Kenya Reaches Mobile Phone Banking Landmark

 

Financial transactions and banking with mobile phones have been a Kenyan success story.

Now, one service, M-Shwari, has reached a significant milestone in the history of m-banking (mobile phone banking): it was able to record a billion Kenyan shillings (US $11,926,100) in savings deposits in a month after its launch in November 2012 and reached deposits of Kenyan shillings 2.8 billion (US $33 million) by February of 2013. This outstripped the Kenyan shillings 378 million (US $4 million) in loans lent by the service, reports Daily Nation.

M-Shwari is a mobile phone banking product that allows people to save and borrow money by phone and earn some interest too. The service offers small emergency loans to customers, offering a financial lifeline to people who would have been frozen out of financial services in the past.

There is no need to have any contact with a bank or bother with paperwork. And loans are instant because they are small.

Safaricom Chief Executive Officer Bob Collymore told the Daily Nation “Trends show that it has become more of a savings service than a lending service. This is what we intended since the beginning.”

As of February 1.6 million customers had used the service.

On top of this success, the pioneering M-PESA (http://www.safaricom.co.ke/personal/m-pesa/m-pesa-services-tariffs/relax-you-have-got-m-pesa) mobile phone banking platform developed in Kenya by Safaricom is set to roll out across India and help bring banking services to the country’s 700 million “unbanked.”

Both these developments are solid proof that innovation aimed at drawing in the poor into the mainstream economy not only works, it is profitable and exportable.

M-Shwari (http://www.safaricom.co.ke/personal/m-pesa/m-shwari/m-shwari-faqs) works like this: a customer can save as little as one Kenyan shilling to receive an interest rate of up to 5 per cent. If they want a loan, then they can borrow from 100 Kenyan shillings (US $1.19) to a maximum of 20,000 Kenyan shillings (US $238) for a processing fee of 7.5 per cent which will need to be paid back after 30 days.

By offering greater access to loans, M-Shwari s increasing competition in the banking sector and giving customers a choice.

It joins an ongoing revolution in access to credit for the poor. Powerful mobile phones enable individual depositors and businesspeople to organize their financial affairs and business needs on the phone. This is a revolutionary development in many places where people previously had to contend with poor access to financial services – or no access at all.

M-Shwari and products like it allow people to borrow, save and conduct transactions with family, friends, business partners and customers over their mobile phones.

M-Shwari is a collaboration between Kenyan telecoms company Safaricom and the Commercial Bank of Africa. It is being hailed as an example of how banks and telecommunications companies can cooperate to offer innovative financial products to the country.

For the unbanked in India, the initiative between Vodafone India (https://www.vodafone.in/pages/index.aspx) and ICICI Bank, India’s largest private bank, has started to roll out the Kenyan M-PESA mobile phone banking platform in India as of April 2013. They are hoping to open up access to banking to 700 million Indians who currently do not have bank accounts or access to banking facilities. The rollout starts in the country’s eastern regions of Kolkata and West Bengal (CNN).

It looks like access to banking services for the poor in the global South will soon undergo radical change with these large-scale initiatives.

By David South, Development Challenges, South-South Solutions

Published: May 2013

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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Global South’s Middle Class is Increasing Prosperity

The global middle class is on the rise – and this is creating both challenges and opportunities. As poverty rates have come down across the global South, many countries have seen a rise in the proportion of their population categorized as “middle class”. Globally, being middle class is defined as a person able to consume between US $4 a day and US $13 a day (ILO).

According to the Organization for Economic Cooperation and Development (OECD), most of this growth will be in Asia and the region will soon make up 66 per cent of the world’s middle class. Historical experience shows that members of the middle class quickly become absorbed in spending their accumulated capital on housing, equipment, industry and business, health and education. In countries with a growing middle class, policy makers need to show a strong interest in creating stable economic conditions to encourage this expanding consumption and domestic demand, the OECD advises.

Growth of the world’s middle class took off after 2001, with an additional 400 million workers joining this group. The McKinsey group of consultants found the total number reached 2 billion in a dozen “emerging nations” in 2010, collectively spending US $6.9 trillion every year (McKinsey).

Forecasters predict a further increase in the middle class across the global South will bring with it a surge in consumption (a combination of spending and demand). Areas being highlighted by various studies and reports include China’s small and mid-size cities, other areas of East Asia and Africa.

