NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Monday, February 4, 2019

By Linda Du

Matilda is a mother of three living in rural Malawi who runs a small fritter business. She fries donuts in her home in the early hours and then sells them by the side of the road. She doesn’t know how to read or write, and her financial needs are not served by traditional banks, which are discouraged by the relatively high costs and low transaction volumes of banking for rural populations.

Nevertheless, Matilda is part of the financial system. Microloan Foundation Malawi, a microfinance institute, serves her credit needs for her business. For her savings, Matilda turns to Airtel, a mobile network operator (MNO).

Mobile money enables anyone with a phone and a SIM card to complete basic financial transactions such as savings and transfers without having a bank account. The model was pioneered in East Africa, most notably by Safaricom’s M-Pesa in Kenya, and has quickly spread to other parts of the developing world. It usually involves the agent banking model, a network of agents with kiosks who can reach far-flung rural populations at a lower cost than brick-and-mortar banks. If Matilda wants to save some money from her business, she walks to her nearest Airtel Money kiosk with her cash and mobile phone, and although she cannot read, the teller can help her make a deposit as small as 50 MWK (7 cents in U.S. dollars), linked to her SIM card.

Over the first six months of 2018, I traveled in the three neighboring Southern African countries of Zambia, Malawi, and Mozambique, exploring the scope of mobile money services. I chose to focus on these countries because their mobile money adoption levels fall around the median of Southern African levels—Zimbabwe has the highest rate of penetration at 49% and South Africa the lowest at 19%. They are fairly representative of the diversity of the wider region, with Zambia and Malawi being former English colonies and Mozambique being a former Portuguese colony. And finally, interest in regional collaboration efforts has grown as initiatives for a Zambia Malawi Mozambique Growth Triangle (ZMM-GT) are revitalized.

Photo courtesy of Neil Palmer.