Posts Tagged ‘financial inclusion’

Design of Digital Financial Services for Inclusion Needs More Respect and Humility to Succeed



In the past week alone, I’ve seen three glaring cases of unquestioned assumptions around the design and implementation of Digital Financial Service (DFS) particularly for financial inclusion, but also otherwise. This gives rise to the question whether the industry is prepared to undertake the mission they have set for themselves.

The first is that their technology, in whatever form – the app, the device, the USSD service – will and should (unquestioned, remember) disrupt people’s behaviour completely. While it is true that using a mobile phone to make a payment instead of cash is a change in behaviour, or rather, habit, it is not the same as type of change as transforming the entire culture to become more individualistic as opposed to communal; or less relationship oriented and more contractually transactional. I am finding the words clumsy to use and hope that one of you reading this has the expert knowledge at their fingertips to better articulate what I am attempting to describe. Hofstede had a clue.

There is a fundamental arrogance in framing the need for human intermediaries in the digital financial service transaction model as a “necessary evil” – sounds like a toddler’s bad habit that they need to be weaned off in order to become adults. The bulk of those who are financially excluded live in cultures where human contact and social relationships within the community are more important than faceless, meaningless transactions by the individual isolated with their techno-utopian device. To expect this to change to conform to your pretty little use case diagram is rather presumptuous, if not downright offensive.

The second is more generalized. Its a blithe disregard for any differences in context and operating environment between the more formal economies and those where the informal sector is the majority. Nobody pauses to question whether there are differences that need to be considered. Its like landing on Mars expecting the same atmosphere. This report on the global emergence of a cashless economy ends with offering 3 implications of 4 megatrends.

If indeed two of these implications are the outcome of the single factor of increasing financial inclusion, then how can they be lumped together with the third implication which is clearly one meant for more advanced consumer markets? The interpretation on transaction volume and pricing behaviour is thus rendered inaccurate as it does not distinguish between the digital payment ecosystem currently prevalent in emerging markets from that existing in advanced markets.

When your fundamental premise has no foundation, your extrapolations and projections will not only be in error, but the unquestioned starting assumptions will snowball along the strategy and product development chain leading to a vast gaping void between your original intent and the actions taken, much less the outcomes aimed at.

Lastly, when it comes to fintech in the African context, there’s a pattern of analysis that is either too basic in its assumptions – mobile phones are good for digital financial services and nobody has actually noticed this fact because we never did; or, too ready to read the worst in a chart or the data. This leads to policy recommendations in 2016, ten years after Mpesa was introduced in Kenya, that offer up such insightful suggestions as “Africa must promote the use of mobiles to include the excluded financially.”


This is rather disheartening for the rest of us who have been watching the African digital financial economy move forward in leaps and bounds, in many ways far ahead of the rest of the world. It also takes the current conversation back to kindergarten level rather than the post graduate courses we could be discussing. Given the advancements already actively engaged with across the continent, isn’t it time that policy researchers took the trouble to come up to speed?

And given the importance of financial inclusion, isn’t it time that the stakeholders actively working on digital financial services took their target audience seriously, with some respect, and wee bit more humility? They might discover their efforts move forward much faster.



Customer-Centric Business Model Design for Financial Inclusion


The Challenge

Digital financial services (DFS) seek to bridge the chasm between the structures, policies and institutions of the formal economy, and the cash intensive informal and rural economy. Current day approaches tend to take the perspective of the service providers when assessing the market opportunity and the needs of the intended customers. And so the research to inform the design of products and services focuses on the behaviour of the end users apart from their context, and isolates their unmet needs within the narrow bounds of a specific project or purpose.

Given that the user researchers, the concept developers and the service providers, are mostly from the formal operating environment and/or first world contexts, they tend to consider consumer behaviour without the explicit acknowledgement that these user responses to the introduction of digital financial services (DFS) are emerging from the context of very different conditions than they themselves are immersed in. That is, there are implicit assumptions tacitly being made regarding the market and its opportunities, which, if left unquestioned, may obscure the underlying causes of the problem. And, thus, may inadvertently act as intangible barriers themselves.


A Framework for Approaching this Challenge – Pasteur’s Quadrant

The cash intensive informal and rural economies of the African continent are a very different operating environment from the formal, structured economy of banks, service providers and institutions. This chasm in context, and thus customer worldview, is particularly wide for the vast majority who tend to be defined as financially excluded. They manage their household expenses on irregular income streams from a variety of sources, not regular and predictable paychecks.