Middle class spending in these dozen emerging nations could reach US $20 trillion during the next decade – twice the amount of consumption occurring in the United States right now (McKinsey).

The result is a re-shaping of populations, with growing numbers of people now neither rich nor desperately poor, but landing in the middle of the income distribution.

And local competitors in the global South are fighting hard for these consumers on their own turf.

The Hangzhou Wahaha (http://en.wahaha.com.cn/) beverage maker in China has been able to compete against multinationals such as Coca-Cola and PepsiCo, according to McKinsey. It has turned itself into a US $5.2 billion business using a multi-pronged strategy: targeting rural areas, catering to local needs, keeping costs low and positioning itself as the patriotic choice.

And this change is also occurring in Africa, where a growing middle class is fuelling sales of refrigerators, television sets, mobile phones, motors and automobiles across the continent, according to the OECD. In Ghana, for example, car and motorcycle ownership has risen by 81 per cent since 2006.

According to the African Development Bank (AfDB), Africa’s middle class has reached 34 per cent of the population, or 350 million people. In 1980, it was 126 million people, or 27 per cent of the population.

Countries with the largest middle classes in Africa include Tunisia and Morocco, while Liberia and Burundi have the smallest number of people in the middle class.

The economic growth that is fuelling this middle-class surge is coming from a combination of increasing investment in the services sector, the tapping of the natural resource sector and better economic policies in the past two decades. Africa’s middle class is driving growth in the private sector and boosting demand for goods and services, most often also provided by the private sector.

“The liberalization of African economies has resulted in improved efficiencies and led to a rapid growth in the service sector, which has spurred the growth of the middle class,” Lawrence Bategeka, a principal researcher at the Uganda-based Economic Policy Research Centre, told The East African newspaper.

How important the middle class is to increasing consumption levels can be seen in the cases of Brazil and South Korea.

According to the OECD, both countries had similar income levels and growth rates in the 1960s. But by the 1980s, high income inequality in Brazil capped the middle class at 29 per cent of the population. In South Korea in the 1980s, the middle class population reached 53 per cent. This larger middle class population enabled South Korea to switch from an export-driven growth strategy to domestic consumption.

While Brazil wasn’t able to do this at the time, it has since made impressive gains in reducing poverty – from 40 per cent of the population in 2001 to 25 per cent in 2009. This has seen the middle class grow to 52 per cent of the population and boosted domestic consumption.

While a rising middle class in the global South is good news for improving human development and living standards, the OECD found much of the new middle class was vulnerable and could easily slip out of that category. They also often lacked enough income to purchase more expensive durable goods such as automobiles (OECD Yearbook 2012).

The success of this fragile but growing middle class will be key to how well the global economy fares in the coming years.

A new report by the UN’s International Labour Organization (ILO) argues that the global South’s growing middle classes are just the thing to spur growth across the wider world economy.

“Over time, this emerging middle-class could give a much needed push to more balanced global growth by boosting consumption, particularly in poorer parts of the developing world,” said Steven Kapsos, one of the authors of the report.

In Indonesia, an example of the economic impact of the middle class trend in action can be seen in the surging life insurance business.

Association of Indonesian Life Insurance Companies (AAJI) chairman Hendrisman Rahim believes the growing middle class are potential customers for the country’s thriving life insurance industry.

“They are the ones who have the need to be insured and can afford to purchase a policy. Extremely rich people are financially capable [of buying], but may not have the need. Extremely poor people have the need, but require financial assistance to be insured,” he said to the Jakarta Post.

As the Indonesian middle class increases, the life insurance industry is expecting to see revenue rise by 30 per cent in 2013.

By David South, Development Challenges, South-South Solutions

Published: February 2013

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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All-in-One Solar Kiosk Business Solution for Africa

 

Kiosks are ubiquitous throughout commercial areas in the global South. These highly efficient little business outlets enable small-scale entrepreneurs to sell necessary products without the expense of renting and running a shop.

While they are a great solution for entrepreneurs and customers alike, they often lack connection to municipal services such as electricity and water. That means kiosk owners need to use batteries or a generator if they need a refrigerator to cool food and drink – an expensive proposition.

A new product launched this year in Addis Ababa, Ethiopia offers a solution.

Created by a team of German architects, the Solarkiosk (solarkiosk.eu) is an autonomous business unit designed for remote, off-grid areas. With solar panels across the top of the kiosk, it generates its own electricity and is basically a mini solar power plant. Inside, it is just like a conventional kiosk, with display shelves for products and a counter in the front with a flap – which can feature advertising and messages – that can be opened up for business and locked shut when the kiosk is closed.

