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44 Porteous concentrated, successfully, on using the mobile as a specialist extension channel. We will discuss one of these—the First National Bank of South Africa—in the second section of this chapter. While first-generation players generally launched in developed- country environments with established financial infrastructure, the initial secondgeneration players launched in 2001 through 2002 in developing-country environments such as Zambia or the Philippines. They soon realized, if they had not before, that they could not assume that there were nearly enough locations at which customers could convert cash into electronic value. Models that depended on bank branches alone simply could not make headway. The second-generation models are therefore distinct in their focus of building a new physical channel of merchants or agents at which cash could be loaded or withdrawn. These models were designed with the assumption that most clients had a basic handset capable only of basic 2G data channels, which was the case for the overwhelming majority of people adopting mobile phones for the first time. A final distinguishing feature of the second generation is that the MNOs had been dominant players to date. We will argue that, in order to develop and protect their core voice business, MNOs had the strongest incentives and abilities to play—but we will also see that these very same motivations may limit the ultimate reach of this generation. The third generation of mobile financial services started with the spread of handsets capable of Internet browsing and running Java-type applications. These capabilities do not require the expense of a “smartphone.” (Smart handsets are spreading quickly but, because of a price tag of US$200 upward, are limited to the top end of the market in developing countries.) Third-generation services simply require an “enhanced” phone or “feature” phone that is Internet-capable: these are now available for as little as US$60 in some markets. For several years now, a greater number of enhanced handsets than basic handsets have been shipped to developing markets, as customers seek features such as e-mail and Internet access. While mobile Internet is in its infancy worldwide, it is already showing what investment analyst Morgan Stanley calls “unprecedented early stage growth.” Africa is no exception to the global trend. A major implication for financial services is that specialist payment providers other than mobile operators may now more easily offer payment services, both as e- commerce transactions and person-to-person payments. A key difference from the second generation is therefore that the arrival of the Internet on the handset has in a sense thrown the door wide open to a new range of providers.
Mobile Financial Services in Africa: The Next Generation 45 These niche providers are already offering innovative financial products in areas such as savings and person-to-person lending, but along with these products come some risks since it is very difficult for regulators to oversee and supervise the large numbers of diverse approaches, sometimes from outside of their jurisdiction. The risks, as well as the potential to increase access under this generation, are therefore higher. The generations described here have distinct characteristics but are not discrete in their timing—rather, they overlap in successive waves, as shown in figure 2.1. Policy makers in Africa today have to deal with all three generations and the differing challenges they bring simultaneously, albeit at differing levels of intensity—the second generation is most prevalent while third-generation models are only starting to emerge. The above genealogy frames the analysis for this chapter. The second section describes the state of play in Africa today, which is primarily concerned with second-generation models. We seek especially to understand why Africa has provided such fertile ground for these models and what their limitations may be for achieving objectives such as greater financial inclusion. The third section characterizes the third-generation models, many of which are still in their infancy worldwide, though they are scaling fast. Here we ask how important this wave might become in Africa. This analysis serves as a basis for understanding the policy and regulatory implications of this new wave. The fourth section consolidates the policy lessons to date, asking what types of regulatory environments have led to the fastest rollout of mobile financial services. It then highlights new questions emerging as well as new opportunities for greater financial inclusion. The conclusion returns to the theme of how best to harness the potential for financial inclusion arising from the now likely outcome that, Figure 2.1 Overlapping Generations of Mobile Payment 1995 2001 2007 2015 1st generation 2nd generation (Celpay, Mpesa) 3rd generation (PayPal, Mxit) Source: Author.
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lic Disclosure Authorized Public Di
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Financial Sector Development in Afr
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Contents Foreword Acknowledgments E
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Contents vii PART III Safeguarding
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Contents ix 4.4 Size of Mortgage Lo
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xii Foreword In their own way, each
Page 16 and 17: xiv Acknowledgments led by Stefan N
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Page 22 and 23: xx Abbreviations FSB FSD FSDT FSI G
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Page 33 and 34: Microfinance in Africa 11 A Special
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Page 47 and 48: Table 1.2 Fanikisha Project Type of
Page 49 and 50: Microfinance in Africa 27 world reg
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Page 53 and 54: Microfinance in Africa 31 Financial
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Page 57 and 58: Microfinance in Africa 35 have yet
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Page 61 and 62: Microfinance in Africa 39 Ehrbeck,
Page 63 and 64: CHAPTER 2 Mobile Financial Services
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94 Coates and Hofmeister farm input
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96 Coates and Hofmeister Technical
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98 Coates and Hofmeister agree to b
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100 Coates and Hofmeister Box 3.3 C
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102 Coates and Hofmeister Attitudes
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104 Coates and Hofmeister developin
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106 Coates and Hofmeister specifica
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108 Coates and Hofmeister ———
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CHAPTER 4 Housing Finance Simon Wal
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Housing Finance 113 Figure 4.1 Mort
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Housing Finance 115 countries, down
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Housing Finance 117 • The housing
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Housing Finance 119 limited to a fe
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Housing Finance 121 housing and inf
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Housing Finance 123 borrowed by ext
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Housing Finance 125 Box 4.1 Afforda
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Housing Finance 127 Box 4.2 South A
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Housing Finance 129 the degree to w
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Housing Finance 131 markets is the
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Housing Finance 133 are unable to o
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Housing Finance 135 greenfield vent
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Housing Finance 137 Figure 4.5 Obst
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Housing Finance 139 changes in the
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Housing Finance 141 • Introduce a
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Housing Finance 143 Box 4.6 Progres
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Housing Finance 145 of the impact o
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Housing Finance 147 funds. Within s
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Housing Finance 149 Hassler, O., an
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CHAPTER 5 The Reform Agenda for Fin
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The Reform Agenda for Financial Reg
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PART IV Financial Sector Reform: Ac
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180 Dafe lack access to external in
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182 Dafe having a positive theory o
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184 Dafe In sum, high transaction c
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186 Dafe through the selective allo
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188 Dafe institutions of the indust
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190 Dafe the boundaries of informat
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192 Dafe range of examples of both
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194 Table 6.1 Period Since the end
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196 Dafe state-owned financial inst
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198 Dafe The degree of success, in
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200 Dafe Although the current conse
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202 Dafe The interdependence of the
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204 Dafe in the 1980s and 1990s wer
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206 Dafe Alternative Approaches to
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208 Table 6.2 Approach to explain/
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210 Dafe state-centered, and interd
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212 Dafe particularly important fac
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214 Dafe Table 6.3 (continued) Mana
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216 Dafe activism in the developing
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218 Dafe structures can undermine m
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220 Dafe Conclusion There is strong
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222 Dafe policy is not straightforw
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224 Dafe banks that open agents in
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226 Dafe Bankable Frontier Associat
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228 Dafe Goldsheid, R. 1958. “A S
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230 Dafe ———. 2001. Types of
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