This means that many of the market assessment frameworks and tools anchored in the characteristics of the formal, calender based economy may not apply directly to a wholly different context with entirely different conditions and criteria, and their use without adaptation or acknowledgement may skew the resulting insights and concepts. Most of the available research tends to fall into either pure social science or design driven user research. As we have seen, when it comes to making markets work for the poor, neither approach alone is enough to make sense of the opportunity.


We are inspired by what is known as Pasteur’s Quadrant – a hybrid approach that integrates the need to understand the context with the pragmatic goal of immediately useful and relevant information.  Our objective is identify strategies that lower the barriers to adoption, whilst minimizing the dropout rate. That is, our goal is to craft sustainable concepts that work for the target audience within the contexts and conditions of their own operating environment and daily life. This approach increases the success rate of a business model. We have been inspired by the way the prepaid airtime model bridges this same chasm for telecommunication giants around the world.


Grounding Insights in the context of Informal and Rural Ecosystems

Taking a systemic view of the untapped market for digital financial services, thus, would ground the market observations and the customer insights within the frame of reference of the target audience’s own operating environment. Among the financially excluded, particularly on the African continent, this can safely be said to be the informal sector which contributes a significant proportion of each nation’s GDP and employment, regardless of industry.

Framing the essence of the challenge in the form of these critical questions,

  • What are the barriers to adoption of DFS ?
  • What can be done to lower these barriers to adoption?

permits us to take a systemic approach to identifying barriers to DFS adoption, balancing the need for understanding the unknown with the insights required for conceptual design.

The following questions demonstrate the way we can drill down for comprehensive understanding for a particular customer segment or region in a viable manner:

1. What are the common characteristics of the cash intensive informal economy in which this population resides?
2. What are their current means to manage their household expenses – urban vs rural
2a. What are their current options for financial services – which all do they have access to and which all do they actually use – informal AND formal
2b. Why do they use what they use? And why don’t they use what they’re not using but have access to?
3. What are the market forces acting upon the existing DFS market in their region – regulatory, policy, prices, interoperability, tech of the solution, type of phone etc
4.  What are the assumptions these DFS are making wrt their target audience needs, behaviour, usage patterns and capabilities? How do these assumptions fall short of the real world context and usage behaviour in the context of their cash intensive operating environment?

And thus, the starting point for business model design are the answers we are able to synthesize from the insights gathered above, in order to answer the following question:

What is necessary in order to bridge the gap between the DFS and the intended target audience?


Our approach offers a pragmatic diagnosis of the situation, from the perspective of the informal economy and the poor, within the conditions and constraints of the current day regulatory and policy environment. It clearly identifies the gaps in the existing system and describes the opportunity space for new business models that would offer value and resonate with the target audience’s needs and context.

We recommend giving technology a backseat and approaching the solution development process from a more holistic perspective of people, their operating environment and their existing financial behaviour.

Read more on these interdisciplinary lenses for innovating for the informal economies of the developing world’s emerging consumer markets.

First world trends: Financial inclusion, the unbanked, and the prepaid business model


The Economist explains just how expensive banking can be for the lower income population, even in the United States. Financial inclusion for the unbanked and underbanked must include cost/benefit analysis based on the limitations of income streams of those whom they hope to serve. The cost of ownership is often overlooked in current day literature, which tends to focus on access to formal financial services, whether digital or otherwise. As the data clearly shows, value for money is a critical part of access, and a deciding factor in the choice to remain unbanked.

Life is expensive for America’s poor, with financial services the primary culprit, something that also afflicts migrants sending money home (see article). Mr Martin at least has a bank account. Some 8% of American households—and nearly one in three whose income is less than $15,000 a year—do not (see chart). More than half of this group say banking is too expensive for them. Many cannot maintain the minimum balance necessary to avoid monthly fees; for others, the risk of being walloped with unexpected fees looms too large.

Increasing popularity of prepaid business models

The GSMA expects the North American prepaid market to grow to 31% by 2020 and its hovering around 29% at this time. This is just over double the proportion of prepaid vs postpaid subscribers in the past 5 years.

In fact, US telcos like Sprint have recently announced their intent to drop the 2 year contract business model, offering smartphones on lease just like competitors Verizon and T-Mobile. And phone maker Apple has gone as far as to offer their own rent to own program, one which resembles SUV leasing arrangments with a new model every year.