The kiosk captures solar energy and the electricity generated can be used to run a computer, lights or a refrigerator. That makes the Solarkiosk capable of offering a wide range of services needing electricity, from Internet access to car-battery charging and mobile phone recharging – a now essential service as mobile phone use explodes across Africa.

The first kiosk was prototyped in November 2011 and the makers incorporated their first subsidiary, Solarkiosk Solutions PLC, in Addis Ababa, Ethiopia in March 2012.

According to Solarkiosk 1.5 billion people worldwide have no regular supply of electricity – 800 million of them in Africa. The makers of Solarkiosk consider this a huge market and hope to make the most of it.

The kiosk comes in a kit form ready for assembly. The kit is designed to be easy to transport and is light enough and compact enough to be transported on the back of a donkey, its makers claim.

Solarkiosk operators receive training in running and managing a kiosk. They learn about solar technology and how to maintain the kiosks and run a sustainable business. Once the operators are trained and up and running, they typically hire others to help with running the kiosk and offer the services at convenient times for the customers. The Solarkiosk then, potentially, becomes an income and employment generator for the local community.

The kiosk is designed to be durable, secure and difficult to tamper with from the outside. The kiosks have been designed to suit many environments and requirements. There is a basic platform that can be added to or expanded depending on local needs and a series of models depending on the customer’s needs. Cleverly, the largest kiosk model is powerful enough to provide electricity to telecom towers. This has proven attractive to mobile telephone companies who can power a telecom tower and make money from running the kiosk as well.

The Solarkiosk is especially useful for countries near the equator where nights are long (12 hours) and the kiosk can help people get light to read, study and work.

Solarkiosk is targeting off-grid customers who are using up to 40 per cent of their household income on electricity substitutes. According to Solarkiosk, people in off-grid households collectively spend more every year (US $30 billion) lighting their homes – using candles for example – than do all the people living in electricity grid connected countries (US $20 billion).

Solar technology is becoming more affordable at the same time as demand in developing countries for electricity and the products powered by electricity is on the rise. Mobile phones are now essential tools for doing business and staying connected – and all of them need to be kept charged up.

Solarkiosk believes it can save the average off-grid household US $10 per month, while each kiosk could supply solar electricity services to between 200 and 5,000 households.

For now, Solarkiosk is available in Ethiopia. It is based in Berlin, Germany and receives money from the German government. The kiosks themselves were designed and built by Graft Architects (http://www.graftlab.com).

By David South, Development Challenges, South-South Solutions

Published: November 2012

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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African Supercomputers to Power Next Phase of Development

Information technology developments in Africa have long lagged behind those in other parts of the world. But the transformation being brought about by the widespread adoption and use of mobile phones – each one a mini-computer – and the expansion of undersea fibre optic cable connections to Africa are creating the conditions for an exciting new phase of computing growth on the continent.

Despite the global economic crisis, Africa is on course to see annual consumer spending reach US $1.4 trillion by 2020, nearly double the US $860 billion in 2008 (McKinsey). On top of this, by 2050, a projected 63 per cent of Africa’s population will be urban dwellers. With Africa’s middle class the fastest-growing in the world – doubling in less than 20 years – matching computing power with this consuming urban population could unleash a treasure trove of opportunity for information technology entrepreneurs.

These developments are creating the conditions for game-changing computing in the next years. And this is encouraging the creation of a new supercomputer (http://en.wikipedia.org/wiki/Supercomputer) for Africa in Kenya that will double the total number of supercomputers in Africa. Hugely powerful compared to personal or commercial computers, supercomputers use cutting-edge technology to carry out high-speed calculations involving vast quantities of data.

Expanded supercomputing power brings numerous advantages to both economic and human development. It will radically alter what can be accomplished in Africa – allowing mass data processing to be done, highly complex and data dense applications to be run, and very large research projects to be conducted on the continent rather than overseas.

Increasing computing power in Africa will bring in its wake, it is hoped, a surge in economic and research opportunities.

It will help African researchers and scientists to undertake globally competitive projects, rather than seeing this work done overseas. It will also open up a vast range of possibilities for African entrepreneurs and businesses to do complex data processing, modelling and research and will enable them to become more sophisticated operations.

