money. The entire process is avoided by using a code
sent and received via SMS. Mobile transfer makes it easier for internal migrant
workers in urban areas to send remittances to their remote rural communities,
which may have difficult access to transportation and financial services. Mobile
transfers could represent a more secure method of transferring funds than
informal remittance channels, avoiding the need to carry cash during long and
expensive trips with the risk of the cash getting lost or stolen (Omondi, 2013).
Lowering the cost of remittances
Sending remittances via money transfers companies (MTC), such as Western
Union, MoneyGram, Money Express, is widely considered expensive. Globally,
sending remittances costs an average of 8.36 percent of the amount sent.
5 Analyzed services: Afghanistan: MPaisa; Brazil: Bradesco and Caixa; Cambodia: WING
Money; Cote dIvoire: MTN Mobile Money, Orange Money; India: Eko; Kenya: MPESA and
Zap; Pakistan: easypaisa; Philippines: GCash and Smart Money; Tanzania: MPESA, Zap;
South Africa: MTN Mobile Money, WIZZIT.

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ACP Observatory on Migration

Africa in particular is one of the most expensive remittance markets in the

world. The average fee to send remittances to Africa is 12 percent. What is
more, the average fee for intra-Africa remittances is 25 percent. In Nigeria,
where most migrants send money home from outside the country, the fee
is 10 percent (World Bank, 2011). For instance, a Nigerian migrant living in
another sub-Saharan country who sends money back home would pay USD
20 in fees, when in general migrants send small amounts of money. The high
cost of sending remittances through formal channels is partly related to costly
currency conversions and strict regulations on cross-border transfers (meant
to curb illicit money flows but in practice also prohibiting open markets and
competition). Besides, the non-existence of multiple money transfer companies
puts the burden of high fees on the customer and pushes those who cannot
afford them to use informal remittance channels. By contrast, mobile money
services allow unbanked people to transfer different small amounts of money
both within and from outside the country at lower costs compared to bank
transfers and MTCs.
b. Macro-economic level
Mobile money services have the potential (a) to improve households income
and thus to facilitate safe savings and human capital investments; (b) to
formalize the informal cash economy by facilitating trade; and (c) to be a
funding platform of development projects or post-conflict operations in several
ACP countries.
Improving households income and facilitating safe savings and human
capital investments
The reduction of remittances costs would increase the frequency and
magnitude of remittances and thus affect households incomes. This could
increase households savings since mobile money services provide safe storage
mechanisms. Based on the evidence collected in Kenya (GSMA, 2013), it is
known that many consumers often use their mobile wallets to save funds at
least for short periods of time and are more likely to be able to have the cash
needed in case of weather emergencies for instances. Besides, mobile money
services would also encourage human capital and physical investments. For
instance, through cheaper transfers across distances, households are more
likely to send their members to distant locations and to invest in skills that are
likely to earn a return.
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Mobile money services: A bank in your pocket: An overview of trends and opportunities

Formalizing the informal cash economy by facilitating trade

By making it easier for people to pay for, and to receive payment for goods
and services, mobile money services give more visibility to money flows as
remittances move from informal channels to formal channels. Indeed, the
use of mobile money may encourage the formalization of the informal cash
economy which, adequately channelled, can in turn have an impact on
economic development by making local markets more dynamic (diversification
of goods and production) (Afful, 2012). In the long run, mobile money services
can facilitate and contribute to improvements in payment of taxes and utilities,
which could in turn strengthen governance and infrastructure, and foster
international trading through an increased offer of financial services (Scott et
al., 2004: 7-8).
Facilitating cash transfer programmes for development projects or
emergency operations in ACP countries
Cash transfer programmesfor development projects in ACP countries could be
funded through mobile money services. Mobile money services can facilitate
social transfer payments from governments to citizens for humanitarian uses.
These mobile transfers have proliferated in various sectors, such as electricity,
agriculture and emergency response. Regarding the agriculture sector, mobile
money is a potentially important tool for agriculture development projects
since the access to financial services is usually a key constraint to success.
Mobile money services can be useful for immediate humanitarian responses.
For instance, in Haiti6, six months after the earthquake, in June 2010, USAID and
the Gates Foundation announced a Challenge Fund Competition to encourage
the launch of mobile money services to deliver cash assistance to victims of
the countrys devastating earthquake. With respect to NGOs, mobile money
services can:
Reduce operational costs, especially when the same beneficiary
group needs to receive recurrent payments.
Mitigate some of the risks associated with cash transfers, especially
security and liquidity management.
Provide direct contact with beneficiaries through mobile phones,
allowing for more communication potentially leading to increased
accountability.
6 In Haiti, mobile money systems followed a bank-led model, which consisted of a partnership
between a bank and a mobile network operator (MNO). Two MNOs dominate the market,
Digicel, which chose to partner with Scotiabank to roll out a mobile money service called Tcho
Tcho, and Voil, which worked with Unibank to launch T-Cash.