Screenshot-2015-09-10-10.02.44-600x283This is an interesting trend as it points to the reluctance of consumers to commit to 2 years of unexpected bills at the end of the month, preferring the certainty that prepaid offers over your spending. Concurrently, there’s been a noticeable rise in prepaid credit cards and other similar facilities.

As of 2012, roughly 12 million Americans used a prepaid card at least once a month and we collectively loaded $65 billion to them – double the amount loaded just three years prior. That figure is expected to rise to $337.8 billion by 2017, according to Mercator Advisory Group – an increase of 420%.

The prepaid business model empowers customers by putting control over timing – frequency & periodicity, as well as amounts spent, in their hands. Flexibility to manage one’s expenses, against incomes, is another aspect that’s attractive about this business model. Companies love it too as cash flows accrue in advance, minimizing the risks of defaults.

Consumer income streams are changing in America

Do these trends reflect the changing patterns of cash flow among consumers, as indicated by the rise of such revenue generators as Uber, AirBnB and others of their ilk?

Irregular and unpredictable income streams are part and parcel of the independent worker, regardless of label, as they are not guaranteed a known amount in the form of a salary arriving on a predictable calender schedule.

This app offering to help you manage uncertainty seems to imply so.

3 Myths of Financial Inclusion


Mama waiting for biashara in Sagana, Kenya (Photo: Niti Bhan)

This article has been co-authored with Michael Kimani @pesa_africa

Banking the unbanked is very popular right now, as financial inclusion is seen as a key milestone on the path to development. In parallel, a plethora of “cashless” or “cash lite” solutions have begun permeating the cash intensive informal economy. These can be broadly described as digital financial services aimed at financial inclusion as they leverage the popularity of the mobile phone as an affordable delivery platform. Yet, their uptake has not been as viral as hoped.

We take a closer look (i) at the challenge from the perspective of market women and micro-traders who form the backbone of informal trade in daily necessities. Without her cooperation, the mass market adoption of digital currency is highly unlikely to become a mainstream part of life. We’ll call her Mama Biashara, from the Swahili word biashara meaning commerce, trade or business.

The United Nations defines the goals (ii) of financial inclusion as follows:

  1. Access at a reasonable cost for all households to a full range of financial services, including savings or deposit services, payment and transfer services, credit and insurance;
  2. Sound and safe institutions governed by clear regulation and industry performance standards;
  3. Financial and institutional sustainability, to ensure continuity and certainty of investment; and
  4. Competition to ensure choice and affordability for clients.


Myth 1: Mama Biashara is financially excluded

All of this assumes that Mama Biashara has no option (iii) but to stuff her savings under the mattress. Since Kenya is the world’s leader in digital financial solutions for the unbanked, grabbing visibility with the undisputed success of its M-Pesa mobile money platform, we decided to choose its context for our analysis. Given below are the various financial services and tools available to Mama in the rural context, placed along a continuum from most informal to most formal.

Informal Formal final QZ africa

As you can see, Mama has a large variety of solutions that she avails for her financial needs – its just that they can’t all be classified as “formal”. Yet, technically, by the UN’s definition given above, can we actually say that Mama Biashara is financially excluded from “Access at a reasonable cost to a full range of financial services, including savings or deposit services, payment and transfer services, credit and insurance”? Many of these locally grown alternatives such as Chama*, ROSCA* or ASCA* have been institutionalized in the Kenyan context, able to match the UN goals for points (2) and (3) as well as proving to be valid and viable competition offering choice and affordability (4).

If Mama Biashara’s basic financial services needs are being met right now by the variety of options and alternatives easily accessible to her, then what is the value proposition of a bank?

Her long standing reputation in the community, her relationships with her friends, family and peers, her “credit history” if you will, all becomes null and void when she approaches a faceless formal institution such as a bank. Due to the cash intensive nature of her business, little hard data on her financial history might be available for formal financial service requirements. On the other hand, her social recognition and long standing business relationships serve this purpose in the informal sector. Daily variances in cash flow which might require a quick loan or flexibility in payment can be easily covered by her ecosystem of financial options, something that the formal procedures and processes of financial inclusion solutions aren’t designed to accommodate. There’s an inbuilt component of trust that  the formal system is unable to overcome at scale.


Myth 2: Trust lies in the regulations, standards, governance and continuity of formal financial institutions

Trust in financial institutions, as implied by points (2) and (3) of the UN Goals, is embodied in their continuity, their regulations and performance standards, their governance by the laws of the land, and all the rest of the formal structures in place to create sound and safe solutions. This assumption, emerging as it does from the point of view of the sophisticated systems of the developed world, places the onus of trust on the rules and regulations governing the institution rather than the reputation of the individual or their worth in the community.

