Rethinking Local Banking in Africa

Posted by Scott Stadum, who writes frequently about NGOs and technology.


From whiteafrican via Flickr Dambisa Moyo's book "Dead Aid" has plenty of detractors and supporters, but regardless of how you feel about her thesis, she raises one very valid point: strategies for development in Africa need to be evaluated carefully. While serving in Peace Corps, I was constantly reminded to consider not only what the community needs, but what is appropriate for the community. While a local bakery might need a new oven, one from Sears isn't practical. Western approaches to commerce and banking need to be reconsidered before they are implemented in Africa.

Africans are able and eager to provide for themselves, provided the opportunity and the resources. One question two different groups are hoping to address is how to develop local markets in areas where credit is nonexistent. Two approaches, FrontlineSMS and PesaPal are both developing systems that leverage "transfer systems and mobile money functionality" using mobile networks.

FrontlineSMS:Credit aims "to make every formal financial service available to the entrepreneurial poor in 160 characters or less. By meshing the functionality of FrontlineSMS with local mobile payment systems, implementing institutions will be able to provide a full range of customizable services, from savings and credit to insurance and payroll."

The FrontlineSMS system also provides an easy method for distributing and tracking loans from microfinance institutions and because the technology isn't web dependent, it can be implemented entirely off the grid.

PesaPal is integrating with main mobile payment services Zain’s Zap and Safaricom’s MPesa and is intended for business through local vendors in Kenya as opposed to one-to-one transactions. PesaPal also integrates easily with websites through available plugins. An example is Totally Toto, an online children's retailer in Kenya that has integrated MPesa as a checkout option.

Do you know of other fresh examples?