Private Currencies

Slums are the future. If you need more evidence that real innovation is coming out of poor countries, check out the new electronic currency systems. Also called mobile payment systems, John Robb gives a quick nod to these new private currencies in a recent post. (Robb left out at least one other new system, Zain Zap from Kenya.)

I had heard about these over the last several years, but I just thought they were kind of weird, and didn’t pay much attention. Until our customers started asking us to integrate our Mifos open source banking software with them, that is. It’s not on the web anywhere yet, but now we’re doing a project to integrate M-PESA with Mifos at the microfinance institution KEEF in the hot zone of mobile money, Nairobi, Kenya.

My initial reaction dismissing these systems as just weird, by the way, proves that we need to get into the field to really understand what customers want.

Why do poor people like mobile money systems so much? Unlike standard banks, there’s no ID necessary – you have a phone, you have a bank account. There’s no going to the bank, either, and that is a big benefit in poor countries. Hauling your ass halfway across a dusty city to visit a physical branch can take hours, not good when you have kids to take care of and work to do. And there’s no hassle or discrimination from commercial bank employees – because there are often no humans involved, you’re just sending a text message to a robot.

It’s convenient to get cash too – just to go the corner store, text the woman at the counter some mobile money from your phone, and she gives you cash.

Now, this currency is really just “airtime minutes” – but since it’s easily transferable from one phone to another, and easily convertible into cash… it’s money.

And microfinance institutions (MFIs) love it too – if they can get their best clients using mobile money to make micro-loan payments, the clients don’t have to waste time at meetings, and the MFI can have more clients per loan officer – increasing profitability, letting them serve more people, so they can end poverty faster.

It’s the poor innovating to help each other. Working on this from the USA, I’m the bottleneck – I just have to figure out how I can get out of the way and let it happen.

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