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Michael Kimani @pesa_africa
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How Africa's Airtime Currency Resellers Birthed Mpesa and Mobile Money /thread
Over 90% of Africa's mobile phone subscription is prepaid. in laymans, this means you top up your phone with airtime currency, before you can use mobile network services - calls, sms, data bundles /2
Walk up to an agent
Hand over cash
Agent tops up your phone with airtime currency

Then you're good to go!

Africans love it b/c its flexible. You only spend when you *need* to. /3
So when cellphones took off, airtime currency took off too!

Everyone learnt how to use this new currency called airtime. You cld buy it as a paper voucher or have an agent "wire" this currency to your phone number.

100 CFA franc cash for 100 airtime units

1:1 /4
Tigo, Safaricom, Vodacom, Airtel - Telcos in Sub Saharan Africa use this model. Pretty standard.

So its interesting how the pattern of airtime as a currency for remittances emerged all across the continent! /5
Airtime is p2p on the same network. Its a "Telcos" coin on a closed network.

So once you have it on your phone, you can just ping it to someone else at no cost. Its friction less. /6
"In 2006 The UK’s Department for International Development had observed Africa’s mobile subscribers sending prepaid airtime to each other as some form of quasi-currency." /7
From what i've come across patterns suggest its usually due to an economic opportunity to fill a service like an opportunity to offer money transfer services. Sometimes it is shock/crisis eg war, famine, drought, boko haram? /7
"For example, Chipchase and Tulusan (2007) describe the informal ―Sente system of airtime exchange in Uganda, where would-be senders can top-off the airtime accounts middlemen (prepaid airtime resellers)" /8
In South Sudan

"As a result of friction, consumers resorting to solutions; I.e, prepaid airtime transfer as an alternate currency. Cashing out minutes with a merchant fee or 10-20% is popular" /9
"the practice of using airtime as money is quite widespread in Côte d’Ivoire, Egypt, Ghana, Uganda and Nigeria, in part because the regulatory environment has not been conducive towards the development of scaled “real” mobile money deployments. " /10
So here is the interesting story about how Tigo Airtime currency Agents gamed airtime distribution in Chad, before the arrival of mobile money

Tigo (airtime issuer)
Airtime Agent A
Agent B
Receiver 11/
Agent A goes to Tigo to buy say 100 K airtime credit for resale provides 100K cFA in cash

Tigo will then issue 105K credit to this agents airtime reseller's wallet (including say 5% commission that he will only realize in cash after selling) /12
Now, instead of selling airtime to consumers for phone calls, they gamed the system to provide money transfers

Here is how it works

A Sender needs to send 100K CFA to a parent back home in rural. The agent will charge him 5% for this "remittance servie" /13
Sender provides 105K CFA in cash. Calls the receiver and asks him for the closest Agent B with enough liquidity

(this is very smart because they verify if there is enough liquidity at destination before making the transaction)

Agent A sends 105K airtime credit to AgentB /14
Agent B gets 105K in airtime in his reseller wallet, and provides 100K CFA in cash to the receiver.

At this stage, Agent A has made 5K net cash of profit

Agent B made a virtual 5K profit and is now actively looking for the next sender /15
the initial 105K airtime credit moves from agent to agent multiple times...each of them making money on commission...regardless of whether customers are buying airtime for phone calls /16
Agent B does not care if the next customer is buy airtime or actually sending money ... given in both cases he receives cash. Tigo doesn't loose much but only makes money when a customer buys actual airtime not send money. /17
Low end consumers preferred this method because only agents had to manipulate this airtime credit. They just hand cash, and make sure the receiver got cash before leaving. simple 18/
This is a very sophisticated scheme set up (informally) by extremely shrewd agents!

Till today, it is quite hard to curb. It can only be done by applying some hard zoning which generally results in liquidity shortage 19/
@prepaid_africa just shared a link to a TED video by Jan Chipchase @janchip

Titled " The Apnthropology of Mobile Phones"

How appropriate! I think there's a lot to learnt from the quirky patterns in our highly informal Sub Saharan Africa economies /20
"the practice of using airtime as money is quite widespread in Côte d’Ivoire, Egypt, Ghana, Uganda and Nigeria, in part because the regulatory environment has not been conducive towards the development of scaled “real” mobile money deployments. " Economist, 2013 /21
In the African context the informal sector is great at identifying service gaps, demands and typically responds by cobbling together a hack from locally accessible artifacts to fill this need.

