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Kenya’s Cell Phone Text-Messaging Program Is Potential Microfinance Tool

March 13, 2009 04:30 PM
by Anne Szustek
Inspired by M-Pesa, a cell phone payment system used in Kenya, Txteagle plans to get unemployed Kenyans working on small tasks via text message.

Cell Phones in Kenya Serve as Handheld Payment Devices

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A few years ago, Kenyan cell phone service provider Safaricom began offering a service allowing prepaid subscribers to send airtime credits to friends and family living in far-flung areas. Eventually, the cell phone credit evolved into a currency of its own.

“Lots and lots of people were using it as a surrogate for currency,” Massachusetts Institute of Technology researcher Nathan Eagle told tech blog GigaOM. “Within about a year, (Safaricom) became the biggest bank in East Africa.”

Subsequently, Safaricom launched “mobile payment service” MPesa, and Kenyans now use MPesa credits to pay for everything from well water to cab fare. According to Wired magazine’s Epicenter blog, 30 percent of Kenya’s population now pays their electricity bills via mobile device.
Eagle, who has been living in East Africa since 2006, saw potential in mobile technology as a means to further empower Kenyans financially. His program Txteagle uses a low-bandwidth mobile phone protocol called USSD to pay users to do small tasks like translating phone menus or listening to short ads.

It’s still in trial format. But if Txteagle proves to be a success, there could be “15 million Africans ready to start working on their mobile phones,” Eagle said at this week’s O’Reilly Emerging Tech conference.

Both GigaOM and Wired Epicenter compare the program to Amazon’s Mechanical Turk, a platform that connects employers with freelance workers willing to perform small online tasks.

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Background: Cell phones powering economic development, regional currencies

It is often simpler and cheaper to set up a cell phone network in a developing country than to put in phone land lines. Cell phone subscriptions are climbing faster in Africa than anywhere else in the world, according to recent data from the GSM Association. 

“The unsated hunger for connectivity, communication, and information just leaps off the charts. Let’s look at, say, Peru, where cell-phone use grew 57%” in 2007, wrote David Kirkpatrick for Fortune magazine, “or the real mobile growth champs—Vietnam at 114%, Pakistan at 170%, and Ukraine at a whopping 185%” in 2007.

And like Kenya telecom Safaricom, U.S.-based Western Union Corp. announced last year that it would make available a service that will let customers in the United States wire money to relatives in Latin America using their cell phones.

Regional currencies in use around the world also bear similarities to Safaricom’s MPesa service.

BerkShares, a local currency flowing through some 350 businesses in the Berkshires region, offers customers an inherent 10 percent discount and gives them impetus to shop at participating businesses. Since its inception about two years ago, more than $2 million in BerkShares has been spent.

Thai village Santi Suk implemented the “bia” about a decade ago to mitigate the effects of the Asian financial crisis, which weighed heavily on the Thai baht. 
“We need our own money more than ever now,” Phra Supajarawat, a Buddhist monk who moonlights as the unofficial governor of the bank behind the bia, told The Wall Street Journal.

Reference: Cell phone projects in developing countries; volunteering overseas

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