This week, the Branson Centre of Entrepreneurship and FORUS Financial Transaction Services announced the launch of the Mahala Project, which provides free mobile banking to communities that are unbanked or financially under-served.
The Branson Centre’s entrepreneurs will be amongst the first people in South Africa to be signed up on the Mahala Free Banking Platform when it goes live at the beginning of May 2011.
One of the major benefits of providing free banking to micro-enterprises, is that, finally, this vital sector of the market can have access to capital for their businesses. The Mahala Mobile Platform also provides these small enterprises with affordable access to advertising and customer loyalty programs. The revenue generated by these value added services pays for any bank charges incurred. This is the Google model applied to mobile telephony.
The Mahala Mobile Platform is an open system, and is available at a nominal charge to all banks and e-wallets wishing to serve this market segment.
By offering financial inclusion to individuals, small businesses and smallholder farmers, it is expected that thousands of jobs will be created, and hundreds of thousands of individuals can now be given meaningful assistance and the opportunity to rise out of poverty.
To this end, FORUS is engaging with government and other role-players to make funding available to this market segment, and will supply their solution to these customers without charge. Lending institutions will now be able to disburse loans, and collect the repayment installments, without obligating customers to pay high travelling costs and bank charges. Furthermore, lenders will now be able to monitor the performance of these businesses, allowing them to lend more money where appropriate, or assist those experiencing difficulties.
Mahala will also make its platform available to government and banks for the distribution of grants and other funding. Based on extensive research, it is estimated that once the roll-out is complete, the government will be able to save in excess of R5 billion a year in cash distribution costs.
Redressing a Social Need
An estimated 13 million people in South Africa (nearly 27% of the population) do not have bank accounts. One of the contributors to the dependance of these customers on cash, is the lack of point-of-sale card terminals at local shops and merchants. Transaction values are low, and becuase banks have been unable to adjust their business model, they remain constrained by high overheads and ageing complex systems.
The aims of the Financial Sector Charter cannot be met by replicating the labour and capital-intensive banking model already under threat by innovative internet and mobile based competitors.
A New Paradigm
There is mounting evidence that the mobile phone, because of its technical sophistication and ubiquity, has the potential to securely replace cash.
In developing countries such as Brazil, India and Kenya, mobile payments have resulted in substantial economic upliftment and gained the trust of the community. In South Korea, government-supported uptake has proved so popular that mobile payments are the norm.
Mobile phones, and particularly SMSs, are proving to be the most cost effective advertising available on any channel. Because advertising can be targeted to specific consumers, and can incorporate the customer’s location, mobile advertising has become the fastest-growing segment in the advertising sector.
Mahala customers can enjoy free money transfers, bill payments, as well as discounted airtime top-ups and retail shopping where discount coupons and loyalty incentives are the norm.
Cash deposits and withdrawals that are done as part of a purchasing transaction are free. The fees charged for cash withdrawals and deposits are paid to the money agents, who ensure there is cash available when needed. Mahala’s agent platform has been designed to empower agents to act as outlets for other mobile banking products. Collaboration is as vital in the Mahala model as it has proved to be in the SASWITCH ATM agreement that links our banks today.
Mahala is a new banking and payments paradigm, whose design exemplifies the principles of internet-era mobile commerce.