MOBILE MONEY AN INVESTMENT OPPORTUNITIES FOR THE SACCOS

A Presentation to Field Officers and Financial Extension Workers At the Regional Field Meetings/Workshops

By Wadriff Abdulfatah

- Introduction - Financial Transactions in the Phone -- Investment Costs involved in providing Mobile Money Services by the Agent (SACCO) -- Information Rates and Commission Charges -- Treatment of MM transactions in Books of Accounts - Challenges/Risks in providing MM services

PRESENTATION SCOPE

INTRODUCTION
The continual expanding coverage and use of wireless mobile devices such as mobile phones in developing regions such as Africa and South East Asia, are leading to increased applications to deliver financial services, especially to those in remote regions and whose low income have typically excluded them from the traditional banking system. Penetration of mobile services across the world is increasing rapidly.

INTRODUCTION CONTN
In 1990 there were just over 11m mobile phone users worldwide. Today, over 3.6 billion consumers own mobile phones. Financial access for the poor is still an issue in many developing countries. There are currently approximately only 0.5 million bank branches globally with only 1.4 million ATM's compared to over 3.6 billion mobile customers worldwide.

FINANCIAL TRANSACTIONS IN THE PHONE - CELL

Financial Transactions made through Cell Phones Mobile financial services are often referred to as m-commerce or mbanking applications. They can be broadly categorized as extensions of existing bank services delivery or as innovative approaches of telecommunications providers where the mobile phone network becomes a medium for financial transactions.

FINANCIAL TRANSACTIONS CONTN

Mobile phone network transactions include the use of network airtime or e-currencies for deposit, transfer of funds or credits, and payment of services.

FINANCIAL TRANSACTIONS CONTN

Mobile phone network transactions include the use of network airtime or e-currencies for deposit, transfer of funds or credits, and payment of services. - Branchless banking models - Mobile payment systems - Mobile Payment/Business Development Model - Air-time transfers

INVESTMENT COSTS IN MM AS AN AGENT/SACCO

Partnerships between banks/SACCOs/Agent and mobile carriers mean that both players are into a contractual agreement. However the biggest gainer here could be the banks/SACCOs. - SACCOs will require very minor upgrades on their systems to transact in mobile money while the telecoms companies have to invest heavily in their infrastructure.

INVESTMENT COSTS IN MM AS AN AGENT/SACCO CONTN

- The second benefit to the SACCOs is that the telephony companies will do the work of bringing on board the unbanked clients who the SACCOs have been reluctant to approach in spite of the stifling competition in the banking sector.

INVESTMENT COSTS IN MM AS AN AGENT/SACCO CONTN

To become an Mobile Money agent, each applicant must be a registered company and have operating capital worth UGX 3,000,000 (in the case of MTN) which is held in an account with a Bank, as well as high quality premises.

INVESTMENT COSTS IN MM AS AN AGENT/SACCO CONTN

- Agent must be a registered limited company documents listed below: - Completed agent agreement - Certificate of registration/Incorporation - Copies of Memorandum and Articles of Association - List of Outlets - Company bank account details and rovide proof

Minimum outlets is 1 outlet

INVESTMENT COSTS IN MM AS AN AGENT/SACCO CONTN

Premises and their Maintenance Mobile Money Companies avails branding and marketing materials for your outlets. The minimum branding requirements will be supplied to you on commencement of business.

MOBILE MONEY AS AN INVESTMENT OPPORTUNITY

As a SACCO grows and matures, it may find a need to invest some of its surplus. Investments can provide income, serve as a source of liquidity and can act as a cushion against unplanned events.

MOBILE MONEY AS AN INVESTMENT OPPORTUNITY CONTN Investments Criteria

The fundamental guide to investing is the SLY principle, which is based, in order of importance:

Safety, Liquidity and Yield.

If an investment meets the safety guidelines, liquidity is examined. If safety and liquidity are satisfactory, then yield is considered.

MOBILE MONEY AS AN INVESTMENT OPPORTUNITY CONTN

Safety in an investment is concerned with

the possibility of a loss. The degree of safety changes with time and must be routinely examined.

Since the members entrust the SACCO with their funds, safety is a paramount consideration.

Liquidity is the ability to convert an investment into

cash. Rule of thumb, the more liquid the investment, the lower the yield. Conversely, the more time the investor is willing to leave his funds in business circulation, making the investment less liquid, the higher the return or yield.

Yield
The commission on mobile money should be properly calculated and SACCO must include that in its cash flow.

IDEAL PROCESS FOR MOBILE MONEY INVESTMENT IN

SACCOS

Develop a cash-flow estimate. Make internal preparations for investment decisions.

Determine portfolio requirements.

Develop internal controls to manage risk.

Purchase the investment.

Follow-up

INTERNAL CONTROLS FOR MOBILE MONEY RISK

MANAGEMENT

Internal Controls Internal controls are an integral part of the investment process and supplement the written policies. Appropriate staff should be designated and controls established to:
Ensure that all mobile money transactions are properly accounted. Include all new investments in mobile money in reports to the board and management. Provide for adequate safekeeping of records

Restrict to the degree possible, amounts of investments are matched with liabilities.

ACCOUNTING ENTRY
1.

When money is invested

Dr. Mobile Money Investment Cr. Cash/Bank with the amount invested

2. When Commission is Received Dr. Cash/Bank Cr. Commission - MM with comm. received

TREATMENT IN FINANCIAL STATEMENT