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ACP Observatory on Migration

Reduce logistics and improve programme efficiency: in practical terms,

instead of sending beneficiaries names and payment instructions to
the finance department or transfer agent, NGOs and international
organizations programme managers access an online platform and
send the payment notification to the beneficiaries mobile phones
(HPN, 2012).
Finally, it is worth noting that beneficiaries using mobile money systems do
not need to collect their payment in full. Instead, they can keep a residual
balance on their mobile wallet and thus better manage their expenditure.
Safe storage of money was invaluable for many beneficiaries displaced in
camps after the Haitian earthquake. Finally, regarding food security assistance,
people in developing countries often prefer cash and vouchers to traditional
food assistance, because they offer more choice and variety (World Food
Programme, 2012).
c. Macro-economic level
It is worth considering that mobile money services might also imply some
challenges, highlighted by several scholars:
A complex replication of the Kenyan M-Pesas success
The success of M-Pesa took place in a country with a specific population base,
economic activity, urban-rural family connections and reasonably extensive
bank infrastructure. Safaricom benefited from strong penetration rates,
market dominance and the millions to spend. The replication of the M-Pesa
model outside of Kenya should take into consideration these specificities and
be adapted to local contexts.
Need of more reliable and accurate data about the impact of mobile
phones on access to financial services and remittances
While limited information is available and companies involved in mobile
money highlight the potential impact of mobile technology on the access to
financial services, the impact of mobile money on micro and macroeconomic
outcomes remains a field to be further researched. To overcome the difficulties
in accessing data and the restrictive rules of non-disclosure and privacy,
researchers could partner with mobile phone providers and local institutions
(Aker and Mbiti, 2010) (Aker and Mbiti, 2011).
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Mobile money services: A bank in your pocket: An overview of trends and opportunities

Being a transformative development tool

The term transformative is understood as a process to make finance and
access to markets and services more inclusive. This approach differs from a
perspective of limiting mobile money services to a way of extending formal
banking, with the involvement of existing banking institutions. Certain entities
introduce mobile money services as a way of banking the unbanked through the
banks maintaining the predominance and focus on these financial institutions.
However, reality shows that mobile communication operators are more
innovative than traditional banks in the field of financial services. Mobile
operators are already serving mass markets in these countries, which banks
are not: they understand and adjust to the needs of markets better than
banks. This transformative role of mobile money services will depend in large
measure on whether stakeholders (private sector, governments, international
organizations, NGOs, etc.) invest in partnerships and approaches that are
appropriate for specific contexts. Several questions remain on the limitations
and actual extent of the effects of mobile money services on the welfare of their
users in developing countries and, undoubtedly, communication technology
cannot replace investments in public goods such as education, power supply,
roads and water.