The airtime for remittances example above /22
Where a shrewd entrepreneur, taps into a money making opportunity to fill a service gap where there is true demand by putting together mobile phone, airtime units and an informal agent network. /23
I come across these patterns in different sectors far too often in my line of work (?)

online biashara (trade/commerce)
mass transport matatu
social savings groups/chamas
offline biashara 24/
Ive seen this pattern in East Africa where peer to peer networks thrive to fill a cryptocurrency gateway service void

Why Kenya’s Cryptocurrency Agents of 2017 remind me of airtime p2p networks of 2006… /25
Another pattern is informal sector biashara people using their phone numbers as a means to advertise their services/biz ID

Or the emergence of phone charging as a service /26
"Oketch, a cross border trader in Uganda stores his most important
trading contacts' mobile phone numbers by writing them on the
wall of his shop. A mobile phone with contacts in it might be lost,
but not the numbers here!" /27

There's too many patterns. Some are offline in the real world, some are online on whatsapp and social media, others are a mix of both. /28
My thesis is, if you want to build/innovate a successful service/product in africa, scale, and lower barrier of adoption you need to look for patterns/quirks and explore them. Therein lie the clues to answer the question "what do i build?" /29
The success of mobile money and mpesa is built around such hacks observed in the informal sector.

The airtime currency hack by agents cited above was adapted and formalized into a full fledged mobile money transfer payment system on cellular network /30
A new digital unit was created w/ rules on issuance. this Mpesa token is equivalent to 1 unit of local currency and can be sent back and forth on the network as emoney.

Telcos companies flipped the idea into a highly profitable business of money transfer by charging fees /31
Another quirk identified was how people sent cash remittances back home. An envelope packed with cash was typically hand delivered to an informal matatu bus service for transport and picked up by receiver at the bus service at destination. Matatu service charged a fee /32
Mpesa and mobile money are built on these 2 "discoveries" then plastered with tech

An agent network for cash in and cash out
Virtual currency mobile phone units
Mobile phones
Cell phone towers

Simple clues that have radically transformed the economies of East Africa /33
Clues form the informal sector hacks by biashara actors.

Indigenous, Ingenious Or Both?

"Africans are not the passive recipients of technology many people seem to think they are." /34
Researchers hav fr some time been observing the behavior of users in developing countries, seeking to identify the next big thing. many of these ideas spring from "the fertile mind of some user who wanted to do something with a mobile that their operator hadn't provided yet." /35
"Whilst many traditional development approaches generally introduce alien ideologies and concepts into developing countries -- sometimes for the better, often for the worst -- today's emerging mobile services are very much based on a model of indigenous innovation." /36
the whole financial industry in East Africa was completely redesigned from bank led, branch led, card led financial services to a telcos + mobile phone + virtual currency + agent network led financial industry.

Its funny how banks in East Africa have been forced to adapt /37
This is my agent, where i bank these days from my mobile phone /38
Today in Kenya alone we have an agent network of over 200,000 agent points for mobile money payment, transfer services & bank services

billions of KES flow thru Mpesa monthly.

1 Telcos
1 country

Now multiply this times all the countries in SSA with Telcos and mobile money /39
If you are just getting started in Africa as an outsider (Mzungu, Chinese) or you come from an African country that's just beginning to unravel, or an entrepreneur banging your head on a product idea, look no further than the cues and hacks of informal sector culture /40
Right now, i am working on product @Chamapesa based on a quirky pattern too that Ken Banks wrote about in his famous

Mobile Finance: Indigenous, Ingenious Or Both?… /41
Here is the quirky pattern /42
And just like airtime currency patterns, its manifested across the whole continent /43
Mobile technology is today showcasing African grassroots innovation at its finest! And i'm glad to be part of it!

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