As the Mobile World Congress 2012 wraps up in Barcelona, there has been a flurry of news about social investments in mobile money. On Wednesday (February 29^th), Omidyar Network and ACCION International announced a $3.2 million investment in Mobile Transactions International, a Zambia-based organization with a technology platform and network of agents for mobile transactions. On Thursday (March 1), CGAP, Grameen Foundation, and MTN Uganda announced a partnership along with $1 million investment into an initiative to research and design mobile financial services for those living on under $2.50 per day.

 

Investment Details

As the first venture capital investment in a start-up technology company in Zambia, Omidyar and ACCION see Mobile Transactions as a leader of expanding access to financial services in the country. The money will be leveraged to build up its executive team, agent network, and further develop their platform in order companies and poor consumers both in Zambia and in new markets to make mobile transactions. The investment into Mobile Transactions includes $500,000 in convertible debt funding from Mennonite Economic Development Associates (MEDA), a nonprofit organization focused on alleviating poverty through market-based solutions and financial investments. This funding will eventually be convertible into shares of the Mobile Transactions. As typical with venture capital investments, Arjuna Costa, Director of Investments at Omidyar Network, and Monica Brand, Fund Manager for ACCION’s Frontier Investments Group, will serve on Mobile Transactions’ board.

Mobile Transactions’ business model combines their proprietary technology with an agent network with the goal of creating a “Cashless Africa.” This idea is that all businesses can transact through mobile phones with the unbanked as well as those without mobile connectivity. Their services offer customers the ability to transfer money, make and receive payments, and eVouchers. This business model was created based on the fact that in countries like Zambia over 80% of the adult population does not have access to formal financial services and roughly 50% of them do not have access to a mobile phone.

The focus of the investment by CGAP, Grameen, and MTN Uganda is to build on the success of mobile money providing access to financial services. The idea is to take it a step further by creating a suite of products and services that fit the needs of low-income consumers. The diverse partnership is aiming at combining the expertise of each organization to provide better access to mobile financial services. CGAP, as a part of the World Bank, focuses on expanding financial services to the poor through independent research, policy solutions, and advisory services to governments and financial service providers. Grameen Foundation, through its AppLab in Uganda, already has the knowledge and experience of expanding the reach of financial services to poor consumers by utilizing mobile technology. MTN Uganda also has had success with mobile money in Uganda which includes building the technical infrastructure and establishing a strong agent network.

 

Social Investing

Mobile money has been in the news lately as global corporations are becoming interested in its revenue possibilities. Visa and Mastercard recently partnered with mobile operators across Africa and the Middle East to start offering their own form of mobile money. Western Union continues to create partnerships in order for their international money transfer services to be used via mobile phones. While these examples are corporations looking to enter new markets and generate new revenue streams, the social investments have much different and hopefully more impactful focus.

Social investing is a necessary component for mobile technology to reach the unbanked. These social businesses have a clear idea of who their targeted consumers are. With this understanding, the products and services will be designed to meet the consumers’ needs. As mentioned, in Zambia, there is a low penetration rate of mobile phones so creating a system based solely for individuals with mobile phones would not reach all the unbanked. The beauty of Mobile Transactions’ services is that provides needed services that are accessible by all, whether they have a mobile phone or not. In Uganda, the AppLab has done extensive research on providing information services via mobile phones to rural communities. The testing and delivery of these services has allowed the AppLab understand the needs of the consumers in the country. This has helped to guide further development of current products as well as the future development of new products. Both of these social investments are exciting as they will create new products and services to expand financial services to the unbanked.