20100524
AFRICA GOOD NEWS

Cash transfers by text message is a boom market in south and east Africa, with companies looking at introducing more sophisticated products in order to get an advance on the competition.

MTN Uganda, the country's largest mobile phone provider, said Monday that nearly 900,000 people were using its text message money transfer since the service was introduced 15 months ago.

Since the launch of the MobileMoney service in March 2009, its 890,000 users have made 11.8 million transactions worth 195 million dollars (157 million euros), according to statistics released by the company.

"MobileMoney is one the fastest growing money transfer services in the world," Richard Mwami, who heads the initiative, told AFP.

The company said it expects to have two million users by the end of the year and 3.5 million by 2012.

In Kenya, where Safaricom's M-PESA programme pioneered SMS money transfers two years ago, the popularity of the service has soared from 52,000 users in April 2007 to 9.7 million as of last month, according to company statistics.

In February of this year MTN launched an equivalent service in Rwanda. In less than four months the company has gained 30,000 active subscribers.

Figures from Uganda, Kenya and South Africa reveal that this enormous growth is primarily driven by small sum transactions among low-income earners.

"A lot of people have access to the technology of cell phones, but do not have access to a formal bank account," Franco Gresse, product manager of the eWallet at South Africa's First National Bank (FNB) told AFP.

FNB customers are now sending roughly 130,000 dollars a day using the eWallet and, Gresse said that the service's major users are city-dwelling breadwinners who send money home to rural areas.

In Uganda, where the average MobileMoney transfer is 21 dollars, roughly 60 percent of the recipients live in rural areas.

The FNB programme relies on the bank's network of 4,300 bank machines around South Africa. A customer can send money to anyone with a South African mobile phone. The recipient enters their phone number at the ATM and can withdraw money without a card or pin number.

In Kenya and Uganda, where banking infrastructure is less solid, MTN and Safaricom rely on a vast network of mobile phone merchants to dispense cash.

Mwami said that convincing small shop owners to hand out money based on a text message was initially a challenge, but the programme succeeded because the technology was demystified.

"We cover every small little corner of this country," he told AFP. "Once (our phone card vendors) bought into it, we were good to go."

Kenya's M-PESA users typically pay 30 Kenyan shillings (38 US cents) per transaction.

Uganda's MTN has a similar fee structure.

At FNB, the service is free until July. After July, the bank intends to charge the customer sending the money two rands (25 US cents) per transaction.

The popularity of the services and the fact that both banks and mobile phone companies are involved means that competition is likely to get increasingly fierce.

To keep pace, companies are developing services beyond the simple person-to-person transfer.

Waceke Mbugua of Safaricom told AFP the company hopes to be the leader in micro-loan payments, but M-PESA has also reached out to higher earners with programmes that enable customers to pay insurance premiums through text.

Mwami of MTN also labelled micro-finance as an area for potential growth because it offers a cheaper way to repay loans.

"The customer would normally have taken a bus ride to go and pay money," he said. "He doesn't have to do that."

He added that it is possible wealthier individuals may start sending larger sums through SMS, but the average value of each transfer has actually declined in recent months and the future of the business remains tied to the lowest earners.

"The opportunity is out there in that unbanked world, the bottom of the pyramid," he said.