The new supercomputer, the iHub Cluster, is being built in the Kenyan capital by one of Africa’s pioneering information technology hubs – iHub Nairobi (http://ihub.co.ke/pages/home.php) – in partnership with Internet products and services company Google and microchip maker Intel Corporation.

Africa’s first supercomputer is located in South Africa and is ranked 497 in terms of computing power on the list of 500 supercomputers in the world (http://www.top500.org/).

It is located in the “Tsessebe cluster” in Cape Town’s Centre for High Performance Computing (http://www.chpc.ac.za/).

“With mobile devices coming in multiple cores, it is important for developers to be exposed to higher performance computing; we are hoping to debut at a higher level than ‘Tsessebe cluster’,” Jimmy Gitonga, the project team leader for the iHub cluster, told Computer World.

Africa suffers from poor supercomputer capacity and this has had a knock-on affect on everything to do with economic development. The iHub supercomputer hopes to help universities and colleges to gain competitive edge and be able to undertake more complex research in the fields of media, pharmaceuticals and biomedical engineering.

“In Africa, we need to be on top of the mobile scene, its our widest used device,” Gitonga told Computer World.

Some of the practical applications for the iHub supercomputer in East Africa and the Horn of Africa include improving weather forecasting and drought prediction, increasing the ability to give advance warning of droughts and famines in the region.

“Most of the United Nations agencies and international agencies operating in the region have extensive field research on how to tackle natural disasters in the region. Imagine if they had affordable space where they can meet with developers and test resource-hungry applications,” Gitonga said.

The iHub also wants to offer the services of the supercomputer to researchers and organizations who have had to go abroad to have their data processed. The iHub supercomputer hopes to be used by mobile phone developers, gamers, universities and research institutions.

In the last two years, China had pushed the United States out of the number one spot for supercomputers. The Tianhe-1A located at the National Supercomputing Center in Tianjin (http://www.nscc-tj.gov.cn/en/), China, was the fastest computer in the world from October 2010 to June 2011.

For those looking to see how they can make the most of the growing supercomputer capability in Africa, examples from other countries offer a good idea. Supercomputers can be used for weather forecasting, climate research, oil and gas exploration, physical simulations like when testing aircraft, complex modelling for medical research, processing complex social data necessary for delivering effective social programmes or running modern health care systems.

By David South, Development Challenges, South-South Solutions

Published: October 2012

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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Egyptian Youth Turns Plastic Waste into Fuel

The challenge of finding alternate fuel sources is capturing the imagination of innovators across the global South. As the world’s population increases – it recently reached 7 billion (UN) – and the number of people seeking a better life grows in turn, the energy demands on the planet are pushing up competition for existing conventional fuel sources.

The modern lifestyle that many aspire to requires energy, whether it’s using electronic products which consume large quantities of electricity, driving personal vehicles or living in homes that are artificially heated and cooled.

This energy hunger has opened up a whole new market demand that needs to be met. The scale of this market is enormous, but the solutions are ultimately limited only by people’s imaginations. An award-winning Egyptian teenage scientist is capturing attention for the imaginative solution of turning waste plastic into biofuel, sparking interest in the creation of a whole new source of wealth for her country.

Sixteen-year-old Azza Abdel Hamid Faiad (http://tinyurl.com/dysemjg) has found a new way to take waste plastic and break it down into fuel. She has discovered aluminosilicate minerals (http://en.wikipedia.org/wiki/Aluminosilicate) – which contain aluminium, silicon and oxygen and are found in clays – can break down the polymers that make up plastic (http://en.wikipedia.org/wiki/Polymer) to produce the gases methane, propane and ethane, all of which can be turned into ethanol (http://en.wikipedia.org/wiki/Ethanol), which is useful as a biofuel.

According to Inhabitat (inhabitat.com), a website dedicated to “green design, innovation, and the future of clean technology,” her solution could turn the country’s annual consumption of 1 million tonnes of plastic into a year’s supply of biofuel worth US $78 million.

Clever innovators are sitting on a goldmine if they can come up with renewable energy solutions. The U.S. Army alone is looking to spend US $7 billion on renewable energy sources and is accepting bids from the private sector to meet its needs (http://www.forbes.com/sites/toddwoody/2012/08/08/u-s-army-opens-bids-to-buy-7-billionin-renewable-energy/). The army is looking to sign contracts stretching up to 30 years for buying electricity generated by solar, wind, geothermal and biomass projects.

