Page 37 - State-of-the-Industry-2013

Part 1 - mOBile mOney

In a somewhat similar manner, Airtel Money in Malawi relies on their banking partners to provide additional liquidity points to
agents during predetermined dates in the distribution period. While this approach is working, it is undoubtedly resource-intensive.
The monthly disbursement involves physical representation from key partners: the agent/bank partner (the liquidity supplier), the
NGO, and an Airtel customer service representative in case of any trouble. PIN resets, in particular, were cited as a key challenge in
G2P payment delivery across markets.
• Product usage: The salient trend in G2P payment-linked accounts is that they are “dump & pull”—benefciaries withdraw 100%
of funds as quickly as they are able to.[2] The pioneers confrm this trend holds based on their experiences. This contributes to
the liquidity challenge discussed above and limits recurrent usage of the account, thereby hindering the development of a digi-
tal fnancial ecosystem. It would make business sense for mobile money providers to encourage greater account usage amongst
benefciaries, yet they may not necessarily have the support from their partners. Many social protection program administrators
are of the opinion that subsidies and humanitarian aid must be immediately liquid, in some cases requesting prompt withdraw-
als. The focus of the service provider then becomes how to ensure the distribution network can handle this, rather than how
to encourage customers to keep and use funds digitally through targeted marketing. Greater account usage would be most
welcome by fnancial inclusion stakeholders.
• Business case: G2P payments can be an important source of revenue for mobile money providers. Airtel Malawi distributed a
total of $3.5 million USD for its NGO partners. This contributed to 60-70% of their business as of March 2013. For UBL, G2P pay-
ments started of as being a key business driver (60% of revenues in 2011), but has now dropped to 20-30% of revenues as ac-
count activity levels are growing. For Davivienda, G2P payments benefciaries comprise roughly half of all customers registered
on DaviPlata. As banks, the revenue model for UBL and Davivienda can include foat income, though all three pioneers may
negotiate service fees as a percentage of the ticket size of the disbursement depending on the program. It is too soon to report
on the overall proftability of this business line.
• Timing for introducing G2P payments: UBL seized the G2P payment delivery opportunity even before the commercial launch of
Omni. They had to build the agent network from scratch in order to fulfll their G2P payment commitments. They in fact have
more rural than urban agents today, refecting their deliberate approach to efectively deliver G2P payments from the start.
Davivienda began ofering G2P payments via DaviPlata nearly two years after launch, though the timing in their case was
infuenced by the government’s open bidding process. Many would argue G2P payments should be phased in only after a mobile
money operation has reached a critical mass of agents and transaction levels. There are too few proof points to make the case
one way or another, and one must acknowledge the complexities involved with securing contracts for social transfers.

There’s no sugar coating this. G2P payment delivery will be a challenge across markets for years to come, even in a place like Kenya
where M-PESA has reached the majority of adults and agents are nearly ubiquitous. The Red Cross recently piloted the delivery
of humanitarian relief payments via mobile money in semi-rural villages in Kenya and came across many of the same challenges
highlighted here. That said, we commend the pioneers for embracing partnerships with governments and donors. As one insightful
pioneer shared, their imperfect and costly system is still better than the alternative of handing out cash envelopes and being subject
to high degrees of fraud and leakage.

* This text box was adapted from a blog post by Mireya Almazan (MMU) that was published on the MMU website on September 30, 2013
1. Hereafter we refer to social transfers generically as “G2P payments”, although we recognize that many social transfers are in fact funded by donors and NGOs. We also recognize
that G2P payments can more broadly include pensions and civil servant salaries.
2. This phenomenon has been documented by CGAP and Bankable Frontier Associates

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