Cellphone Banking in Kenya

Matthew Clark's article in the October 12, 2007 edition of The Christian Science Monitor discusses how poor Kenyans, without access to banks, are using a system of cellphone banking to send money from the slums of Nairobi to the villages from which they came. Called "M-PESA," the "M" standing for "mobile" and PESA for "cash" in Swahili, the system, not connected to any bank, allows people to select from a short menu on their cellular phones such options as "send money" or "withdraw cash." The person receiving the funds can then go to an M-PESA agent or participating gas station to receive the funds.

Kenyans love this system. It provides them a means of getting money back to the rural villages without the dangers of carrying large amounts of cash. This in turn allows the people in the villages to more effectively and efficiently run their farms and make a living.

Africa has more than 225 million cellphone users, according to the article. This is double the amount from just two years ago. In a part of the world where it does not make sense for large banks to open branches, because the transactions are small and the administrative costs too large, this "banking" system empowers the poor by providing them the means to "save for a house, plan for emergencies, or get a loan," according to Mr. Clark. Matthew Clark noted the number of people in the slums who receive money from people in even poorer rural areas. Mr. Clark explained that many urban dwellers were receiving money from the villages to invest in their small business in the cities. This would be impossible without a system like M-PESA.


India has a population of approximately 1.136 billion people of which 72.2% live in rural areas. A majority of these people including low income people who live in urban areas do not have access to the banking system as opening an account is a major hurdle.

Eko India Financial Services Private Limited (www.eko.co.in) - startup company based in Delhi, India is looking to extend banking facilities in these untapped/un-banked areas through the use of mobile phone as a channel (currently there are over 200 million mobile phone subscribers (GSM & CDMA). Eko is looking to ensure greater financial inclusion and increase the outreach of the banking sector as envisaged by RBI – the Indian Federal Bank through the use of Business Correspondent Model.

Initially starting with No-Frills Savings Accounts, Eko later intends to have three lines of business; platform, membership and payment. Eko has signed Letters of Intent with three banks including a large MNC bank and two Indian private banks to do a pilot at Uttam Nagar, a low income area in west Delhi. The pilot project is scheduled to go live in the 1st week of December.

Eko aims to become a $1 billion market cap company by 2011. This will require Eko to be a $100million plus revenue company with clear visibility to $1 billion in revenue by 2015 with good profitability.

Our team can execute and has the ability to attract world class talent. We believe that we are capable of achieving the targets as we have a disruptive solution that leverages the widespread usage of mobile phones and processes that are based on a self regulating “Circle of Trust” powered by Eko Relationship Officers (agents). Eko is adapting the success of prepaid methodology in the telecom industry for financial inclusion using several innovations, one of which we have patented. Eko aims to have 100 million plus members and the ARPM (Average Revenue per Member) will grow from $1 per member annually to $10 per member. In other words Eko is aiming at building critical mass and monetizing it.

With the pilot project we aim to refine our model and once we have a robust system we will grow rapidly. Eko is also fortunate to be in a space where they will help improve the lives of their members with dramatic improvement for the lower income group.

Eko has a number of competitors and expects the number to rise. We ensure zero cost for the customers. Additionally, our competitive advantage lies in our ability not only to innovate and execute on a total end-to-end solution but also bring in ease of use for the customers rather than just be a technology provider. Further, our business model aligns the incentives for all the members of the eco-system to make a win-win deal for all. We will have to run smarter and harder to become one of the leaders (market is very big for just one dominant player). It gives us some comfort that in disruptive models incumbents find it difficult to compete.
Josh Burker said…
Hmm, I'm tempted to call this comment spam, but it is encouraging to see projects similar to the one in Kenya emerging elsewhere.
I am sorry but the intent was not to spam.

Eko’s unified approach to financial services will address two key challenges - ubiquity and comprehensiveness of range of financial services. Often financial services with the focus for financial inclusion have resulted in high transaction & servicing costs, inadequate collection & use of customer information, and a focus on credit based services leading to the exclusion of more needed services including Savings.

The need is for a secure & convenient system that offers choice & customer delight. The most fundamental need is a savings account. Eko plans to integrate and create an ecosystem which greatly leverages existing infrastructure to enable a very low cost “No Frills Savings Account”. Eko plans to execute widespread distribution, in partnerships with banks, of these very low cost “No Frills Savings Account” under the “Business Facilitator and Business Correspondent” regulation from RBI.

We are putting together an infrastructure for “No Frills Savings Account” (NFSA) Infrastructure. Eko Cash Points are retails points who have existing “Prepaid Recharge” business. 24x7 pharmacies will be ECPs providing 24 hr services. Eko Relationship Officers are individual who have full KYC (Know Your Customer) compliance and minimum 1 year of “good” banking record. Such individual would be “introducers” to customers who have limited KYC. This is a mandatory requirement defined by RBI regulations for customers with limited KYC to open “No Frills Savings Account”.

The only infrastructure which will be created grounds-up is going to be the Eko Operations Center (EOC). EOC setup may be distributed in early days of operations in a city/region and would be consolidated once the distribution setup is integrated and in full swing of operation. ECPs and EROs are not working full time for Eko. It is an added source of revenue for them. This model has been inspired by various “agent models” deployed across the globe.

The complete ecosystem is energized by the technology platform. The technology platform adopted is MIFOS, which has been developed by the Grameen Foundation and has been deployed by more than 18 MFIs across the globe.

Once the customer requests for creating the account, the ERO in the same locality is notified. The ERO visits the customer at her/his residence and gets a form filled. Subsequently, ERO brings the customer to the ERO Facilitation Center where the customer is photographed as part of the KYC information and a starter kit with a signature booklet and operating manual (comic) is handed over. Once these procedures are completed, the customer’s account gets activated and now the customer can deposit and further withdraw money at ECPs.

The ECPs are expected to keep a security deposit against which they can mobilize deposits. The security amount is flexible and it is the limit to which the respective ECP can mobilize deposit.

Eventually, multiple value added services would be offered to the members, including more credit and savings product apart from transactional services.
Josh Burker said…
How about a link for the venture capitalists?
Our website site is www.eko.co.in

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