Mobile Credit

As mobile applications continue to grow in popularity, several companies and nonprofits in sub-Saharan Africa have joined the industry; the most notable of which have won competitions held be Android Challenge SSA (Google), Apps 4 Africa (US State Dept), MTN, and Pivot25 (infoDev) in Kenya. The winning apps have included games, media, commerce, education, and agriculture. As an example, iCow, winner of the Apps 4 Africa challenge, is the world’s first mobile phone cow calendar, and helps farmers track their cows’ estrus stages, while giving them valuable tips on cow breeding, animal nutrition, etc. The most successful mobile innovation has been M-Pesa and has even inspired related e-commerce businesses such as Pesapal and Pesapoint. Despite the growth of mobile commerce, however, access to financial credit remains a challenge for African entrepreneurs and farmers alike. In response, a number of efforts to build credit opportunities have developed across the continent, including micro-financing initiatives, private credit bureaus, and both Visa and Mastercard have made strategic partnerships. Thus, the question remains, what role will mobile applications play in granting access to financial credit? Already, the digital age has begun to blur the line between formal and informal lines of credit by connecting individuals from across the globe through sites like Kiva.org or Kickstarter.com. Both sites allow individual lenders to contribute a small amount (as little as $25) to a larger fundraising goal. While Kiva is a non-profit that works through micro-financing groups in developing countries who lend primarily to farmers (i.e. a Kenyan farmer is seeking $500 for chicken feed), Kickstarter focuses specifically on projects directly related to the arts or media (i.e. documentary filmmakers in Ghana raised over $11,000). Similarly, in the US there are sites where one can seek a personal loan (lendingclub.com) or a new mortgage on your home (lendingtree.com). Through the Lending Tree, banks actually pay the site for the access to review your mortgage application and compete for your business. Through these few examples (and a little creative thinking), one can already imagine a farmer or entrepreneur in East Africa uploading relevant pictures and personal information through their mobile and competing for investment capital from formal and informal sources alike. And while formal sources may need to wait for credit bureaus to become more developed, informal credit groups can join the mobile apps movement today.This past December, Visa and the government of Rwanda entered a Charter of Collaboration to develop financial services locally. Among their 12 key initiatives, Visa has committed to deploy mobile solutions as well as introduce payment products (including credit, prepaid and debt). By working with both banks and telecoms, Visa will be able to develop a traditional credit structure, while also innovate mobile commerce solutions by taking the movement M-Pesa began a step further. These initiatives could potentially enable every mobile phone subscriber to build their credit and gain access to credit by developing the M-Pesa model into a prepaid credit system. Only a couple months into their formal collaboration, it is difficult to predict the success of this pilot project, but its ambitious goals are encouraging of where the future of mobile credit may lead. In 2011, the global e-commerce industry reached $680 billion, yet without access to credit cards and other financial products, Africans will remain unable to buy and trade online. While some American markets have moved from brick-and-mortar retail locations to online sites (i.e. Amazon.com), the rising tide of mobile applications may one day allow farmers to run their entire business from their phone; from seeking loans to buying supplies and equipment and ultimately, finding wholesale buyers for their agricultural products. First however, we must continue to build the infrastructure of credit bureaus, improve e-security, and educate the general population on the benefits of credit. The increase in mobile application competitions is promising, but the bold initiatives that governments, banks and credit agencies take today will determine where the future will lead us tomorrow.

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Mobile Credit