Vicky Hausman

Mobile Money in Haiti: A Novel Approach to Developing the Financial Sector

Editor’s Note: To access the entire Dalberg report referenced below, please click here.

Can a mobile phone-based banking system help a poor country to recover from disaster and build a more prosperous future? Can its banks and telephone companies join with foreign donors and on-the-ground relief agencies to make this system a success? Can prizes offered by a foreign foundation drive the development of the system?

The Haiti Mobile Money Initiative, sponsored by the Bill & Melinda Gates Foundation with support from the U.S. Agency for International Development (USAID) raises all of these questions and more.

Haiti is still struggling to regain its footing, one year after the disaster that literally shook the ground beneath it. As if the initial effects weren’t bad enough – 250,000 killed, 500,000 displaced, and costs of $7.2 billion to $13.2 billion, according to the Inter-American Development Bank – a series of additional challenges followed the earthquake. They include the controversy about presidential candidates and alleged fraud in the election on Nov. 28, the destruction wrought by Hurricane Tomas, an ongoing and deadly cholera epidemic, and riots brought on by growing resentment of international agencies and donors.

But with a mobile phone penetration rate of 35 percent and with 85 percent of households in Haiti having access to a mobile phone, the introduction of mobile money offers an opportunity to strengthen financial inclusion and expedite the delivery of cash assistance by humanitarian agencies. Moreover, a concerted effort by the players in Haiti’s mobile money ecosystem may lead to particularly rapid uptake of the service, given the damage to the country’s traditional banking infrastructure.

To realize this potential, the Gates Foundation and USAID launched a $10 million incentive fund in June 2010 to speed the growth of mobile money services in Haiti. With the two largest mobile network operators already planning mobile money services when the earthquake hit, the prize mechanism was designed to spur key stakeholders in Haiti’s mobile money ecosystem to act. Its immediate goals were to accelerate the delivery of cash assistance to victims of the earthquake by humanitarian agencies, and to enable Haitians to send, receive, and store money safely using their mobile phones. As a development initiative, it was a unique effort by foreign donors to expand the financial sector without using traditional tools such as loans and grants.

All three of Haiti’s mobile phone operators and some of the country’s biggest banks (one operator has yet to announce its banking partner) have entered competing partnerships to offer mobile money. So far, two partnerships have launched similar consumer-focused mobile money solutions with identical pricing. In interviews, executives of the companies have cited different economic benefits as motivating their investments in mobile money, with the incentive fund contributing primarily to the speed of launch. All the companies approached mobile money as a business opportunity, but, interestingly, none noted direct revenues as the main economic objective. Executives instead mentioned drivers such as lowering churn or the cost to serve. Answers varied widely on the relative importance of the incentive fund, too.

On January 11, 2010, the Gates Foundation announced an award of $2.5 million to Digicel and Scotiabank, Haiti’s largest mobile operator and its banking partner, signaling 10,000 transactions spread over 100 agents. Going forward, Dalberg will work with the partnerships to understand their strategies and with other stakeholders to understand reactions to the incentive fund. We will also identify lessons that can be applied by donors worldwide. In mid-2011 and early 2012, we will carry out two additional rounds of research on the business models being deployed in Haiti. We hope that the results will prove useful and illuminating.