Yet, over and over, we see that Mama Biashara barely ends up using her bank account even if she manages to obtain one (iv) or is slow to adopt an innovative digital financial service. So we reorganized her financial tools on a continuum of most trusted to least trusted to see what patterns we could observe when we compared the same against the formal vs informal continuum. Was formality indeed the driver for trust?

Trust Continuum QZ africaWe were surprised to note that the least trusted was the most common metric of financial inclusion – the bank. These insights, based on interviews with women in Nyeri by Michael, reflect what Susan Johnson wrote on Kenya (v) –

But the difficulty of gaining loans through them (banks) means that the evidence confronting poor people is that a relationship with a bank is not a dynamic system of exchange in which funds are lent in both directions. The bank does not therefore represent a social relationship of equality and a means through which social connections are developed in ways that offer access to resources.  

The very nature of the formal system – in this case, the regulated and institutionalized bank – is the barrier to adoption among those active in the informal sector. The system is faceless, nameless and cannot provide the basis for an equitable, social relationship, as compared to a network of peers, a self help group (SHG*), or your friends and relatives. You cannot negotiate with the system as it offers no flexibility to accommodate the individual’s peculiarities or sudden needs.

Sustainable Value Chain 1

And the issues of trust and performance, in closely knit communities, depend upon social relationships, word of mouth and reputation built up over time. If someone doesn’t repay a loan, or if the semi-structured self-help group faces issues with their treasurer, these matters not only become common knowledge but can be dealt with directly by the affected members. For the most vulnerable segments of society, most of whom also fall in the category of being “unbanked”, whom do they turn to if a national bank or large telco fails them? Even M-Pesa is fronted by a human intermediary, the mobile money agent, a locally known member of the community.


Myth 3: Financial inclusion is an individual matter, or for the nuclear family

In Mama’s environment, social connections and belonging is very important. It is the foundation of her business, and it matters a lot. Especially in the rural context, your friends, neighbours and extended family are most likely to be your customers. The vast majority of your daily financial transactions are conducted within the community. This is reflected by the patterns seen in the two continuum diagrams of trust and formality. Each points towards local networks and social relationships as an important component of money management by the unbanked.

As Johnson discovered, reciprocity is as much a critical part of the functioning of the informal financial group, as negotiability (vi) is for successful adoption in cash intensive operating environments. The prepaid business model offered by telcos empowers Mama Biashara by giving her control over how much money to spend on her mobile phone, when to spend it as well as how often. In contrast, banks may penalize the early payment of a loan or impose a rigid payment schedule based on the calender year. Give and take is part and parcel of the community life. Groups help Mama in self control, restraint on spending, planning and saving for goals, together with social support in ritualized form.

Yet, the financial inclusion industry focuses counting the number of bank accounts rather than the number of people accessing one together under some umbrella of cooperation – a self help group or a chama might collectively bank their pool of money for safekeeping.  A group account is not about labels eg. Chama,  or a type of bank account, or the social features in a digital solution. There are rituals, practices and human connections embedded in the sharing of value. Entire cultures revolve around the community spirit and coming together in times of need – harambee, it is called.

When what is measured is what gets done, the financial inclusion industry overlooks all these elements in their goal to sign up each individual with a bank account (vii). No wonder such a high percentage of bank accounts become dormant within a year.


Mama Biashara’s perspective: What does financial inclusion mean to the unbanked?

These three myths are very powerful ones and they drive the design and implementation of financial inclusion programmes for the unbanked. Assumptions made by the stakeholders immersed in their formal, structured environments from the outset, when left unquestioned, act as intangible and unseen barriers across the formal/informal economic divide. “Banking the Unbanked” is such a catchy slogan that it took M-Pesa’s success in Kenya to expand the definition of financial inclusion in the latest version of the World Bank’s Findex report. Now, we see digital financial services rapidly becoming the holy grail for reaching the unreached. Yet not a single program or research project has begun from the perspective of their target audience of their aims and objectives. What does financial inclusion mean to Mama Biashara? Is there a need not being met by her existing solutions? What are her current alternatives? Until the informal sector is taken seriously in its own right as a vibrant & dynamic market and operating environment, offering stiff competition for Mama’s few extra shillings, we don’t see any of the technological marvels being introduced as viable or desirable in the long run.


