This is the second part of my conversation with Zahir Khoja. In this segment, Zahir describes the significance of the phrase ‘The Hawala on your Mobile’, the market conditions that were taken into account when designing M-PAISA, the process and importance of agent training, and the alternative payment options that exist in Afghanistan today.

To read Part 1 of the inteview, click here.

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Paul Leishman: What types of tactics do you use to convert registered customers into active users?

Zahir Khoja: There are a number of tactics, but the primary one is educating and training M-Paisa agents so that they are well equipped to talk to customers about the service. That’s our main focal point. There are also a number of marketing initiatives utilizing the Roshan mobile network that we use to communicate with customers. The marketing services we deploy take into account the fact that 75% of the Afghan population is illiterate. These types of initiatives have been recently launched so we are still in the process of evaluating their effectiveness.

Paul Leishman: So your offering includes money transfer, MFI loan repayment, salary distribution and airtime purchase. What types of market conditions or customer needs were taken into account when designing this offering?

Zahir Khoja: First, we considered is access to finance. When you look at what Afghanistan has to offer today in terms of a banking environment, only about 3% of the population are banked and there are about 300 bank branches which are owned by 17 banks. So most of the country doesn’t have access to financial services unless you’re in a large city, and even those who do have access generally don’t trust banks given the history they’ve had with them over the last 20-25 years. We also considered the transportation infrastructure. It’s very hard to get around in Afghanistan: roads aren’t developed like they are in Europe or North America, and buses or cars aren’t as common: donkeys or walking are often the preferred mode of transportation here. The third factor we considered is security. When you’re travelling with large sums of cash, and when I say large I mean $100 or more, you stand the risk of meeting someone on the road who wants to take your money. In the last 6 months of 2008, there were about $30 million in transit robberies.

There are a lot of obstacles in Afghanistan, but these do vary in severity depending on where you are in the country. Take Southern Afghanistan for example, where the rules of engagement are different than what they may be in the North, it’s not safe to walk around there with money or conduct business. For women in particular it’s a lot easier for them to have a business in Central or Northern Afghanistan than it is in the South due to instability.

Opening up the movement of money is the first step to financial inclusion and alleviating poverty: that’s where the money transfer offering comes into play. p2p payments break down boundaries between different villages or communities so that people can expand their trading partners. The second thing is that these customers now have access to getting a microfinance loan without actually having to visit a specific bank branch. They can repay their loan by changing cash at an agent. Once they take a microfinance loan, they’re probably using it to develop their business. If they’re developing their business they’re employing more people. If they’re employing more people they’re probably generating more revenue. Through all of this comes savings, which will probably be the next thing we explore: once these people have money they want somewhere to put it other than under their pillow. You can see that over 10-15 years all of this plays into making the community self sufficient and alleviating poverty. At Roshan we don’t just look at products from a commercial perspective. We also consider economic and personal development perspectives and they were obvious in bringing M-PAISA to market in Afghanistan.

Paul Leishman: What other payment options exist in Afghanistan, given that just 3% of the country is banked?

Zahir Khoja: If you want to send money today from one district to another, you’ll personally deliver that money by walking, taking a taxi, or taking a donkey. Alternatively you would give the money to a friend, what’s referred to as a trusted agent, and say ‘please deliver this for me and you can keep 5-10% for yourself.’ Or finally you would go to a Hawala market and pay a set fee for the money to be sent to the recipient in a corresponding district, village or province. These are the money transfer options that exist today, and we’re trying to educate people on how to send money on their mobile phone. 25% of the population in Afghanistan have a mobile phone and this is the group we’re targeting. The challenge we have is that people don’t trust banks, let alone the idea that their money is now just on an SMS. But recall that 75% of Afghans can’t read: that’s where our IVR comes in.

Paul Leishman: What have you done to driving understanding of the benefits and functionality of an IVR?

Zahir Khoja: That’s the challenge we’re having now: getting the IVR message into the marketplace. What we’re trying to do now is address the market based on their needs. Afghanistan just went through an election period which was an unsafe time for the country. In response, the campaign we’ve launched is ‘buy Roshan airtime using your M-PAISA wallet from the convenience of your home.’ This gets a customer to say ‘Yes, I’d like to continue to have airtime, so I’ll figure out how this M-PAISA thing works because I don’t want to leave my home and risk my safety.’

It’s important to use tactics like this that will make a customer say ‘Yes, I really need this’. Right now if you talk to the average Afghan person, there’s no desire to put money into a bank. In some sense, we need to create the need for them – illustrate how these services can make a difference in their lives. Right now we charge 50 Afghani, which is the equivalent of US$1, to send money. The average person today sends between US$30 and US$50. The pitch to these people to justify our fee is that they no longer need to leave their home, take a taxi or donkey, or spend time going to a Hawala market. Yes, there is a fee but it’s cheaper than all other methods used today.

Paul Leishman: You’ve chosen to use the word ‘Hawala’ in your tagline: ‘The Hawala on your Mobile’. What is the significance or thought behind this?

Zahir Khoja: Hawalas have been around for hundreds of years and everyone knows that this is where you go to send money. Rather than recreate the wheel, we decided to go with what people understand. Our pitch is that we’re bringing the Hawala to you through your mobile.

Paul Leishman: Thanks Zahir.