Why NGOs are switching to mobile money
Hint: It’s not about financial inclusion
Mobile money is being touted in the development sector as one of the most promising mobile applications that can drive financial inclusion for the BOP, empower people and grow emerging economies. But these positive outcomes might just be side effects of another, less-discussed phenomenon.
After spending the last two years helping organizations switch to mobile money, we’ve found that it’s not always the prospect of enhancing financial inclusion that’s driving NGOs to adopt mobile money. It’s a desire for more transparency.
In Uganda, where USAID spent $293 million USD in FY 2014 and there are very public examples of corruption, the potential losses due to cash use could easily be in the tens of millions.
The first step towards transparency is to admit that you need it
In the past 8 months, Save the Children, FHI 360, PACE, World Vision and EGPAF* are just a few of the organizations in Uganda that signaled interest in making the shift to mobile money. The common thread among all of these organizations? They are beginning their mobile money journey by digitizing internal cash disbursements.
All of our customers are encouraged to pilot mobile payments internally, prior to exploring payments to vendors, training participants or beneficiaries. Piloting internally allows for organizations to adjust accounting cycles and troubleshoot any issues with their own staff. It also prevents future problems when making payments to external recipient. Upon switching to mobile, many organizations are surprised to see just how much more efficient and transparent their operations become.
This was the case for one customer working in the agriculture sector. They suspected that some of their agents were bribing farmers, but didn’t know just how much money they were losing. Once they switched internal payments to mobile money, they were able to eliminate these losses and their operations became far more efficient.
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It would surprise me if NGOs were unaware of the losses they were incurring due to cash payments. Issues with cash management are often deeply rooted and might be swept under the rug to avoid exposing how big they have become. Pressure to conceal losses might be driven by a fear of admitting them to donors, upon whose funding they depend.
Overcoming resistance to make the shift to mobile
For cash-based organizations, internal resistance to switching to mobile money can be strong. Those who are benefiting from the cash-based system are likely to protest most adamantly against a transition to more transparent payment platforms. They are incentivized to demand the status quo.
Increasingly, however, great tools are making the shift from cash to mobile easier, and organizations with strong leadership and commitment are able to overcome internal resistance to enable a break from cash. In our experience, the most successful organizations are those that commit to making the shift and see it through to the end.
Financial inclusion: Not a cause, but a powerful side effect
While “financial inclusion” may not be driving organizations to adopt mobile money, it is a powerful side effect of this transition. Integrating mobile money has been proven to lay the rails for true financial inclusion to be achieved.
While most of our customers first focused on internal cash disbursements, many are now paying vendors and beneficiaries using mobile money. Low payments transparency might be a near-inevitable consequence of cash-based payment systems, but it can be avoided through a transition to mobile money.
As adoption increases, so will the availability of additional services. Merchants will start to accept mobile money, insurance companies will offer micro-insurance to payment recipients and lenders will offer recipients savings and loan products.
Thinking of making the shift? Talk to us. We’d be glad to share our experiences with you, and help you find the right partners every step of the way.