ASCA –        Accumulating Savings and Credit Associations
ROSCA –     Rotating Savings and Credit Association
SHG –          Self-help group of mamas with common business interest
Chama –      Informal cooperative society used to pool and invest savings
P2P credit –     peer to peer credit eg mama to mama
B2C credit –     business to consumer credit eg mama to her customers
B2B credit –     business to business credit eg a supplier to mama
MFI –          Micro Finance institution
SACCO –     Savings and Credit Cooperative


End Notes

(i) Qualitative interviews on digital currency with rural women micro-entrepreneurs in Nyeri, Kenya in February 2015
(iii) Mobile Finance: Indigenous, Ingenious or Both?
(iv) One out of four accounts ‘dormant’ as mobile money takes over banking
(v) How Does Mobile Money in Kenya Affect Financial Inclusion?
(vi) “Payment Strategies for those with irregular income at the BoP” (2009) – The Prepaid Economy project by Niti Bhan (UNIID SEA 2012)
(vii) Financial exclusion


Emerging Futures Lab brings to life concept design of innovative products and services by applying years of immediately actionable primary research in the cash intensive informal sectors of the emerging economies of the developing world. We see opportunities and markets where others see adversity and scarcity. Contact us now if you’re interested in the exciting frontier markets of Kenya, East Africa or elsewhere on the African continent.

Creative ways to financial inclusion, inspired by observing practice

Needless to say, mobile money has been a wild success in scaling an expansive agent network for converting cash to e-money and enabling person to person money transfer. Speaking at a recent conference, John Staley, Chief Officer – Finance, Innovation and Technology at Equity Bank had this to say:

“We should move the conversation from mobile money to mobile financial services.”

Absolutely! My takeaway from his comment was ”how do we get there?”

You see, with a mobile phone in (almost) everyone’s pocket, coupled with ubiquitous mobile money, conventional wisdom quips “to each his own bank.” Building on this assumption, focus quickly shifts to tweaking mobile money functions and pushing mobile based financial products to market. While this strategy may work for affluent, educated urban consumers, already familiar with banking functions of a modern economy, is it a fit for others who do not meet these criteria?


Banking Outside the Box

Often cited as the ‘unbanked’, lower income segment groups found amongst rural and informal sector demographic, aren’t as helpless as we imagine them to be. In fact, they have devised creative ways to exercise parallel banking functions: group savings, insurance, social reputation based credit scoring and loan systems; mechanisms oblivious to outsiders and at times, even subject to misinterpretation.

One instance, from Kenya’s Kiambu County, in part rural part urban Ruiru, a young goat grazes idly, unmanned and tethered to a pivot stone. For the family that owns it, this is their way of saving; it costs little in terms of management and input, with a future expected value that can be reasonably estimated. This practice is not unique to East Africa, evident from similar field observations in rural parts of India and the Philippines.

“The comparative affordability of a calf is such that the value of the mature animal is considered a worthwhile return on investment. In an emergency, livestock is a walking fixed deposit, to be sold for ready cash.” – Niti Bhan

The way I see it, in order to succeed, financial inclusion efforts need to draw insights from the people it seeks to enable, be considerate of their culture, observe their behaviour and get a better sense of their environment. Like the domestication of animals common in rural, for example.

Which is why I was rather pleased when I came across this headline on an unconventional approach to credit, Ng’ombe loan; much closer to the realities of a rural operating environment in my opinion.

“[Murang’a] Youth will receive high-yielding, pregnant dairy cows on credit [from Muramati and Unaitas SACCO] and repay the loan through milk deliveries to processors.” – Business Daily

An expectant cow as the loan principal, with repayments priced in daily milk deliveries.


Putting People first

So how do mobile financial services fit into this picture? What will mobile financial services for the ‘unbanked’ look like in the future? Is mobile even a consideration for servicing the ‘unbanked’?  I won’t pretend to know.

One thing seems certain though, if the plan is to expand these services to our target audience, then just tweaking won’t cut it. It could be because the people involved are far removed from our daily experiences, interactions, notions and concepts of money or banks. Whatever the reason, when the customers are people, it behooves us to better understand their POV, even if seemingly unorthodox, so as to inform design of financial products – mobile or not.

The importance of the agent/customer relationship for successful financial inclusion

The role of agent networks in East Africa’s mobile money and mobile banking roll-outs is widely documented; as an intermediary, a kiosk exchange point – accepting deposits for e-money/ withdrawals for cash and usajili (registration).