5. Impact on human development of ACP countries

a. Facilitating remittance flows to enhance local development
In the past, considerable literature on financial inclusion has linked the
economic growth and social development of developing economies to the
access to financial services by its rural and poor populations. Banking the
unbanked would lead to better decision-making, more efficient markets, and
various others development goals. Financial inclusion has been seen as having a
multiplier impact on the lives of people drawn into the formal financial system,
leading to social inclusion. The logic behind this thinking was that when the
poor people get access to financial services, their cash flow management gets
better, their financial planning is enhanced and their savings are increased.
Using the same perspective, mobile money services could be considered a
development tool due to the specificities presented above, including the wide
territorial outreach (even where roads and other infrastructures are not present),
the technological advantage, the potential transparency, the reduction of costs
and the increase of accessibility. Mobile money services would encourage
more migrants to remit money, which would improve households income and
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ACP Observatory on Migration

thus facilitate safe savings and human capital investments. By increasing the
GDP rate per capita thanks to the productivity gains associated with mobile
phone communications, mobile money could have the potential to increase
incomes (Afful, 2012; Gencer, 2011).
b. Reconfiguring social and communal life
The use of mobile money services is creating new forms of social and
communal life (Kusimba et al., 2013). On one hand, sending and receiving
mobile money is part of a culture of entrustment (Shipton, 1989): most users
in African countries use mobile money as a social and economic tool through
which they create relationships by sending funds, airtime gifts and vouchers to
family or friends. A wide range of mobile money services includes social gifting,
assisting friends and relatives, organizing savings groups, and contributing to
ceremonies and rituals. New forms of social interaction around mobile money
recast long-standing traditions of reciprocity and are subject to cultural rules
(Kusimba et al., 2013).
On the other hand, mobile money transfers can have particular impacts
on familial bonds and relationships. With the option to send remittances
electronically, immediately and affordably, their frequency may increase; yet
as the funds do not need to be delivered in person, working persons earning
salaries may return less often to their home villages.
c. Empowering rural women by increasing their financial autonomy
Besides the economic aspects of peoples lives, mobile money services may
also have a particular impact on social and family structures. For instance,
through altering bargaining power, mobile money services may have the
unintentional consequence of empowering rural women by increasing their
financial autonomy: Especially among poorer segments of the population,
remittances and transfers received (and sent) via M-Pesa are less visible than
those transmitted by other means, such as delivery by a friend or relative
[hence] the use of M-Pesa could allow women to thwart the complete control
of finances by male family members(Morawczynski, 2009). Women could be
able to preserve a greater portion of received transfers, which could positively
affect the allocation of household spending (Jack and Suri, 2010).

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Mobile money services: A bank in your pocket: An overview of trends and opportunities

d. Improving food security and nutrition through funding development

assistance projects
Mobile money has the potential to be a tool for development assistance
projects. For instance, the World Food Programme is using innovative ways to
deliver food security assistance, such as scratch cards (e-vouchers) delivered
to mobile phones by text message7. Virtual vouchers can be redeemed for food
items or spent in selected shops. They are used to tackle hunger in places
where there is plenty of food in the marketplace but where poor people cannot
afford to buy it. Besides, cash and vouchers can sometimes cut down the costs
of transporting and storing food. They may also benefit the local economy
because beneficiaries spend the money in local markets.

6. Conclusions
This general overview of mobile transfer systems shows that mobile money
services take advantage of their ubiquitous, real-time mobile communications
networks and bring financial services into rural villages and everyday retail
stores, thus alleviating the lack of banking infrastructure and filling a huge niche
in developing countries. The rapid adoption of mobile money services can lead
to both positive outcomes and unintended consequences, several of them not
fully identified yet. Indeed, by making money transfers faster, safer and more
convenient as well as lowering the cost of remittances, mobile money services
can contribute to local development. They can improve household incomes,
savings and human capital investments; formalize the informal cash economy;
facilitate cash transfer programmes for development projects or emergency
operations. At the same time, mobile money services may reconfigure social
and communal life.
Some questions remain on the limitations and actual extent of the effect of
mobile money transfer services on the welfare of their users in developing
countries. It will therefore be essential to produce more reliable and accurate
data about the relevance and impact of mobile remittances on peoples lives in
developing countries.

7 http://www.wfp.org/cash-and-vouchers.

