Contrary to what you might believe, mobile money isn’t new in Nigeria. In fact, Nigeria has had mobile money before Kenya’s M-Pesa launched in 2007. It’s been around since the early 2000s, way back when the telcos were gaining traction and ATM machines hadn’t proliferated all over the country.
Back then, accessing cash meant you had to make the trip to the nearest branch of your bank, no matter how far away. This proved troublesome for a lot of people, especially the ones who had accounts with some obscure banks (before the Soludo led reforms and the consolidation of the banking industry, we had a lot of those). Never mind the ones who didn’t even have bank accounts.
To get around this problem, people devised an interesting stratagem that took advantage of the mobile telecommunications boom, which was happening at the time, to transfer money. It quickly became widely popular, especially among students and other dependants who rely on monies from parents and benefactors who live far away.
The device was very simple. When people needed money, they would call home or whoever was in a position to provide, to ask for “credit” — credit here being airtime for mobile networks. When the credit was sent (the recharge string, via SMS), they would take it to the nearest mobile call center/airtime vendor, which by then could be found at virtually every street corner with their unmistakable branded umbrellas, and “sell it” in exchange it for its money value. The call center would however charge a small commission agreeable to the seller for accepting the credit.
Here’s what a typical transaction looked like. The sender goes out and buys credit from an airtime vendor — say MTN airtime worth NGN1,500. He doesn’t load it though, he sends the recharge string to the receiver via SMS. The receiver takes the recharge string to the nearest call center/airtime vendor who accepts the credit and gives them its money’s worth. Instead of giving them NGN1,500 however, the vendor might give them NGN1,350 cash and pocket NGN150 as commission. Everybody is happy, and none of them had to go to the bank. This device was so useful that it’s gotten people I know out of sticky situations on many occasions. Say for instance, if you found yourself stranded somewhere without funds to take you back home — all you had to do was send an SMS asking for credit from your friends/family, locate a call center and exchange the credit for the money you needed — no problem!
If you agree that the money transfer strategem which I have related above is indeed consistent with the essence of mobile money, then you’re impliedly agreeing that mobile money in Nigeria predates Kenya’s M-Pesa. The call centers/airtime vendors were the agent network, SMS was the channel, and it solved a pressing need — the need to transfer money over long distances with relative ease. The only element missing is probably an electronic wallet, but that didn’t hinder people from doing what they needed to do. During that period, airtime had virtually become legal tender.
All of these took place in an informal context however, and now that Automatic Teller Machines that work with almost any bank and debit card are now abundant, the use of this method has declined, except among the un-banked population.
So Nigerians were able devise such a useful solution, sans a formal framework — but it appears that the government and corporate stakeholders are finding it difficult to bottle and mass produce this product in a refined package that works, at least so far. For an initiative whose processes have been set in motion since last year, the levels of public awareness fall far short of where I expected it to be at this point in time.
I intend to address the question of why mobile money is having trouble taking off in Nigeria in my next post. For now, your ideas on the subject are welcome in the comments.