The options are numerous for renewable energy – from solar power to wind power to algae as a source of biofuels (http://en.wikipedia.org/wiki/Biofuel). The challenge is to find a fuel source that is plentiful, renewable, and crucially, doesn’t harm other needs.

Using biofuel as a replacement for conventional petroleum-based fuels like gasoline and diesel appears to be an attractive solution, but it can lead to other problems. Some people are using used cooking oils to convert into biodiesels, but sometimes there is not enough used cooking oil to meet demand. In short, a constant supply source is required to meet ever-increasing energy demand.

A famous example of where the use of renewable plant-based fuel sources can go wrong is the case of corn. The widespread use of corn as a source for biofuels – rather than for animal feed or human food – has led to accusations this is contributing to the global food crisis. The current drought in the United States is damaging corn crops and only making this problem more acute. The U.S. is the world’s largest producer of corn (US Department of Agriculture) and much of it is used as livestock feed around the world.

Faiad’s solution is appealing because the fuel does not come from biomass – derived from plant matter – but turns waste plastic into the raw material for biofuel.

Plastic waste is a common byproduct of modern life. Plastic is used extensively in packaging, bottles, bags and electronic products. It fills up landfill sites and is a blight on the landscape in many countries. It is also a product made from petrochemicals (http://en.wikipedia.org/wiki/Plastic), the very source of conventional fuel used by most of the world’s vehicles.

Breaking down waste plastic from bottles, packaging and other products into what is called ‘biofuel feedstock’ – the substance necessary to start the creation of biofuel – requires a means to turn the plastic into fuel.

According to Green Prophet (greenprophet.com), Faiad believes her technological breakthrough “can provide an economically efficient method for production of hydrocarbon fuel namely: cracked naphtha (http://en.wikipedia.org/wiki/Petroleum_naphtha) of about 40,000 tons per year and hydrocarbon gases of about 138,000 tons per year equivalent to US $78 million.”

This could be a big economic boost to Egypt’s economy, simultaneously reducing dependence on petroleum-based fuels and creating a new source of income. Egypt’s economy has been hit hard since the start of the Arab Spring (http://en.wikipedia.org/wiki/Arab_Spring). The number of tourists fell 33 per cent in 2011 and revenue dropped by US $3.7 billion from 2010 (Egyptian Tourism Minister). In 2009 about 12.5 million tourists visited Egypt, bringing revenue of US $10.8 billion. The tourism sector is one of the country’s top sources of foreign revenue, accounting for more than 11 per cent of GDP, and offers jobs in a country beset by high unemployment – for Egypt, tourism makes up 11 per cent of its GDP (gross domestic product) (Reuters).

Faiad’s innovation has not gone unnoticed. She received the European Fusion Development Agreement award (http://www.efda.org/) at the 2011 23rd European Union Contest for Young Scientists (http://ec.europa.eu/research/youngscientists/index_en.cfm). She is also receiving interest from the Egyptian Petroleum Research Institute (http://www.epri.sci.eg/), according to Inhabitat.

Ambitious Faiad is also seeking to take ownership of her innovation by getting a patent from the Egyptian Patent Office (http://www.egypo.gov.eg/english/default.htm).

By David South, Development Challenges, South-South Solutions

Published: August 2012

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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Google Books: https://books.google.co.uk/books?id=CQHG3jRMm4UC&dq=development+challenges+august+2012&source=gbs_navlinks_s

Slideshare: http://www.slideshare.net/DavidSouth1/development-challengessouthsouthsolutionsaugust2012issue

Southern Innovator Issue 1: https://books.google.co.uk/books?id=Q1O54YSE2BgC&dq=southern+innovator&source=gbs_navlinks_s

Southern Innovator Issue 2: https://books.google.co.uk/books?id=Ty0N969dcssC&dq=southern+innovator&source=gbs_navlinks_s

Southern Innovator Issue 3: https://books.google.co.uk/books?id=AQNt4YmhZagC&dq=southern+innovator&source=gbs_navlinks_s

Southern Innovator Issue 4: https://books.google.co.uk/books?id=9T_n2tA7l4EC&dq=southern+innovator&source=gbs_navlinks_s

Southern Innovator Issue 5: https://books.google.co.uk/books?id=6ILdAgAAQBAJ&dq=southern+innovator&source=gbs_navlinks_s

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