Mobile Money’s Newest Outpost

> Posted by Allison Ehrich Bernstein, Executive Communications Specialist, Accion

Quick: Pretend you’re a telecommunications operator in Africa. Which country would you choose for the launch of a new mobile money network?

Since the runaway success of Kenya’s M-Pesa system, banks and mobile service companies have been looking for the next big opportunity to bring cell phone-based financial services to a whole new client base. While we haven’t yet seen anything on the scale of M-Pesa, numerous companies (e.g. Easypasia in Pakistan, bKash in Bangladesh) have been chipping away at its number-one position.

So, what’s your pick?

You might say a fairly stable country that already has a reasonably strong banking sector, like Ghana. Or a high-population nation like Nigeria, or perhaps a place like Zimbabwe, where the financial system could use a jolt. And those wouldn’t be bad ideas.

Established African mobile-service providers Zain Group and MTN are taking a very different approach, however: they’re setting up mobile money networks in the world’s newest country, South Sudan.

Even if it weren’t a nation less than three years old, South Sudan might not strike the average observer as the next “it” spot for mobile money. Banking penetration in-country is negligible; there’s currently neither the central infrastructure nor leadership for it. And mobile penetration was somewhere around 13-15 percent in 2012, according to an International Finance Corporation study and other sources.

Yet South Sudan’s transitioning economy, with swaths of untapped mobile and finance customers, may be why it’s a strong bet for a successful mobile money network. The relationship between post-conflict development and mobile money isn’t uncomplicated, though: in post-conflict countries people are displaced and families spread apart, so the need to move money around is high. At the same time, traditional infrastructure is poor, travel can be dangerous, and trust in institutions is low. In such a setting, phone-based services can be a lifeline. (For more information, read CGAP’s primer on the subject.)

Current mobile customers are already testing out their options, by using prepaid airtime as an alternative currency to difficult-to-come-by cash for sending and receiving remittances. Mobile penetration is increasing fast, already up to 18 percent since 2012. The Zain Group reported a 27 percent increase in its customer base and 36 percent revenue growth in just the first half of 2013.

The national government has few rules and regulations in place to govern the sector at the moment, but regulators are eager for guidance and to promote economic development – not to mention locally-governed financial institutions. A National ID program may soon become a reality, too, which could make it easier for people to open mobile money accounts or to connect mobile and bank accounts.

And, most importantly, “There’s pent-up demand for it, particularly in the NGO sector, government, and business,” says Hakeem Dario N’Moi, Zain’s chief executive in South Sudan. With more than three-quarters of South Sudan’s population living outside of cities and few paved roads between them, cash transfers are risky, so secure electronic options have a real chance of solving a prevailing problem.

Though Zain has already announced its partnership with eServGlobal, a mobile money technology company, it’s far too soon to gauge the success of these efforts – especially relative to other networks – but it’s exciting to see a fledgling nation ready to take advantage of the transformative power of mobile money.

Image credit: Steve Evans

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