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ACP Observatory on Migration

7. References and further reading

ACP Observatory on Migration
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Migration and development within the South: New evidence from African,
Caribbean and Pacific countries, MRS N46, IOM Migration Research Series,
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Afful, F.
2012
Africas mobile banking revolution: the poor now have access to financial
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Aker, J.C. and Mbiti, I.M.
2010
Mobile phones and economic development in Africa, CGD Working Paper
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FINAL.pdf.
Aker, J.C., R. Boumnijel, A. McClelland and N. Tierney
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Zap it to me: The Impacts of a Mobile Cash Transfer Program, Center
for Global Development, Working paper September 2011. Available from:
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Allen, K.
2013
On the new frontier of mobile and money in the developing world.Hydra
2(1)pp 49-59. Available from: http://journals.ed.ac.uk/hydra/article/
view/725.
Andrew, W.
2009
Mobile Banking in Developing Countries: a case study on Kenya, Vaasan
Ammattikorkeakoulu University of applied sciences. Available from: http://
publications.theseus.fi/bitstream/handle/10024/4402/Wambari_Andrew.
pdf?sequence=1.
Batista, C. and P.C. Vicente
2012
Introducing Mobile Money in Rural Mozambique: Evidence from a Field
Experiment, October 2012 preliminary. Available from: www.novasbe.
unl.pt/images/novasbe/files/INOVA_Seminars/nova_sbe_batista_vicente_
introducing_mobile_money_rural_mozambique_19oct2012.pdf.
Bruett, T.
2011
The Latest Frontiers for Financial Inclusion: Using Mobile Phones to Reach
the Unbanked, UN Capital Development Fund, Community Development
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Communications Commission of Kenya
2013
Quarterly Sector Statistics Report Fourth Quarter of the Financial Year
2012/2013, Communications Commission of Kenya, APRIL-JUNE 2013.
Available from: www.cck.go.ke/resc/downloads/Q4_201213_STATISTICS_
final_25th_oct_2013.pdf.
Consultative Group To Assist the Poor (CGAP)
2008
Global Program Review, Volume 3, Issue 1, Independent Evaluation Group
(IEG) The World Bank Group, Whasingtong, 2008. Available from: http://ieg.
worldbankgroup.org/Data/reports/gpr_cgap.pdf.
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Mobile money services: A bank in your pocket: An overview of trends and opportunities
2012
Corbett, S.
2008
Day, P.

Cte dIvoire: A Perfect Time for Mobile Money?, CGAP, 2012. Available
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Can the Cell phone Help End Global Poverty? The New York Times (13 April).
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Dermish, A., C. Kneiding, P. Leishman and I. Mas
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Branchless and Mobile Banking Solutions for the Poor: A Survey of the
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Department for International Development (DFID)
2006
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Donovan, K.
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on Development as Freedom, University of Cape Town, International
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GSMA
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54 May 2012, Accessible online: http://www.odihpn.org/humanitarianexchange-magazine/issue-54/innovation-in-emergencies-the-launch-ofmobile-money-in-haiti.
2013

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ACP Observatory on Migration

InterMedia
2012

Mobile Money in Uganda. Use, Barriers and Opportunities, The Financial

Inclusion Tracker Surveys Project, InterMedia, October 2012. Available
from: http://audiencescapes.org/sites/default/files/FITS_Uganda_
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cfm?abstract_id=1552753.

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Mobile money services: A bank in your pocket: An overview of trends and opportunities
Ismail, T. and K. Masinge
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Mobile money services: A bank in your pocket: An overview of trends and opportunities
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25

Mobile transfers technologies are changing the way in way

populations relate to financial services in many developing
countries. While robust and comprehensive literature on the
subject is not yet available, this background note provides a
general overview of the trends and opportunities emerging
with these new systems.
Based on the example of Kenya and drawing conclusions from
other cases, this background notes highlights that mobile
money systems can play an important role for development
given their adaptation to local contexts and their unsefulness
for unbanked populations. Mobile technologies are also
expected to bring along unexpected social, economical and
cultural consequences that will require increased attention in
the future.

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