“. . .as the first point of contact, human agents help bridge the gap between a high-tech service and low-literacy clients.” – CGAP

But, most research falls short of exploring the subject in its entirety, specifically, the relationship between customers and human agents  – a recent example is the just released Agent Network Accelerator Survey – Kenya Country Report 2014 by Helix Institute of Digital Finance. To sum it up, I would say it was a numbers driven top-down approach to the subject (most likely focusing on what is best for the service provider), that failed to explore the human touch-points that make mobile money relatable.

“A lot these findings, I’m noticing, do indeed do all the research, but leave their underlying assumptions on people unquestioned [. . .] researchers go in & see behaviour – the What & How – but assume a lot on the Why”@prepaid africa

As I see it, there is a subtly rich layer to the mobile money agent and client relationship that is readily observable in close knit communities; frequent micro-transactions lead to conversations beyond basic transactions, off-the-cuff inquiries, and thus reinforce continued trust. For people not well acquainted with the intricacies of mobile money, or tech for that matter, these human intermediaries – the agents, most of whom happen to be women – are your trusted guides to the technology and face of the service providers.

Which is why, this assumption in a post by Mondato, hit a nerve.

“In the long run, as more fully developed digital payments ecosystems develop, there will be less need for agents . . .”

When talking about Africa’s markets, in mobile financial services or whatever context, research reports which disregard the qualitative nuance of local, social and communal interaction, lead easily to such assumptions. The  Helix report for example, grouped agents into 2 categories: rural and urban. On the ground however, these are polar extremes on a scale. If we go by strict definitions, this frame of reference doesn’t translate on the ground ; more common is a mix of both, or peri-urban or even rural folk who commute to their place of work in peri-urban. Perhaps a measure of cash intensity or ‘unbanked-ness’ in immediate contexts makes for a better framing?

My point is, the agent – customer relationship on Moi Avenue in Nairobi’s CBD, is markedly different from Githurai’s packed informal market place despite both located in Nairobi. In this cash intensive ecosystem, in the thick of all the chaos characteristic of informal micro-economies, human agents sit right next to mama biashara and boda boda guys. Here is where, you are likely to find the unbanked, underbanked and lower income segments.

I can’t help but think there is a larger role for mobile money agents in financial inclusion; one that resonates with commonly observed themes in this segment – social groups, local, face to face, trust. Like Monica, a cyber cafe attendant in Maai Mahiu whose role in the local community extends beyond simply offering internet browsing services. Jan Chipchase aptly describes this as symbiotic : customers, agents and service provider.

“The careful use of real world analytics combined with contextual qualitative understanding has the opportunity to reveal not only what people are doing, but also the nuances of how and why . . . this in turn will lead to the next round of service innovation insights”

Systems thinking and the mobile platform for economic impact and wealth creation

I have been meaning to write this post for quite some time now, percolating as it has in the back of my mind but it was Mark Kaigwa who finally spurred this writing. This is not all about MPesa, though it will take a look at some of the issues why its runaway success in Kenya has not yet been duplicated elsewhere, beyond the obvious brought up in most articles of “its the banking regulations” or “its the distribution network”.

Much credit of the fundamental thinking that will underlie this post’s premise must go to Wambura Kimunyu with whom I’ve discussed these issues on Twitter.  Furthermore, I believe that if we can frame the problem (and thus the potential solution) correctly, we may be onto something that could in fact make a big difference to the many ways  we attempt to enable and support social and economic development.

Some background

The topic today is the mobile phone (which I’ll also refer to as the mobile platform, since the phone aspect is but a feature of this handheld device) and its role among what is popularly known as the BoP or those at the Base or Bottom of the Pyramid, yet when I think about the very many pilot programs and attempts to spur development via the mobile platform or, as in the case of MPesa, to launch game changing mobile money transfer et al systems elsewhere, what immediately comes to my mind is a reflection on the issues that plagued the analysis of the success of Asus’ eeePC when it was first launched back in late 2007.

We take very affordable and very portable netbooks for granted today but back then in time, the category did not exist until Asus launched their 7″ linux based, open source, rugged and durable beauty for around USD 400.  It was referred to as a “subnotebook” back then and caused much head scratching among the developed world’s leading lights, even as it spurred all manner of competitors to focus on the two most obvious elements of its perceived success criteria – “price” and “form factor”.  Whereas I argued, that what made the Asus eeePC so successful was its fundamental premise – to be an easy to use affordable device squarely aimed at emerging markets and how it was this positioning that drove every other element, including its form factor and price. By focusing only on the obvious, without taking the holistic thinking and underlying value proposition into consideration, competitors were overlooking many of the details that supported its initial success.

