Virtually every day I speak to someone in Kenya, or read about the way in which mobile phones and the internet is being used to come up with a solution to a problem. Oscar has set up a shortcode to allow people to donate money for drought relief. Cathy has set up a shortcode to allow people to sponsor a school child from the village they grew up in. That pro-active and entrepreneurial attitude is so typical of all the Kenyans I have met, and I’m still positive it’s one of the main reasons for M-PESA’s take-up and success in that country. The m:lab consortium(a list of mobile start ups selected for the resident incubation program at m:lab East Africa) , Pivot25 (a mobile apps and development innovation conference) and a whole host of mobile banking conferences that are held in Nairobi each year provide further proof that folk in Kenya are embracing technology at speed to make a difference.
In all developing countries, we’re now seeing Banks and formal money institutions actively targeting the underbanked; they are potentially hoping to replace the very informal ways of transacting, saving, lending and insurance that has sprung up over the years in these developing economies. Recently in S Africa I noticed frequent TV adverts – insurance for funerals and medical expenses, loans and savings plans. That’s just one example, and for sure, there are many, many more. Text loans, internet loans, ability for mobile money solutions to enable savings and loans, and for loans to be disbursed straight into mobile ‘accounts’ – all of these are going to impact on this sector, and will determine whether the MFIs and informal institutions are edged out of business or not. Many MFIs in Kenya are embracing technology – they will probably grow from strength to strength. Or will they be ‘gobbled up’ by bigger Banks? Mobile money, when implemented well, has the potential to revolutionise the informal economy of a country, and seems to strike a better chord with the target market than prepay or bank cards. That’s the first step, and hot on the heels of a successful banking solution, savings, insurance, loans, pay bill, salary disbursement and buy goods become attainable.
Will this change be for the better or not? Will the lives of poor people be enriched, or will formalising the sector only lead to further suffering and hardship? Will Banks adopt suitable models / adapt their processes to include this sector, or will they burn their fingers in the process? I would like to think that the current changes will make a positive impact on these emerging economies, but ultimately time alone will tell...