Mobile phones, once exclusive preserve of the rich now presents an opportunity to start a second wave of mobile money revolution in Nigeria.
As The Economist reported mobile phones have evolved in a few short years to become tools of economic empowerment for the world’s poorest people.
These phones compensate for inadequate infrastructure, such as bad roads and slow postal services, allowing information to move more freely, making markets more efficient and unleashing entrepreneurship.
All this has a direct impact on economic growth: an extra ten phones per 100 people in a typical developing country boosts GDP growth by 0.8 percentage points, according to the World Bank. More than 4 billion handsets are now in use worldwide, three-quarters of them in the developing world. Even in Africa, four in ten people now have a mobile phone. In Nigeria, there are more than 70 million subscribers.
With such phones now so commonplace, a new opportunity beckons: mobile money, which allows cash to travel as quickly as a text message. Across the developing world, corner shops are where people buy vouchers to top up their calling credit.
Mobile-money services allow these small retailers to act rather like bank branches. They can take your cash, and (by sending a special kind of text message) credit it to your mobile-money account. You can then transfer money (again, via text message) to other registered users, who can withdraw it by visiting their own local corner shops. You can even send money to people who are not registered users; they receive a text message with a code that can be redeemed for cash.
By far the most successful example of mobile money is M-PESA, launched in 2007 by Safaricom of Kenya. It now has nearly 7m users—not bad for a country of 38m people, 18.3m of whom have mobile phones.
Similar schemes are popular in the Philippines and South Africa but not in Nigeria.
Extending mobile money to Nigeria would have a huge impact.
It is a faster, cheaper and safer way to transfer money than the alternatives, such as slow, costly transfers via banks and post offices, or handing an envelope of cash to a bus driver.
Rather than spend a day traveling by bus to the nearest bank, recipients in rural areas can spend their time doing more productive things.
Mobile money progress has however been impeded by banks, which fear that mobile operators will eat their lunch, and by regulators, who worry that mobile-money schemes will be abused by fraudsters and money-launderers.
In many countries mobile money has been blocked because operators do not have banking licences and their networks of corner-shop retailers do not meet the strict criteria for formal bank branches.
Banks and regulators elsewhere should take note. Instead of lobbying against mobile money, banks should see it as an exciting chance to exploit telecoms firms’ vast retail networks and powerful brands to reach new customers.
Tie-ups between banks and operators will help reassure regulators. But they, too, need to be prepared to be more flexible. People who want to sign up for mobile-money services should not, for example, have to jump through all the hoops required to open a bank account.
Concerns about money-laundering can be dealt with by imposing limits (typically $100) on the size of mobile-money transactions, and on the maximum balance. And inflexible rules governing the types of establishments where cash can be paid in and taken out ought to be relaxed.
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