MicroLoan Malawi introduces mobile money

Mobile money is efficient, time-saving and COVID-19 safe.

What is mobile money?

Mobile money is the process of using a mobile account to access financial services. This allows people to transfer and deposit funds and pay bills without having to use hard cash. MicroLoan can disburse loans and collect repayments using a mobile money platform.

Why do we use mobile money?

Using mobile money brings benefits to both our clients and our organisation. It helps make our operations more efficient, which will enable us to financially empower more women.

We work in some of the most rural and remote locations across Malawi, Zambia and Zimbabwe to help those who live in extreme poverty and are most likely to be financially excluded. The lack of nearby banks and financial services in the communities we support means that MicroLoan Foundation’s clients have to spend a lot of time and expense travelling to more urban areas to make savings, deposits and repayments. Using a mobile money service means women can access capital faster, which is especially important to meet the current high demand for capital.

By reducing the amount of cash handling that takes place, mobile money makes it safer and easier for MicroLoan staff, as well as our clients. To gain access to loans, clients need their own mobile money sim card that is registered in their own name. This can give women more ownership and control over their finances, something which many of them won’t have had before.

The mobile money platform is integrated with MicroLoan’s core management system which allows us to obtain useful data about the financial behaviour of our clients. This helps us monitor clients’ progress and identify if and when they may be struggling so that we can help them.

Mobile money is also COVID-19 safe because it facilitates social distancing. It also enables us to continue providing our financial services in case of a lockdown.

Where do we currently use mobile money?

In 2017 we started using mobile money services in our operations in Zambia. As of December 2020, almost 100% of our operations in Zambia now use mobile money on the MTN platform.

Mobile money has been used widely in Zimbabwe since we launched our operations in 2017. All disbursements are made via mobile money instead of cash due to a shortage of cash in the country. The mobile money platform we use in Zimbabwe is called EcoCash. In response to worsening financial crisis, the Reserve Bank of Zimbabwe recently announced a number of macroeconomic measures to control inflation and the rapidly devaluating currency. One of these changes was restrictions to the EcoCash mobile money services and we now disburse money to our clients’ EcoCash accounts through a company called MyCash.

Using mobile money has proven successful in both Zambia and Zimbabwe and in light of the access challenges experienced by our beneficiaries during 2020, we decided to accelerate this part of our digitalisation strategy in Malawi. We are working with Airtel, the biggest mobile money provider in Malawi, to integrate the platform into our core management information system. As of December 2020, we are conducting a pilot study in Lilongwe to train staff and beneficiaries on the mobile money banking application, which we hope to roll out in 2021.

How does it work?

  • In their initial training sessions with our Loan & Training Officers (LTOs), clients are informed that in order to receive loans through mobile money they will need an EcoCash/MTN/Airtel account and sim card registered in their name. Our LTOs will assist in the set up if required.
  • Each client will then be issued an EcoCash/MTN/Airtel account identification number.
  • MicroLoan will move the relevant funds from their regular account into their EcoCash/MTN/Airtel mobile money account.
  • After clients have received all their initial training sessions, they are ready to receive their loans.
  • Using the clients’ individual identification numbers MicroLoan will send the appropriate loans into clients’ accounts.
  • Repayments are expected either monthly or fortnightly. They have a code to use to send their money.

Key challenges with using mobile money

The low literacy rate is a prevalent problem in communities we work in. This is especially important in reference to mobile money because the women need to read the information on their mobile. This is one reason why MicroLoan’s training is so crucial.

Whilst a mobile device is required to make repayments, clients do not have to have their own. As long as they have their mobile money identification account number they will be able to use the service by using someone else’s mobile device. Some clients share phones and use them when needed. Very basic mobile devices are also becoming more affordable. Over the past three years, we have seen a significant increase in the number of women who have their own mobile devices.

In order for mobile money to work, there must be a network of mobile money agents that can exchange credit for cash, or cash for credit. The mobile money agent network is not yet developed enough in rural areas in Malawi, but this is starting to change as demand for mobile money services grow.

Another key concern is that the women are unlikely to trust technology. MicroLoan prioritises ensuring the women feel safe and secure using mobile money, and feel that they understand how to use it. MicroLoan has a highly engaging and high-touch training program. Building trust between our team and the women is paramount to their success as entrepreneurs.

Building mobile money services into our operations creates an opportunity for MicroLoan to increase the number of women we are supporting, utilising technology to expand financial inclusion. Mobile money does not just benefit our clients, but it increases the efficiency of our operations and our capacity to deliver our much-needed services to some of the poorest women in the world.