Mobile is Transforming Africa’s Remittance Market
Across the world, migrant workers face an uncertain future, difficult labour conditions, and a myriad of bureaucratic challenges. In South Africa, they face an additional hurdle: Exorbitantly high remittance fees.
Mama Money is a startup in Cape Town, South Africa that is trying to alleviate the burden of high money transfer costs by taking on industry leaders with a mobile-focused business model. Mama Money’s approach to money transfer is purely digital, in which money is transferred via mobile phones and received directly in the destination account. Companies like Mama Money are challenging major corporations such as Western Union and leading South African banks in the lucrative $2bn remittances trade, with dramatically lower fees.
Along with Nigeria and Egypt, South Africa is one of the continent’s largest economies, and a beacon for migrant labour. Of the country’s 3.2m migrant workers, roughly 2m come from neighbouring Zimbabwe. Unlike other economies of scale with similar migrant labour demographics, South Africa levies extraordinarily high fees on remittances from the country. As Zimbabwe’s economy continues to be plagued by dangerous instability, remittances from South Africa play a crucial role. There has even been discussion in Harare of the country adopting the South African rand instead of the US dollar as its official currency.
South Africa’s youngest bank licence holders
For Mama Money’s co-founders, Matt Coquillon and Raphael Grojnowski, the idea to lower remittance fees for South Africa’s migrant workers took shape on an epic road trip across the continent. As Coquillon, a South African, was hitch-hiking his way through Africa on a corporate sabbatical, he met Grojnowski, a German, who had been working for the UN World Food Programme. They travelled together in Grojnowski’s “big yellow bus”.
A year later, they met again on the sidelines of a World Food Programme conference in Rome, and Mama Money was born. From the start, social entrepreneurship played a major role in the company’s vision: A money transfer business located in Cape Town that would bring down the cost of small remittances from South Africa for migrant workers.
But make no mistake — Mama Money is not a charitable endeavour. It is a commercial enterprise that sees profits in the digitalisation of remittance for low-income workers sending small sums back home. Targeting a small segment (low-paid Zimbabwean workers) allows Mama Money to build a base of loyal customers without attracting too much attention from big players in the industry. This is the essence of a ground-up business model for a sector desperate for change.
With little background in finance, Coquillon and Grojnowski were able to convince the Central Bank of South Africa to issue them a licence. “We said to everyone, give us a chance,” Coquillon told me. “I don’t know exactly how it happened but we received a licence, becoming the youngest guys ever to get a money transfer licence in South Africa, and the first startup.”
With licence in hand, the company began by employing roughly 650 Zimbabweans to act as agents and sign on other migrant workers for the service. These employees go to churches, markets, and other public places around South Africa armed with a smartphone to capture the identification details needed to create an account and set customers on their way.
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