Policy support and MDGs

Financial inclusion and financial deepening have an important role to play in promoting
economic growth and reducing poverty and inequality, while mitigating systemic risk and
maintaining financial stability. M-Pesa aims at providing easy payment and cash transfer to
the poor and the remote through mobile services. Hence, it plays an important role in the
development policy framework of India. It fits into to the policy framework of Financial
Inclusion, adding a new way of approaching the issue.
It addresses the following MDG Goals directly or indirectly:
MDG Goal No 1: It helps in reducing poverty and hunger indirectly. It neither provides
employment opportunities nor works towards providing food to the hunger but indirectly it
helps the poor people to easily get payment regularly, receive money at a faster rate from
their family members who have migrated to earn their livelihood with the help of mobile so
that they can start new business activities which indirectly improves their financial state.
MDG Goal No 3: To promote gender equality and promote empowerment of women. It
helps the women again to get loans, pay their bills faster. Thus they dont have to depend
on men for different activities and even can start their own enterprises. The financial
independence empowers women as their say and decisions do matter now.
MDG Goal No 8: To develop a global partnership for development by creating an open, rule-
based, predictable, non-discriminatory trading and financial system. It is open and non-
discriminatory as anybody can use it and there is no restrictions with respect caste, creed,
culture etc. It has certain procedures and rules which are very easy transparent, and
predictable.
In the future it can deal in various other MDG goals. Some have been implemented in India
now as mobile technology can be used to extend the reach of education by enabling
students in rural areas to join lessons remotely, and by helping teachers manage student
attendance and performance and access educational content. Learning with Vodafone
solution in India, developed by the Vodafone India Foundation, in partnership with Pratham
Education Foundation, uses innovative software and mobile internet to train teachers and
help them engage students using interactive learning materials and multi-media content. In
India, our e-Mamta initiative is helping to improve maternal health by ensuring timely and
pro-active pre- and post-natal care in association with the Gujarat state government
In India, the Vodafone Foundations Red Rickshaw Revolution saw three women drive a
rickshaw from Delhi to Mumbai over 10 days in March 2013 to showcase inspirational
women and highlight their achievements along the route. They raised 30 million rupees for
three partner NGOs that work towards empowering women across India. It is also
empowering women across India through our 16 Angel Stores, which are managed and run
exclusively by female employees.

Supply Driven:
It is currently supply driven in India. This service is provided by Vodafone in India. At present
the average revenues per user (ARPU) is around Rs. 200 per month which is very low. Thus
the telecom companies are seeking opportunities in seeking more revenues by providing
additional services which can be offered using mobile platform in rural area. The Universal
Service Obligatory Fund (USOF) of 14000 crore fund is available to set up the infrastructure
and increasing the m-awareness in rural area. To use the M-Pesa service, Vodafone
customers need to visit an M-Pesa agent at present, there are more than 8,300 specially-
trained authorized agents fill out the requisite form, submit proof of identity and address,
and deposit a minimum amount to open their M-Pesa accounts. The MCSL mobile wallet
gets activated immediately and the customer can carry out a variety of transactions, such as
deposit cash, transfer money, recharge mobiles and pay utility bills. Customers pay a
minimum of Rs 200, of which Rs 100 is deducted as a one-time account activation fee. The
remaining amount is credited to the customers account. It has also tie up with ICICI bank
for authenticating all the financial transactions so that the customers are not worried about
the security and have the trust that their money is safe.
Demand driven:
M-PESA has a good scope of being converted to demand driven since it provides a very
disruptive technology for money transfer. In India, many people migrate abroad or to cities
to earn money for their family, hence the demand for domestic remittances is very high in
India. Considering India's huge migrant population - a lot of people travel to bigger cities
such as Delhi and Mumbai for jobs - sending money back home has always been a big
worry. Often people would either wait to go home, or send money through someone
immediately travelling to their village.
M-Pesa has made their job easy. Here is how it works: A person pays Rs 100 as a one time
activation charge, with lifetime validity. Then he recharges with whatever amount he wants,
and can transfer the entire money through a simple message to any part of the country. The
receipt of the message can go to the nearest M-Pesa agent, and ensures the money is
encased. Moreover 51% of the population of India has mobile phones currently, yet 40% of
the population has no access to bank. Hence, people will find it easier to transfer money
through mobile rather than banks. The other mobile based services transactions need to be
conducted on a phone via an internet connection, which is not only a relatively expensive
service but also requires basic know-how about the internet technology while in m-PESA.
But there are certain obstacles in this path in India today due to the stringent banking and
RBI regulations. As per the RBI regulations the person who deposits money in the M-Pesa
account, can't take it out - a tie up with a bank is required to do so. Documentation of the
person who takes out cash from his own account needs to get approved by ICICI Bank.
Moreover, the number of M-PESA agents is also not very spread out in India. For example: I
have to travel till Vadodara to get my M-PESA cash if I withdraw as the nearest M_PESA
agent from Anand is at Vadodara. Entire distribution is restricted. We have to be in radius of
30 kilometres of an ICICI Bank. Thus to make it demand driven from supply driven in India,
the above obstacles needs to overcome.
Disruptive:
The technology is disruptive in the sense that mobile is being uses (sms, ie, even GPRS is not
required for money transfer. Money can be transferred only via a SMS. It disrupts the postal
service and internet transactions. Existingly money istransferred either physically or by using
money order service by post office. There are around 638596 villages. There is one post
office for 5 villages. The reach of Post offices is still low as compared to mobile recharging
shops which are not govt. driven but are run by village level entrepreneurs. For sending the
M.O. one has to fill up the form and also provide an identity card which is not required in m-
pesa. m-pesa transactions are assisted by the mobile shop owner.
Social-embeddness:
User-centered design: It is user-centric explained by the following 3 criterias:
Usefullness: M-pesa is positioned as a medium to transfer money from one place to
another. The beneficiaries would be the migrants from villages who want to send money
back to home.
Migration rate in rural India is around 26 percent. According to NSSO the main reason for
migration from rural area is employment seeking. It s also found that there is an increase of
18 to 39 percent in monthly income after migration. It also provides easy platform for
transfer of money, payment of bills, hence saves the transportation charges.
Ease of use: The user can do all the transactions themselves through their mobile without
the need of any 3
rd
party in a very simple way. It is innovative transformation.
Actual Use: There are more than 60,000 such agent managed outlets in the country, and a
surprising 52 per cent of the centres are in rural belt. It is the largest network, even
surpassing State Bank of India's 38,000 centres.
They are partnering with government now to take it to another level of inclusion.
Vodafone is working on a pilot project on money disbursement through Mahatma Gandhi
National Rural Employment Guarantee Act (MNREGA) which guarantees employment of 100
days in a year. The state government will directly disburse the money over the M-Pesa
platform to the villagers, which they can instantaneously encash from the agents. In another
project in the Namkom, in Jharkhand, Vodafone is working on a pilot with the government
of Jharkhand, transferring money under the National Rural Health Mission to pregnant
women, and mid-wives through M-PESA.
Positioning in the mind of the citizens: 17 percent of migrants belong to these classes
whereas only 3 percent of bottom monthly per capita expenditure (MPCE) decile classes are
migrants. About 18 percent of migrant population is illiterate whereas 38 percent are
graduate or above.
36 percent of households in bottom MPCE class receives remittance whereas 39 percent of
top classes. The average remittance sent to rural area from abroad is Rs. 52000 and from
within India it is Rs. 13000.
The m-pesa is targeting the literate medium and top MPCE decile classes.
Thus, it is both socially embedded and disruptive.