Mobile phone apps have evolved to make all of our lives easier, but in Africa they are fuelling a consumer and business boom by enabling a whole continent to access vital financial, health and educational services
A few years ago, just as his daughter was about to start high school, a fierce drought struck Joseph Mkopi’s farm in western Kenya, destroying his crop and putting his family on the verge of bankruptcy. With no money for school fees his daughter missed the first terms of her secondary education. There was only enough money for one meal a day. When the rains failed again two years ago, the story was very different – all because of simple technology using basic mobile phones.
Africa has long been recognised as a pioneering space for mobile money applications
Mkopi is one of 73,000 farmers in Kenya and Rwanda who use a mobile money-transfer scheme to send small insurance premiums to an outfit called Kilimo Salama (“safe agriculture” in Swahili). It has weather stations dotted around heavily cultivated areas. If data suggests the rains will fail, Kilimo Salama sends insurance payouts back to the farmers to cover the costs of their lost harvests.
“It has given me peace of mind, so I invest without fear of losing everything to risks that are beyond my control,” Mkopi says. “When I lost part of my crop to drought in 2011, I was compensated, which meant I was still able to pay school fees, buy seeds for a new crop and keep food on the table for my family.”
Africa – where south of the Sahara only 12 per cent of the 850 million population has access to formal banking – has long been recognised as a pioneering space for mobile money applications. Today, the first generation of those services is maturing, and new tools are flooding the market, dedicated to personal finance, to boosting business, to agriculture, education and healthcare. In developed countries, mobile-based apps tend to be most popular to share photographs or keep tabs on friends’ social lives – in Africa they are helping to pull millions out of poverty.
The continent’s explosion in mobile-phone connectivity is well known: from fewer than 20 million handsets on the continent in 2000, there are now more than 650 million. By 2020, that figure will pass one billion, making Africa the world’s fastest-growing mobile market, according to the International Telecommunication Union. And a 10 per cent increase in people’s access to mobile phones can boost GDP per capita by 0.8 per cent in developing countries, the World Bank estimates.
What that means, according to a December 2012 report on Africa’s “e-transformation” by the World Bank and the African Development Bank, is millions of individual successes all across the continent. “Phones, computers and websites are powerful tools, but it is individuals, communities and firms that are driving change,” the report’s authors said. “Mobile phones and the internet are helping to release the dynamism of African society.”
Perhaps the most famous such mobile app – although it is network-based, not web-based – is Kenya’s M-Pesa or “mobile money”. It debuted in March 2007 and has since grown to 14.6 million subscribers – one in three Kenyans – and two million daily transactions. A tenth of the nation’s US$76bn annual GDP shifts through the system each year.
In a country where few people had bank accounts, and money was often moved around the country from relative to relative and business to business by bus drivers or truckers, M-Pesa was and still is a revolution. Like all mobile money systems, its beauty is its simplicity. If you can afford a mobile phone – and prices have fallen from more than US$2,000 for a basic handset a decade ago to less than US$30 now – and you can send a text message, you can use it.
The rest of Africa was not slow to see the success of M-Pesa. Operators across the continent have followed suit. The Nigerian subsidiary of Etisalat telecoms corporation, the largest operator in the Middle East and Africa region with its headquarters in Abu Dhabi, has recently launched easy-wallet, which links users’ mobile phones to their bank accounts and doing so in four languages – English, Yoruba, Igbo and Hausa. MTN’s MobileMoney is well-entrenched in Uganda, and is expanding to Rwanda. Airtel, with operations in more than a dozen African nations, runs Airtel Money.
Now these systems are evolving to offer new products, says Alfred Hannig, Executive Director of the Alliance for Financial Inclusion, a network of policymakers focused on financial services for the poor. “Small payments address the basic financial needs of poor people and seem to be the logical entry point on the way towards full financial inclusion,” he says. “With increasing market saturation and other services such as credit, savings and insurance will enter the mobile financial services space with enormous potential to transform the financial industry.”
Such a transformation is already happening in Kenya, where the original M-Pesa money-transfer scheme is evolving to offer near-complete banking services.
Safaricom – the Kenyan network behind M-Pesa – recently launched M-Shwari. This uses the original system to turn mobile handsets into virtual bank branches that offer loans and savings – which even earn interest.
“Economic development, on a macro or a micro scale, is dependent on credit, and ideally credit at a fair cost,” says Aly-Khan Satchu, a financial analyst in Nairobi, Kenya’s capital. “These kinds of systems, via mobile phones, or via micro-credit enterprises, are what truly will boost our productivity, in millions and millions of small ways.”
Back in western Kenya, where Joseph Mkopi continues to pay his drought insurance premiums to guard against future catastrophe, Rose Goslinga, who helped to launch the Kilimo Salama scheme, sees it as representative of the success of all such mobile apps.
“The key thing for products like this to work is they have to be simple, bring a clear business advantage and fill a gap that was not easily accessible before,” she says.
With African countries full of such “gaps”, as well as full of consumers in a market that is only just beginning to boom, the mobile phone will continue to be one of the key drivers of development for people who may soon no longer be the world’s poorest.