http://news.yahoo.com/s/nm/20051101/tc_nm/africa_banking_dc
Cell phones plug Africa's poor into mobile banking
By Rebecca Harrison
Tue Nov 1,11:39 AM ET
SOWETO, South Africa (Reuters) - After years of stashing his cash
under the mattress, Jeremiah Mpanza now transfers money with a flick
of his thumb to his girlfriend in South Africa's rural heartland.
His trick? The humble cell phone.
Mobile technology has already revolutionized communications in the
world's poorest continent, bringing phones to millions of poor and
isolated people who had never before made a call.
Now cell phones are serving as a bank in your pocket, providing
virtual accounts for South Africans excluded from the financial
mainstream by exorbitant charges and branch networks clustered in
wealthy white suburbs.
"I used to keep my money in an envelope stuffed under my mattress,"
said Mpanza, a community worker in the Johannesburg township of
Soweto. "With most banks you need lots of papers, but with this one,
all you need is a cell phone."
Open to anyone with a phone, mobile banking has proved a hit with
people such as Mpanza in South Africa's townships and villages, and
looks set to spread quickly across Africa. Account holders use text
messages, or SMS, to pay for goods, transfer money to friends and
family and top up the credit on their pre-pay phones. Bosses can pay
salaries direct into cellular accounts and customers can deposit cash
at Post Offices and some bank branches.
"It's cheap, it's easy, it's unintimidating," said Jenny Hoffmann,
head of MTN Banking, which launched the service earlier this year.
"And if you live on a hill in (rural Africa) you don't have to go to
town to make a payment."
CUMBERSOME BUREAUCRACY
Widespread banking services are seen as crucial to boosting growth in
Africa's biggest economy and shrinking the huge gap between mostly
well-off whites and poor blacks, but banks often put off low earners
with cumbersome bureaucracy and high fees.
A 2003 survey estimated that only half of South African adults had a
bank account, but a third of those without an account owned a mobile
phone. Cell phones have spread quicker than bank accounts across the
rest of Africa.
"People might not have shoes but they have a cell phone," said Brian
Richardson, chief executive of Wizzit, a small start-up that
pioneered cell phone banking in South Africa. "We can turn that phone
into a bank in your pocket."
FinMark, a British-backed non-governmental organization that looks at
ways financial markets can help the poor, estimates at least half of
all bank accounts in South Africa will be administered via cell
phones within five years.
MTN (MTNJ.J), Africa's biggest mobile operator by sales, hopes the
new banking service will serve as a retention tool for existing high-
spending cell phone customers.
Finmark expects the new technology to attract a rush of demand from
low earners, who critics say have been neglected by big banks focused
on more lucrative business.
Under fire over excessive banking charges, Absa (ASAJ.J), Standard
Bank (SBKJ.J), Nedbank (NEDJ.J) and FNB (FSRJ.J) last year clubbed
together to launch the "Mzansi" entry-level account for low-earners,
and are opening new branches in townships.
However, some commentators say mainstream banks have not done enough
to develop services for the poor and are merely paying lip-service to
pressure from the government.
"The cost of banking is an impediment," said Finmark Chief Executive
Mark Napier. "If people have to travel 40 minutes and pay 20 rand for
a taxi to visit their bank, then a transaction cost on top of that,
it's not something they will consider."
MTN Banking's Hoffmann said it still made more financial sense for
the rural poor to keep their life-savings at home -- a risk given
South Africa's notorious crime rates -- than to open a conventional
bank account.
Internet banking is not an option for the majority on a continent
where only a fraction have Web access.
LEAPFROG
Cell phone banking was launched earlier this year when Wizzit send
1,100 'wizzkids' -- all previously unemployed and decked out in smart
black uniforms -- into townships and rural areas to sell virtual bank
accounts.
MTN Banking -- a joint venture between MTN and Africa's largest bank
Standard Bank -- followed quickly, and Absa and First National Bank
launched less ambitious offerings.
They say the cell phone is as safe as ATM machines or the Internet
since each customer has a personal PIN and MTN even uses voice
recognition technology to screen customers.
Wizzit said it aimed to open 300,000 accounts in the medium term and
MTN Banking hopes to sign up 400,000 customers by the end of next
year. Neither gave current figures. Wizzit says it expects to expand
into other African countries next year and has been approached by
potential partners in Kenya, Botswana, Namibia, Zambia and Malawi.
MTN will also consider expanding into other countries where it
already offers cell phone services, such as Nigeria, Uganda, Cameroon
or Rwanda. Both hope to offer savings, credit and investment services
in the future.
Cell phones are booming in Africa with subscriber numbers expected to
hit 100 million by the end of the year from 40 million in 2002. The
technology has already been adapted for myriad projects to enhance
quality of life and create business opportunities.
In Senegal, farmers and fishermen get the latest market prices for
their goods via their phones, in South African townships
AIDS counselors monitor patients on life-prolonging drugs via cell
phone applications, and in tiny Lesotho, farmers receive weather
forecasts via SMS.
MTN's Hoffmann said that, in the same way as wireless systems
leapfrogged Africa past generations of fixed-line technology, it
could end up transporting the continent into a new age of electronic
banking, circumventing debit and credit cards.
"We may find that credit and debit cards never really take off in
Africa because people go straight to electronic transfers on their
phones," she said.
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