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One of the big financial innovations in East Africa over the past ten years is mobile money. We’ve briefly mentioned mobile money in previous blog post on banking, which discussed how mobile money is filling the gap left by having the majority of the population not in the formal banking system (and I doubt that you would be if bank fees ate up ~10% of your income!)

Having lived in Tanzania for over a year and a regular visitor for over three, I now take the system for granted. And it’s certainly great! There are many benefits over the typical financial transaction systems that most in the west are used to. And it all comes from just from tapping a few numbers into any old mobile phone. But leaving the details of the mechanics of the systems to more technically minded blogs, I’ll just highlight a few instances where mobile money has been particularly useful:

  • Mpesa main menu screen shotWhilst driving across Tanzania to Zambia, my wallet was stolen. And along with it my credit card and all of my cash. A catastrophe! But no, a quick phone call and a friend obligingly sent me money via mobile money. I withdrew it from one of the ubiquitous mobile money agents and continued on my merry way. I imagine the same situation on a lonely highway in Australia. The term ‘shitfight’ doesn’t do it justice.
  • Want to buy something from far away Dar es Salaam? Instead of transferring money via bank or paying with credit card, by far the most common and easiest method is to use mobile money.
  • A friend of mine ran out of phone credit and was unable to make calls or access the internet. No matter, I was able to top up their account with mobile money without moving from my chair.

You can also pay utilities, get small loans, build a credit history, and save money with more functions are being coming on stream regularly. All of this functionality is available through the simplest mobile phone possible. Old school Nokia and their Asian clones are still head and shoulders the most common phones in Tanzania. None of that ‘app’ rubbish here! But as more people become smart-phoned it is possible to foresee another big increase in the functionality of the mobile money service. By in large, companies in the west and elsewhere have so far not had much luck in this area of finance. But the systems available in China are leading the way in many respects; in both service function and usage uptake. The leaders of many African countries lionise the so called China-model of development and seek to replicate the successes in their own countries. Soon African citizens may also be looking to the Middle Kingdom for the mobile money inspiration.

 

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