Mobile banking’s potential to leapfrog existing mainstream banking is apparent in countries with large populations without access to traditional banks and financial services. In these cases, mobile banking streamlines existing financial transactions which might take months and cost an exorbitant percentage of the value being exchanged. Instead the instant, low cost money transfer makes these affordable, and even permits transactions which would otherwise be impractical. Another functionality which mobile banking provides, however, that is easy to group together with these streamlined transactions, are transactions which could not have taken place before, not because they were unaffordable or impractical, but because of conflict and forced migration.
With significant personal experience among forced migrants from Darfur, Palestine, Iraq, Western Sahara, and Somalia, I have heard firsthand of the economic isolation which cuts ordinary people off from financial transactions which others rely on the world over, even those without access to banks. These conflict zones may lack not only traditional banking infrastructure, but even, at times, access to financial instruments depended upon in the most economically isolated countries. In these situations, when cash may be unavailable or unreliable (because of hyperinflation, or counterfeiting), and other assets not liquid enough to be protected or transported in the face of conflict, the necessity of communication remains paramount, and mobile phone infrastructures continue to be maintained, and to provide a foundational infrastructure for mobile banking. Even in Darfur where the Sudanese government would cut all cell phone service during offensives against rebels, satellite phones could be used in the most isolated areas to transfer credit and maintain lines of communication. Likewise, in Somalia, where widespread violence and anarchy have eroded most confidence in mainstream financial institutions, mobile phone networks are among the better ones in Africa1, and The Economist claims that: “A call from a Somali mobile phone is generally cheaper and clearer than a call from anywhere else in Africa.”2
We can see how this potential is actually being exploited a bit more, albeit informally, in Iraq, where “reluctant to risk their lives by visiting a bank, many [Iraqi phone] subscribers transferred money to each other by passing on the serial numbers of scratch cards charged with credit, like gift vouchers.”3 The unique combination of security, liquidity and discreetness allows mobile credit to perform a role which could not be filled by any traditional financial instruments, regardless of time scale or cost. Having recognized the significance to Iraqi communities, “the UN says it has plans to deliver aid to Iraqi refugees in Syria in the same way.”4 This institutional turn to mobile financial transactions underscores the unique place of mobile money in conflict contexts, as no other means is really accessible. One US government intern describes a pilot program for paying Iraqi soldiers with mobile money, because a quarter of them were on leave at any one time because they couldn’t receive their pay.5 If even these large, bureaucratic organizations have found a way to incorporate mobile money into their structures, how much more potential could there be for agile and flexible local NGO’s working on the ground.
The need for mobile financial transactions in countries from Iraq to Mauritania is not limited to situations of crisis, conflict and forced migration. However the ingenuity and resilience of some of the populations in these countries in the face of these challenges is teaching us how mobile money can solve financial problems that previously could not be addressed at all. In working with FrontlineSMS:Credit as the regional coordinator for the Middle East and North Africa region, I am eager to learn more about the different ways that mobile phone users in these regions are leveraging technology to make a difference in times of conflict and peace.
This post was contributed by Joel Mitchell, North Africa & Middle East Regional Coordinator for FrontlineSMS:Credit.
To contact Joel, email joel@credit.frontlinesms.com or follow him on Twitter at @jdmitchjoel.
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1. Ford, Nowrasteh, Powell; 2006. “Somalia After State Collapse: Chaos or Improvement?” Independent Institute Working Paper Number 64. November 30, 2006. Oakland, CA. http://www.independent.org.
2. Economist Editors. “Mobile Phones” The Economist. December 20-24, 2005.
3. Economist Editors. “Iraq’s Mobile Phone Revolution: Better than Freedom?” The Economist. November 14-20, 2009.
4. Op. Cit.
5. http://a517dogg.blogspot.com/2007/07/mobile-banking-and-poverty-part-1.html
