Since we last wrote about the potential of using mobile money to deliver humanitarian assistance in Pakistan, Digicel and Voila have announced in September their intention to enter the Haiti Mobile Money Initiative (HMMI) Competition. The HMMI is a partnership between the Bill and Melinda Gates Foundation (BMGF) and USAID which awards cash to companies that offer mobile money services in Haiti, with the ultimate hope of expanding the availability of financial services to victims of the Haitian earthquake. The first company to launch a mobile money service that meets criteria before December will receive a $2.5 million award, whilst the second operator to launch will receive $1.5 million—with a total of $10 million available to mobile money initiatives. To understand the rationale behind HMMI, we caught up with Salah Goss, associate program officer with the Financial Services for the Poor initiative at the Bill and Melinda Gates Foundation.
MMU: Why did the Bill and Melinda Gates Foundation (BMGF) choose specifically the mobile money platform to deliver humanitarian aid?
SG: While our initial focus was not particularly aid, as we looked at the tragic earthquake in Haiti, it was clear that, had the country already had a widespread mobile money system such as M-PESA, the problem of getting much-needed aid funds to recipients would have been significantly eased. Not only would it have been easier for money to reach people fast, but it would also have relieved the entire cash system, since people could have transacted electronically with one another if cash were not available.
After asserting the utility of a mobile money system and holding a series of meetings with Haitian organisations and partners, we identified two reasons why mobile money services could be particularly powerful if deployed quickly in Haiti:
- With the banking infrastructure so damaged and the resulting difficulty to access cash, it seemed very likely that adoption of mobile transfer services would be rapid. If humanitarian agencies and remittances services moved to electronic payments, they would induce a large uptake amongst recipients. Those recipients would have a strong incentive to keep their funds in electronic form and use them for payments, since the option of cashing out (or in) remained difficult. In fact, it seemed possible that the entire system could reach scale quickly, thus skipping many years of slow adoption of mobile money systems, which proves an expensive experience in other countries.
- In any emergency, cash from friends and family is a major source of household survival and reconstruction. If mobile money could make these, and humanitarian payments, cheaper, quicker and more transparent, there would be a much greater and more immediate welfare impact than for typical mobile money deployments.
As such, if we could accelerate the deployment of mobile money in Haiti we could potentially move much further towards the scaled adoption of mobile money services than we have seen in other countries.
MMU: Do you think that delivering aid via the mobile platform will have knock-on effects, i.e., will users save money through mobile money, will household expenditures change, etc.?
SG: There are currently studies underway to test the effectiveness and efficiency of a mobile phone-based conditional cash transfer system as opposed to normal cash transfer systems (for instance, in Niger). The big question here is: can mobile phones allow recipients to better manage cash transfers during food crises as opposed to traditional cash distribution mechanisms? If so, do the benefits outweigh the costs? There are similar studies being conducted that look at the efficiency gains of mobile based cash transfers for recipient households and the related knock-on effects of increased household savings or expenditures.
Recipients of certain government funds are allowed to receive their payments in a formal account rather than receive a lump sum to withdraw entirely in cash, and there is evidence that some chose to save a portion. Although we are still unsure of the specific motivations, we expect that in Haiti we will see similar behavior. The insecurity of keeping cash, especially in urban areas like Port au Prince and Cap-Haitien makes the storing of money on a mobile wallet more attractive and an added value to cash-for-work recipients (cash-for-work is a short-term intervention used by humanitarian assistance organizations to provide temporary employment in public projects). In fact, some recipients have stated that they are most excited about having a safe place to store small portions of the transfers they are currently receiving from NGOs. We are still unsure of what mobile money will be used for or if stored funds will be treated as savings or used for the purchase of goods, consumption smoothing or to assure livelihood. The extent to which mobile money can reach the poor, rural areas, women and different ages will likely inform the knock-on effects of aid distributed through the mobile platform.
MMU: A recent report by Refugees International highlighted that many international NGOs implemented programs in an ad hoc manner, resulting overlapping and unequal resources and programming, with massive gaps in coverage. In this light, do you think there will be a high take up by NGOs?
SG: NGOs and UN agencies are very keen to make their payments electronically but so far are mostly dealing in cash. While some distribution does take place through bank branches, the banks remain well below capacity and overwhelmed with back-office processing as well as cash logistics. Certain NGOs are using the transfer houses, especially Caribbean Air Mail Inc. (CAM) which has a wide rural presence, to help facilitate these transfers. We have spoken to many NGOs that would be keen to switch to administering their humanitarian payments through a mobile platform. They see tremendous value in this project as there are sometimes delays using the existing infrastructure to administer payments. Although they have come up with some creative solutions that are cheaper than more traditional approaches, they would prefer a solution that is more easily monitored and less fraught with delays. Indeed, there is already evidence that operators and NGOs have started to pilot mobile based cash for work distributions in different parts of the country.
