Executive Summary: In 2007, M-Pesa started in Kenya as a CSR pilot project by Safaricom, a Vodafone subsidiary, to transfer money over mobile because it was unsafe to carry cash. But soon it changed into a financial service and became a big hit. Vodafone brought the platform to India in 2010 as a pilot in Rajasthan, and launched it in April 2013. But it has had a slow start considering only 1.5 million of Vodafone’s 170 million subscribers use this service. This case study looks at how a service that originated in Kenya was tweaked for India and whether it can succeed.
Geeta Devi, Choti Devi and Lilima Kachaap, three poor women in the nondescript area of Namkum near Ranchi, Jharkhand’s capital, had recently given birth to healthy offspring. But their joy was tempered by exasperation. Their wait for due money from Janani Suraksha Yojana (JSY), a financial assistance plan under the National Rural Health Mission (NRHM), was getting never-ending. The scheme, which promotes institutional delivery among poor women, gives Rs 1,400 on the birth of every child to the mother.
Thankfully, the trio would get their due unlike thousands of others who do not, and from quite an unexpected source. It all started when Vodafone, India’s second-largest mobile operator by subscriber base, tied up with NRHM to do a pilot project in Namkum. The objective: disburse money directly to the beneficiaries through M-Pesa – its financial mobile service better known as a mobile wallet. M-Pesa is a USSD-based (an SMS-based service that does not need Internet) technology that helps people send and receive money over the mobile, apart from making utility bill payments, and recharging mobile and DTH accounts.
The Jharkhand government shared the list of beneficiaries with Vodafone. In turn, Vodafone identified its customers on the list, and activated the M-Pesa service for them. For people who were not on Vodafone, the company put up camps in Namkum so that they could get Vodafone SIMs and the M-Pesa service.
Once that was done, the government sent information on the beneficiaries – and the money – to the banking system that was linked with the M-Pesa accounts. Vodafone’s agents – some of who are also business correspondents – then hand over the money to the recipients. So, Geeta, Choti and Lilima – and several others – finally got their money through M-Pesa.
WHY MOBILE MONEY MIGHT WORK IN INDIA
Mobile money has worked elsewhere in the world. M-Pesa was started in Kenya in 2007 by Safaricom, a 90- per cent Vodafone subsidiary, as a corporate social responsibility (CSR) activity. Due to Kenya’s high crime rate, it was near impossible to carry money physically. So M-Pesa started as a money transfer project and was hugely successful. Today, M-Pesa has 70 per cent penetration in Kenya and is no more a CSR activity.
India might not have the same problem as Kenya, but mobile money still holds up an interesting solution for money transfer to rural areas.
Consider the facts. India has 100,000 bank branches, five per cent of which are in rural areas. Sending money through banks becomes impossible for the millions of villagers who migrate to big cities for work. The post office system is also used a lot to transfer money, but is not considered entirely reliable. As a result, most migrant workers send money home in cash through travelling relatives or acquaintances – a method fraught with chance and risk.
At the same time, government assistance schemes like JSY and employment plans like MNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) have given rise to a new breed of middlemen. This unscrupulous lot takes commissions to disburse the money to the beneficiaries, but don’t always deliver. And the cheated beneficiary is none the wiser, largely due to ignorance and illiteracy. Plus, there are the inevitable delays due to red tape.
In Odisha, for instance, a large chunk of rural employment comes from MNREGA, which ensures 100 working days to every enrolled individual in rural India each financial year. In the current financial year, according to estimates by experts, 6.48 crore payments are delayed by more than 15 days, worth Rs 4,629 crore, much behind the government’s desire to clear all payments within 15 days.
In Odisha, Vodafone did another pilot and tied up with the state government to disburse wages of MNREGA workers through M-Pesa in the Hinjilicut and Chikiti blocks in Ganjam district. It solved two problems. For those with accounts in local cooperative banks and post offices, it reduced delay in payment. And it helped deliver the money to the people who didn’t have bank accounts.
What works in mobile’s favour is that India has 900 million mobile subscribers, 40 per cent of which are rural consumers. “Time will tell if it is the best possible way, but it definitely seems that m-banking is the best available medium, because of mobile telephony’s penetration in rural India,” says telecom regulatory expert Mahesh Uppal.
HOW VODAFONE DID IT
After travelling through Tanzania, Fiji, South Africa and Congo, M-Pesa finally made its launch in India in April 2013, after a pilot in 2010. That was when Vodafone had tied up with HDFC Bank to become a banking correspondent in a small village called Sikar, in Rajasthan’s Jaipur district. The pilot was small, and wasn’t scalable then due to regulatory problems – the government had yet not given mobile wallet licences to operators. Vodafone was dependent on HDFC Bank to get the wallet activated, which took anything between eight and 10 days. As a result, people would often lose interest and never come back. “We wanted to understand distribution and customer need,” says Suresh Sethi, head of M-Pesa in India. “It was a good learning process for us.”