Talking to Dr Leslie Budd, Michael Joseph discusses mobile phone technology in use in Africa:
- To what extent can innovations like M-Pesa contribute to developments such as workers transferring sums of money back to their home countries?
- Is there something that banks can learn from this?
- Does the ubiquity of the mobile phone make a bigger contribution to the development of Africa than the internet and ICT?
- What are the other uses of mobile phone technology in Africa?
- How can communities raise social investment?
Michael Joseph and Leslie Budd were talking after a recording of The Bottom Line.
Interviewer: I’m with Michael Joseph of Mobile Money Vodafone. Michael, remittances to global diasporas is a very large source of income that’s often overlooked by policymakers and financial institutions. I wondered to what extent can innovations like M-Pesa contribute to this kind of development?
Michael Joseph: It’s an interesting question, and it’s massive, as you said, the amount of money going back into the country is really big, and most of it comes in through the banking system and Western Union, and sometimes through the informal Hawala system which is not always monitored by everybody. M-Pesa is actually ideal for remittances, international remittances, because you can [go] to a remittance agency in any country, or you should be able to go to any remittance agency in a country and then send money directly to that person’s phone, and in fact this will probably happen during this year that we’ll actually do this. We’ve signed a deal with an international money transfer hub in Belgium, and that we will then allow, then all the remittance agencies will connect to this hub and all the mobile money operators will also connect to the hub, so this will make it very easy and much cheaper for people to send money home.
So I think this business will grow tremendously for us. The thing that we have to be careful of is the cost of sending that money home. It’s okay if you’re sending £5,000 home and the cost of doing it through a traditional bank or a Western Union is reasonable, but if you want to send £100 home, which a lot of people want to do, the costs are very prohibitive, and I think that’s where M-Pesa will come in and make it much better for the customer.
Interviewer: Just on that, do you think the banks should learn something about what you call the unbanked citizens who are not sending large sums of money but just actually treat them in a kind of homogenous way when they come to remit money back to their families?
Michael Joseph: I think the challenge with banks that we have, and I’m sorry that I always seem to be bashing banks, but the challenge that we have is banks have a cost for every single transaction that they do, everything they do there’s a cost, and that cost normally doesn’t bear any resemblance or doesn’t have any relationship with the cost of doing that particular transaction. And I think banks can get into this business if they just lower their charges for international remittance to a reasonable sum of money, not to what is the most we can sell it for, and I think this is the big thing that we have to look at banks for. But I don’t think banks will ever really do this in a big scale. I think we will have our eye on lots of remittance agencies, informal remittance agencies in the origin countries sending money directly to a person’s phone.
Interviewer: The internet and ICT are seen as the basis completely transforming economy and society, and yet the ubiquity of the mobile phone seems to actually make a much greater contribution to development, particularly in Africa. I wonder what your take is on that view.
Michael Joseph: I think yes, at the moment that’s true, the mobile phone is much more ubiquitous in Africa and the emerging markets. People have accepted it, people use it for everything. It is their friend. It’s not just a tool; it’s now a part of their family life. But I think we’re on the beginning of data becoming a much bigger part in Africa. We’re just on the cusp of it. I think it will grow. The challenge that we have is the cost of the device. And if you look at a basic mobile phone, now you can buy a basic mobile phone for maybe €10 or €12, maybe even less now. A smartphone where you want to do data is still in the €50 to €100 cost. And I think that’s where the challenge is, is bringing the device cost down to a reasonable level where data can be used by everybody. But I think we’re getting there. If you look at what’s happening now in Africa and the various manufacturers, we are getting to the sub €50 phone, a smartphone.
Interviewer: And in terms of using mobile phones, do you see beyond M-Pesa other kinds of uses whereby it makes some other contribution. You mentioned earlier about health applications, but are there other kinds of applications of cheaper or economical mobile phones that actually can contribute to development?
Michael Joseph: I think there’s many. I think that health is very interesting, not just payment for health insurance but actually, you know, diagnosing, diagnostic and also reporting and collecting of data for the medical personnel out in the field. But I think there are many other applications, you know, remote monitoring of sites or remote monitoring of pumps and things like that where this is becoming a much bigger possibility in the emerging markets. So, you know, I think it’s growing. We are just on the verge, I think, of it really taking off in Africa like we were twelve years ago on the mobile phone.
Interviewer: And finally, I mean returning to banks, a couple of social investment funds in the UK have just issued the first ever social impact bond to address particular problems about teenagers in a particular area, and also extending some of that to a loan to a housing association. Again, do you actually, although you say you’re evangelical about M-Pesa, is it a kind of model that actually has also a greater application in things like investment, so although you’re not in competition with banks, there’s a way in which innovation can point to how communities can raise social investment?
Michael Joseph: I think the traditional banks are becoming more aware of their responsibilities in this area of social impact and corporate social responsibility. I think in the past, banks, or not just banks, big corporations had a sort of tick box for corporate social responsibility, taking responsibility for it and sort of said, okay, we have given $5 million to five different charities or five different children’s homes and we’ve done what we needed to do and we’ve fulfilled our obligations. I think big corporations including banks are saying this is not the way to do it, we need to get more involved, we need to make more social investment than rather just donating money and saying we’ve done our job. And I think this is going to grow as banks and big corporations want to be seen to be more part of the community in which they operate, and I think this is a growing trend.
Interviewer: Michael Joseph, thank you very much.
Michael Joseph: Thank you. It was a pleasure.