Rogue Mobile Money Agents and Black Market SIMs of the DRC: A Barrier to Financial Inclusion

The proliferation of rogue mobile money agents selling black market SIM cards in the Democratic Republic of Congo bogs down provision of high-quality financial services.

“Up until today, I have never received a SIM card from XXX” (a leading mobile network operator). “The agent SIM I use is not mine, it is in the identity of another person, and I bought it from him,” explained Francis Malamu.

Francis is a mobile money agent from Kongo Central in the Democratic Republic of Congo (DRC). His problems with registration came up while we were determining his pathways of becoming a mobile money agent. MicroSave Consulting recently conducted a market research study in the DRC to determine the key trends, success factors, and challenges in the operational management of agent networks. The research comprised 50 in-depth interviews with digital financial services (DFS) agents across the DRC, as well as interviews with key staff from Airtel, Equity, FINCA, Orange, and Vodacom.

In this blog post, we take a deep dive into one of the key findings from the market research study—the reselling of MNO agent SIMs on the black market.

This is not a phenomenon unique to the DRC. In fact, we’ve observed this across numerous markets, usually during the initial stages of DFS industry growth. We believe that DFS providers in the DRC need to address this issue urgently if the sector is to flourish in a way that is sustainable for providers while providing high quality, transformative financial services.

What is the “Black Market” for Agent SIMs?

A black market for agent SIMs is created when the original owner of an agent SIM re-sells it for use by an unregistered third party, who will use the SIM to provide DFS services. A special SIM is necessary to enable a person to act as an MNO agent, carrying out cash-in and cash-out transactions, among other services, and reaping the accompanying commissions.

We established that there are two main reasons for the agent SIM black market:

  1. MNOs generally have a permissive agent SIM card issuance policy, enabling one agent to own many—or even an unlimited number in some cases—agent SIMs. Some of these are then sold (illegally) to people who are keen to become DFS agents.
  2. Regulations allow MNOs generally to have agent selection criteria that are less strict than the banking sector. MNOs tend to issue agent SIMs relatively freely to interested parties. Without any real barrier to entry for this work, the perception is that it is an easy job to get and that it will generate income quickly.

Unfortunately, this means many new agent SIM owners are underprepared for the job. They lack capital, skills, and sufficient client base, among other factors. Moreover, agents rely on commission earnings: if they do not transact, they quickly become inactive. Inactive agents may choose to re-sell their SIMs to other people who are interested in becoming agents, thus perpetuating the black market.

 

“I know someone working at a leading provider here in Kolwezi who helped me get my SIM. Although prior to that, I had met an agent who promised me he would give me an agent SIM for USD 20. But he swindled me and I have yet to receive a SIM from him...”
-An agent in Katanga

Why is the Agent SIM Black Market a Concern?

Agent, provider, and consumer risks

When agents begin operations without vetting from the DFS provider, the quality of service is affected, the brand of the DFS provider is compromised, and customers are at risk from unscrupulous agents who are not registered or identifiable in the DFS provider database. When agents obtain SIMs illegally, they do not undergo provider KYC checks, contracting, or training. Nor are they monitored and supported by the provider. KYC checks are required by the Central Bank of the Congo DRC, as an essential practice to ensure exposure to risk and fraud are kept to a minimum. The gaps reduce agent (and provider) profitability and add a multitude of risks to the DFS business. As the agent SIM black market grows, the DFS provider loses more and more visibility over the identity of its individual agents, making it harder for providers to ensure the quality of the entire network.

The black market is a phenomenon that must be curtailed.

Agent sustainability

An agent who has not been through the official contracting process is unlikely to have a clear overview of responsibilities and duties. An agent who has not received official training will struggle to serve clients to the high level of quality that DFS providers require, thus damaging the reputation of both the brand and service.

For example, their ability to manage liquidity is likely to be suboptimal due to lack of training and provider support. Lack of liquidity, in turn, limits the agent’s ability to offer services to clients consistently, and thus will limits commissions and earnings potential, likely making the DFS business financially unviable for the agent in question.

Thankfully, some MNOs in the DRC have already started to take measures to address this issue. Some of the measures that providers are currently employing to curtail the “black market” of agent SIMs include:

  • Linking the issuance of an agent SIM card to the agent in question, after the agent fulfills official training and contracting requirements
  • Deactivating agent SIMs that either have been dormant for a specific time, or whose operational locality does not match with the registered locality
  • Driving re-registration of black market SIMs. For example, some DFS providers have communicated to all agents that those working with a SIM card that is not registered in their own name cannot reclaim e-money balances if they lose the SIM card.

Other measures that DFS providers have employed effectively in other markets include:

  1. strengthening agent selection and recruitment procedures to ensure that all agents undergo requisite checks and are equipped to offer services,
  2. regular audits of agent outlets to ensure that all operational agents have been registered,
  3. withholding commissions for agent transactions on unregistered SIMs,
  4. mystery shopping and feedback from customers who use agent outlets to ensure quality of service and identify unscrupulous agents.

Quality vs. Quantity of Agent Bankers

Finding the right balance between the quantity of agents on the ground and the quality of agents is tricky. Yet it is crucial for a DFS provider to get this right if they are to minimize risks and ensure that the service is sustainable. We believe that three major factors would help ensure a better balance between the quantity and quality of DFS agents on the ground, while also working to eradicate the black market itself. These are:

  • investment in human resources to monitor and support agents,
  • improved training programs,
  • the implementation of stricter agent selection criteria and processes.

As our research clearly shows, the black market for agent SIMs in the DRC presents significant risks to providers and is likely to stifle the long-term growth of DFS in the country.

Join the Conversation

<noscript><iframe src="https://www.googletagmanager.com/ns.html?id=GTM-W5XP2HF" height="0" width="0" style="display:none;visibility:hidden"></iframe></noscript>