Mobile Money: Creating a Transparent Framework for the Movement of MoneyRoshan2010 Confidential

Mobile Money Afghanistan Creating a Transparent Framework for the Movement of Money

and Providing Financial Inclusion For the Unbanked

Shainoor Khoja

Managing Director, Roshan CSR

August 2010

Mobile Money: Creating a Transparent Framework for the Movement of MoneyRoshan 2010 Confidential

Mobile Money: Creating a Transparent Framework for the Movement of MoneyRoshan 2010 Confidential

Mobile Money: Creating a Transparent Framework for the Movement of MoneyRoshan 2010 Confidential

59% of the population said corruption is a bigger problem than insecurity or unemployment.

One out of two Afghans had to pay at least one kickback to a public official.

More than half the time (56%) the request for illicit payment was explicit by the service provider.

Approximately $2.5 million in bribes was paid in the last year, which is equal to 23% of Afghanistan's GDP.

UNODC Report

What happens when this Police Officer gets paid his full pay, can support his family and values his job?

Mobile Money: Creating a Transparent Framework for the Movement of MoneyRoshan 2010 Confidential

RoshanAbout Afghanistan

Mobile Money: Creating a Transparent Framework for the Movement of MoneyRoshan 2010 Confidential

Population 32 million •There are currently no mobile money providers except Roshan which is the largest telecoms operator covering 58% of the population.

97% of the population is unbanked

17 commercial banks in Afghanistan

Need to move cash safely and securely

Hawala system is well established and trusted

Trust in the banking system is low

Afghan’s prefer to carry and keep cash on hand

GDP per Capita $350.00

Mobile Penetration 30%

Literacy Rate 30%

Primary Languages Dari, Pashto, Urdu and English

IVR Yes

Percent with Bank Accounts 3%

75% of the population lives in rural areas without access to a bank. More than 70% of the population lives on less than $2/day.

M-PaisaToday and Looking Forward

Mobile Money: Creating a Transparent Framework for the Movement of MoneyRoshan 2010 Confidential

Deposit

Pay Loan

Pay Bill

Salary Payment

Buy Airtime

Bank Integration

Send/Receive Money

Withdraw

Online Merchant Payment

ATM

Merchant Payment

Point of Sale

Deposit through Credit

Card

Cross Border Money Transfer

Cash Scratch Card

M-PaisaWhy Salary Disbursement?

Problem: Ministry of Interior physically distributes salaries to the Afghan National Police.

Solution: M-Paisa can serve as a secure instantaneous scheduled mechanism to transfer and receive funds.

Improve safety and security related to money transfer.

Provide transparent movement of funds versus the current method.

Reduce soldiers taking absence without leave (AWOL).

Increase employee satisfaction and guarantee salary payment.

Provide a mechanism for financial inclusion.

Mobile Money: Creating a Transparent Framework for the Movement of MoneyRoshan 2010 Confidential

M-PaisaBenefits

Government of Afghanistan RecipientTransparencyAll transactions are logged and fully traceable.

Safety and SecurityNo cash movement through unsafe districts.

Cost Effective & EfficientNo lost money due to theft, or skimming (savings of approx 20%).

Employee SatisfactionReceive their salaries in full and on time.Reduction of employee churn.

Retention of Trained Personnel•ANP officers do not need to travel, thus allowing them to remain at work and securing the country.

Employee SatisfactionReceive their salaries in full and on time.ANP family members can receive money instantly.

Anywhere, AnytimeSalaries can be withdrawn from any approved M-Paisa agency in Afghanistan, at the convenience of the employee.

Safety and Security ANP officers do not have to travel home to send

money. No loss of money due to theft, or skimming.

Mobile Money: Creating a Transparent Framework for the Movement of MoneyRoshan 2010 Confidential

M-PaisaOpportunities to Promote Financial Inclusion

Over 1 billion people across Asia, Africa and Latin America have access to a mobile phone, but not a bank account.

Cell phone banking is potentially six times cheaper for routine banking transactions.

In Afghanistan, there were ~356K MFI clients in 2008, which is equal to 18% of the 2 million households living under the poverty line.

Mobile Money: Creating a Transparent Framework for the Movement of MoneyRoshan 2010 Confidential

M-PaisaThe First Microfinance Bank Afghanistan & Hope for Life

First Microfinance Bank Afghanistan FMFB has only 17 branches across the country. Largest MFI institution in Afghanistan. Loan clients can receive and repay loans through M-Paisa. Opportunity to reduce cost of loans by 5 percentage points. Branches in Badakhshan serve as M-Paisa agents (cash in and

out point).

Hope For Life (MFI) Provide small loans $200 to $1,000 USD to groups of five to nine. Active in Kabul and growing number of clients: 54% are women. No branches in country – only one main office. Loan officers interface with recipients in their homes. Loan officers save approx. 4 hours a day and can securely get

funds back to the office.

Mobile Money: Creating a Transparent Framework for the Movement of MoneyRoshan 2010 Confidential

M-PaisaHope for Life

Number of loan officers using M-Paisa grew from one to 18 in just three months for this MFI. Seven females officers also using the service. M-Paisa makes it safer to travel with funds. M-Paisa reduces fraud.

Mobile Money: Creating a Transparent Framework for the Movement of MoneyRoshan 2010 Confidential

April May June

Growth in MFI Transfer

310%

347%

M-PaisaBenefits

Bank Customer

ExpansionQuickly move into rural areas to reach the ultra-poor and bank the unbanked.Not dependent on bricks and mortar.

Safety and SecurityNo cash movement through unsafe districts.No lost money due to theft or robberies.

TransparencyReduces corruption from loan officers.

CostAdded savings to MFI, which can be passed down to the recipient.

Anywhere, AnytimeLoan can be received and paid from any approved M-Paisa agency in Afghanistan, at the convenience of the recipient.

Safety and Security No loss of money due to theft, or robberies.

CostLower interest rates.

TimeNo need to shut down operations and take time to make repayments.

Mobile Money: Creating a Transparent Framework for the Movement of MoneyRoshan 2010 Confidential

M-PaisaCreating a Regulatory Framework

Know Your Customer (KYC) Fully compliant. Monitoring of all transactions – resource

heavy. Any suspicious activity reported to the

Central Bank.

M-Paisa is regulated under the Central Banking Authority – Da Afghanistan Bank (DAB).

To register for M-Paisa, all customers need to have either taskara card (national identification) or passport.

In conjunction with DAB and Government, Roshan is taking a lead role to help shape and create a regulatory framework for mobile money.

Mobile Money: Creating a Transparent Framework for the Movement of MoneyRoshan 2010 Confidential

M-PaisaChallenges to Salary Disbursement & Loan Payment

Current methods have been around for many years and willingness to change at working levels faces resistance.

Lack of capacity, technological illiteracy and illiteracy pose challenges.

Develop tools to resolve this (IVR, Voice SMS, Auto-dialer).

Engagements and alignment of all necessary parties.

Ensuring reach and distribution mechanism to unlock the base of the pyramid.

Mobile Money: Creating a Transparent Framework for the Movement of MoneyRoshan 2010 Confidential

M-PaisaLooking Forward

Faster economic development, not dependent on international aid.

Spurring and supporting Afghan led businesses and their development.

Empowering communities to take control over their own development.

Largest impact for the rural communities and the ultra-poor.

Access for the unbanked.

Mobile Money: A Tool for Financial Inclusion and Economic GrowthRoshan 2010 Confidential