MMU: While there is a lot of potential for mobile money in Haiti, as you have outlined, the country still presents significant barriers to the uptake of mobile money services. How do you think MNOs and NGOs will address challenges such as literacy, distribution footprint, KYC requirements, liquidity, trust, etc.
SG: Haitians have already adopted mobile services. The question therefore is less one of technology adoption and more about delivering mobile money services that address the needs of the population and solve concrete demands. While we acknowledge there may be other issues, the design of the prize mechanism is such that it incentivizes the providers to be creative about solving them.
We are therefore focused on scale as the main driver of success and have designed the Haitian Mobile Money Initiative to promote scale at the market level, rather than for any individual provider. Reaching scale or critical mass quickly has proven to be vital in other deployments and we expect that to be especially true of Haiti. Rapid scale can combat the chicken-and-egg trap of a two-sided market where in order to grow, agent-based cash-in/out networks have to attract both customers and stores in tandem: there should be enough outlets that curious potential customers can easily find an outlet to try out the service but enough customers to keep existing outlets interested in offering it. There are also strong network effects at play in that the more people that are using the network, the more valuable it becomes to its users. As a scheme grows, network effects can rapidly make it more valuable or difficult to attract early adopters while there are only a few users on the platform. As with any new initiative, trust could also be a barrier. Customers have to become comfortable with receiving and sending funds through their mobile phone. The best way to build trust in the system is to reach critical mass quickly so that existing customers can attest to the reliability of the system, bringing in more customers through positive first-hand experiences.
NGO cash-for-work recipients will, in effect, be the early adopters of this system and will be important for its broader national acceptance. Many cite the introduction of SMS in Haiti, remarking that it did not take long for the country to adopt this service. In fact, the purchase of airtime is now largely done through SMS, replacing scratch cards for the most part. With the introduction of mobile money, NGOS are well placed to assess what is needed for their recipients to assimilate to this new way of receiving their cash-for-work transfers and to provide the appropriate assistance.
Besides benefiting from a stock of early adopters, Haiti has many retailers who are used to managing liquidity in earthquake-affected areas and a culture of receiving (and sometimes on-sending) transfers in the form of remittances.
MMU: just to continue on that, former PM Pierre-Louis mentioned the obstacle of the lack of IDs amongst the population—do you see this being a challenge?
SG: There are ways that NGOs have worked to positively identify recipients of aid. The lack of a national ID will become less of a challenge the more we can learn from and leverage these techniques.
MMU: Earlier in our conversation, you mentioned studies on the efficiency of mobile phone based conditional cash transfer programme. But as you know there has been little rigorous evaluation and evidence of the impact of mobile money in development to date. How does the Foundation plan to contribute to the emerging body of research on mobile services?
SG: The possibility of engaging in the mobile money experience from just before the start offers a fantastic research opportunity, thus allowing for good baseline studies that have not been possible in other countries since researchers, for the most part, only get involved once the deployment is on its feet. It’s clear that if this program is successful, there will be rich learnings for the industry, governments and donors on the impact of mobile money on:
- Household welfare, including understanding how households use and transfer money before mobile money and after;
- Emergency programs, including the cost savings, efficiency and transparency gains for relief agencies in making emergency social payments by mobile money transfer;
- National government objectives, such as bringing people into the financial sector and making the informal sector more visible in the financial system
We will attempt to answer these questions through different streams of work including business-model and cost-benefit analyses, and possibly surveys at the household level.
MMU: And lastly what is your vision of success?
M-PESA in Kenya is by far the most successful mobile money deployment. In May 2010, Equity Bank and M-PESA announced a joint venture, M-KESHO, which permits M-PESA users to move money between their M-PESA mobile wallet and an interest-bearing Equity Bank account. This recent development could show how low-cost transaction platforms can facilitate access to savings services.
Although the Kenyan story remains a unique one to date, our hopes are to see Haiti take a similar route, and we believe success will come in a two-step process. The criteria of the incentive fund are meant to rapidly introduce a mobile money service and then to quickly drive scale, delivering a ubiquitous cash-in/out outlet network throughout the country. This would be the penultimate vision of success. Kenya has shown us that the value proposition of such a network can attract financial institutions to offer financial products through this distribution channel. The ultimate vision of success, in a country like Haiti, where less than 15% of the population have access to a bank account, would be a product similar to M-KESHO that would dramatically expand poor households’ access to savings accounts by connecting a bank to a ubiquitous agent-based mobile-payment platform. This could allow Haitian families to set aside small sums of money in a safe place to help build assets, guard against risks like illness or crop failure, and invest in educational and other opportunities for the next generation.
MMU: Thank you, Salah for your insight and time. We look forward to tracking Voila’s and Digicel’s progress and hopefully write about it on the blog
MAKING MONEY MOBILE
Jonathan Stack, Director/Producer; Mara Batlin, Producer
Capturing the game-changing power of cellular telephones to deliver financial services to the poor in earthquake ravaged Haiti, teams are building on models developed in Kenya and elsewhere in Africa. This film will highlight the potential of low-cost cellular technology to serve the poor.