Some framing

I see something similar happening with one of the most obvious success stories in the “Mobile as a platform for economic development of the BoP” bandwagon.  MPesa shows up in most analyses of “Business models or mobile thingies that are helping the poor” reports churned out so faithfully by researchers everywhere, yet the question arises, should it be even considered in that sandbox of things that help the poor in the first place? And by doing so, are we overlooking some of the factors of what makes it work so well in Kenya as well as misinterpreting that it was meant to be used only by the poor?

When the first reports of MPesa’s hiccups in South Africa came to light, it was then that Wambura first tweeted about the lack of the banked that were critical to spur the unbanked and thus the overall uptake of the service.  That is, if the MPesa ecosystem did not have enough banked people with money to circulate, then there wouldn’t be enough unbanked nor would there be enough money to circulate etc etc leading to the challenges that they are facing in South Africa now.  You needed the banked to bank the unbanked.  It sounded counter intuitive to me back then but over time as I observed many different facets of this activity across different strata in Kenya it came to me just how much sense this made and also how relevant this aspect was for the success of anything that should be considered as a means to improve incomes among the BoP when using the mobile platform (or otherwise, to be honest).

Why so?

Some systems thinking

That is, for any solution designed to enable the flow of wealth – mobile money transfer for example – or improve wealth creation at the BoP – it was not enough to simply target the poor alone. It would not work as a “Solution for the BoP” primarily because the BoP do not have any liquidity,  even if they do indeed have assets especially in rural areas, or they do not have the cash for it to flow through the system in the first place. Thus solutions aimed at improving economic activity for the poor needed ‘non poor’ actors in the ecosystem in order to inject cash into the system and thus make it flow (and one hopes, grow).

Taking this thought one step further, MPesa – assessed as a holistic ecosystem for financial transactions – has been so very obviously successful in the Kenyan context primarily because it is used by everyone, regardless of their economic standing or bankedness (if I may coin a non word).  In fact I believe that the number of banked actually surpasses the number of the unbanked – there is a link there that right now is not in the scope of this post but we can look at it later.

And thus, when ‘Solutions on the mobile to help the BoP or poor’ are considered, they should be looked at in terms of the complete ecosystem including the critical question of Where will the money come from into the system in the first place?  Without which, they will limp along as a cash poor system with little wealth to circulate, achieving nothing for the BoP in question. Look at this article on MPesa repositioning itself in South Africa towards higher income brackets and away from the original target audience of poor rural women. QED.

Solutions meant to improve economic conditions for the BoP cannot be focused only on the BoP.

Rather the focus needs to shift to complete ecosystems that fill a vacuum of need – usually in infrastructure or services – that include actors from differing socio economic strata in order to make a viable difference to larger population involved.  Not only is MPesa a clear example of this framing – it filled the vacuum of “how to securely and affordably send money” – but it did so for everyone and anyone who wanted to do so.

Similarly, when I consider my favourite example of the Mumias Sugar Company and their payroll management pilot program for their daily wage sugar cane cutters, I see the same potential for a greater impact on social and economic development for the lower income demographic involved in this system. The solution is one that is win win for all stake holders – from the company who doesn’t need to send armed guards with cash into the fields to the workers who now not only have savings accounts but don’t need to carry lumpsums of cash around with them on payday.

I also hear that real time inventory management and other enterprise level solutions for supply chain management are also moving onto the MPesa/mobile platform in Kenya – again involving the tiniest duka as well as the big name manufacturers or distributors.  Again we can see the potential impact on inventory management and thus, cash flow, even at the bottom of the retail pyramid, where its most critically needed and we can project the potential that it will improve the economic standing or at least help smoothen the variability of income streams that these smallest players in the informal economy require.

Will all stakeholders benefit? Yes. And will the members of the ecosystem who happen to fall into the so called BoP category benefit? Most likely. And more likely than if only the lowest segment was involved in a system of this sort rather than participating in the larger ecosystem of buyers and sellers.

Bottom line

Bringing all this back to the framing of the solution space or rather, the analysis of the success factors, I believe that a simple shift away from seeing only the obvious – mobiles! money! BoP! –  system level solutions that fill critical infrastructural and service gaps in locales where there are few or inadequate alternates and that serve many including the BoP can and will do far better to improve the economic wellbeing across the board of society that those that focus on one demographic alone.

Note: This was the original post that inspired the editor’s version published on Afrinnovator.

The maturing of the African mobile phone market Feb 2008 to Nov 2010

This post has been percolating through my mind for the last couple of days, its time to attempt setting it out in words for a stab in the dark at some clarity.  The trigger was the recent hue and cry over Nokia’s percieved downfall as the calculated global market share for the device manufacturer dropped to under 30% after the heydays of hitting almost 40% in the recent past. Digging through the data showed that the actual size of the market had grown significantly, the equivalent of a large size pizza instead of a medium sized one. Naturally the percentage share would drop even if the absolute numbers of devices sold increased. The growth in overall market was primarily driven by the category called “Others” and to a smaller degree, the exponential growth of Android as an OS. The data is all available here, I am not bringing the table into this post because I can already sense that my circumlocutory meanderings in this space are going elsewhere.

Before I go forward, I want to step back.


Its a pity I deleted my old blog and can’t link to the relevant post directly, but regular readers may recall this visual that I’d used for a post on Africa as the driver for innovation in the mobile space. Googlefu finds that the wayback machine has finally done its job, so here’s the relevant snippet accompanying the above visual from a post written December 14th, 2007:

Lets face it, Brazil, Russia, India and China have emerged and we can start calling them ‘driving markets’. So what’s really emerging in the mobile innovation sphere?


Think about it, where did the concept of airtime minutes as an alternative currency arise? Along with numerous different innovative business models centered around the use of airtime as a means for making transactions, providing credit and other banking services? What about the proliferation of small business opportunities for the entreprenuerial? From car battery charging stations to sophisticated voice and text based social networking services? Not from the BRIC for sure.

Shortly thereafter, Emerging Futures Lab stuck its head into the space directly with an African fieldtrip looking at the lower income demographic. From that foray, the following sketch emerged as our synthesis of the market forces at play in the context of the mobile phone landscape as of early 2008,

Africa Mobile price shift by Emerging Futures Lab, Torino February 2008

Africa Mobile price shift by Emerging Futures Lab, Torino February 2008

In summary, back then the situation was primarily focused on the killer app of voice and text – communication leapfrogging the vacuum that the high cost and lack of appropriate infrastructure had created as its legacy.  The market had just begun to show the crazy growth – where did we recently read that it took 25 years to reach the landmark figure of the first 20o million African mobile phone subscribers but the next 200 million have emerged in the past 3? The crown prince was the basic Nokia handset and the average price for a candybar was 50 USD so we put that in the middle of our bell curve of price vs purchasing opportunity.  Cutting a long story short, projecting weak signals a short distance forward implied a rise in numbers across the board in terms of sales and new buyers but also a concurrent flattening of the curve as the price line stretched out between the high end and low end – this was looking at the “prepaid” market or those who manage on irregular income streams. Services were the next major opportunity space, given time to market in a product development cycle.

But that was then, this is now.

Everything has changed in the three years and the market is now showing all the signs of imminent maturity rather than potential growth. Sure, numbers sold and new phone users are increasing exponentially but that is not the primary focus anymore. The African mobile market has not only matured rapidly, even while growing, but its leapfrogging the traditional “market analysis curve and behaviour” to attempt to articulate the complex situation. Its sophisticated far beyond its youthful years and this is the underestimation that is creating a cognitive dissonance amongst those seeking to address the challenges from the point of view of corporate strategy.

Look, the phone has already become established as the go to or default technodevice building block. Erik Hersman puts it well in today’s blogpost, here’s a significant yet relevant extract:

We’re already seeing stories of the way guys are doing everything from creating their own vehicle security systems, home security systems, distance-triggered food preparation and even fish catching alerts. That’s with no support at all. What happens when you provide a space to make it faster, better and possibly an avenue to manufacturers and funders?

The vacuum leading to innovation and leapfrogging of technological solutions has not been limited to simply the device and service alone as in the beginning. As soon as a critical mass of devices and service affordability was reached, experimentation, innovation and invention took over to provide a host of relevant, ingenious and sometimes mindblowing solutions.  This is no more simply a market for affordable mobile phones and uplifting solutions for the world’s overlooked and underserved. Africa has become a pioneer in technological innovation on the wireless platform – products, services, applications far ahead of anything we can imagine for this little brick in our pocket.

Our biggest error would be to continue to use the same lens by which to view the African mobile phone market as we did three years ago. The mobile phone has already changed the world.  Where do we want to go tomorrow?