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Financial Insights and Mobile Money – Kopo Kopo – Ep015

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This episode is part of a podcast series called “Entrepreneurs & Economic Development” talking to entrepreneurs using business and technology to solve problems at the Bottom of the Pyramid. Listen to the interview by clicking play above. 

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Today’s Guest

Ben Lyon is Co-Founder and VP Business Development at Kopo Kopo a platform that enables merchants to accept mobile money. Ben is considered an expert in mobile money and shares his opinions on the future of digital currency in emerging markets.

You will learn:

  • While studying informal economies in University and in Uganda Ben experienced the birth of air time transfers and mobile money
  • A brief history lesson on M-Pesa
  • Fun Fact: Kopo Kopo is an alteration of the Creole phrase Kobboh kobboh meaning money!
  • How Kopo Kopo helps merchants manage mobile finance with business tools
  • “The Trojan Horse”, electronic payments build the relationship with merchant which opens up doors for future services
  • Grow cash advance: a new product using financial data to provide loans to SME clients
  • Expansion:
    • 4 New markets this quarter
    • More products in the toolkit to help businesses grow
  • The plan, 5 years, 100 million dollar company, serving 1 million merchants

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Great Quotes

There are over 100 million active #mobilemoney users globally - @Kopokopoinc Click To Tweet #MobileMoney is becoming the payment card of the global south - @Kopokopoinc Click To Tweet There are more phones in #India than #toilets, talking innovation w @BMLyon Click To Tweet

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Ben Lyon & Kopo Kopo Contact info:

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If you have any recommendations for future interviews please place them in the comments section. 

Education, Mobile Money & Diaspora: Part 3

This article is the final piece of a 3 part series. Click here for Part 1 or Part 2.

 

Imagine working hard as a recent immigrant driving a taxi or cleaning washrooms and sending money home to your sister living in Ethiopia. Although research shows most remittances are spent effectively there is no guarantee your funds will put her kids through school, provide healthy meals and not end up as part of her husband’s beer fund. To quote one study: “Very few (overseas workers) have families who use budgets or think of saving money. They send the money back, and their family wants to show they have succeeded, so they go out and buy a new TV.” There must be a better way to incentivize transfers and improve their effectiveness.

With mobile money becoming increasingly prevalent and schools shifting to cashless systems what if you could send money directly to the education provider? If you live in Nairobi and your relatives live in a rural area this is already possible domestically but international transfers are on the horizon. While researching I found an excellent case study, the authors were specifically interested in the allocation of remittances. The authors worked with Pilipino immigrants in Italy and developed 3 control groups. Group A continued their normal practices, Group B labeled the remittance (food, school, clothing) and Group C sent the funds direct to their family members school via EduPay, a platform set up by the researchers.

The results showed that Group B transferred 15% more than Group A, and Group C transferred 2% more than Group B. In the Philippines over the last 15 years they have seen education numbers increase substantially with the increase in remittances. This research supports my assumption that sending the funds direct would increase spending on education, and my opinion is that with feedback or reports from the school to the diaspora would retain long term family support. A minor payment shift could mean the difference between a family sending the boys to school or all children. Unfortunately the reality is that girls are pulled from school far more often than boys when financial strain is an issue.

For example, Bridge International Academies the company upon which I conducted the most research charges 7 USD per month, per student. A relative could pay 77 dollars for 11 months of school fees allowing a student to complete the entire academic year in one easy payment!

The most innovative company working with money transfers is Papatel and their primary market is United States to Columbia transfers. Individuals buy items online that can be picked up locally in Columbia via a partner network. Papatel also allows long distance calling and airtime top ups for most countries, a first step into new regions. Their site also has an education section allowing family members to pay for relatives to learn English.

The fact that private schools, mobile money and diaspora communities are increasing rapidly provides a huge opportunity for education to accelerate in emerging markets, which will in turn grow their economies.

Overall multiple articles pointed towards a positive correlation between remittances and education. Remittances increase household wealth providing increased capital to spend on non-survival services, some individuals used the funds to invest in new businesses which in turn increased their income allowing their children to attend school. Interestingly enough one study based out of Nepal stated that young children (5-10 years old) benefited more from remittances than older (11-16 year olds) children. My assumption is that their labour becomes more valuable with age and there is an incentive to pull them from school. Both reading and writing on the subject has been extremely interesting and I hope to post more Bottom of the Pyramid business research on my Consulting blog.

For more information please view the references below:


Macmillan, Paul, and William Eggers. “Winning Strategies For the Solution Economy.” Forbes India Magazine. Forbes India, 4 Aug. 2014. Web. 23 Sept. 2014.

Westhead, Rick. “Money from Expats Built the Philippines. Did It Also Ruin It?” Thestar.com. Toronto Star, 30 June 2014. Web. 23 Sept. 2014.

Quinn, Jennifer. “$24B Left Canada in 2012. Here’s What Happened to It.” Thestar.com. Toronto Star, 20 June 2014. Web. 23 Sept. 2014.

O’Kane, Josh. “Money from Abroad a Lifeline for Poor-country Entrepreneurs.” The Globe and Mail. N.p., 18 July 2013. Web. 23 Sept. 2014.

Kifle, Temesgen. “Do Remittances Encourage Investment in Education? Evidence from Eritrea.” University of Michigan Library, 2007. Web. 23 Sept. 2014.

Yang, Dean. “Increasing the Development Impact of Remittances among Filipino Migrants in Rome.” Innovations for Poverty Action (2013): n. pag. Web. 23 Sept. 2014.

Bansak, Cynthia. “How Do Remittances Affect Human Capital Formation of School-Age Boys and Girls?” The American Economic Review 99.2, Papers and Proceedings of the One Hundred Twenty-First Meeting of the American Economic Association (2009): 145-48. JSTOR. Web. 23 Sept. 2014.

Education, Mobile Money & Diaspora: Part 2

This article is part 2 of a 3 part series. Click here for Part 1.

My research started with a Google search for “Remittance transfers and Education”. I was not surprised to find multiple articles on the subject from Ivory Tower academics but I was shocked at the few practical options. The idea of transferring money directly to a school for individual students fees is moderately complex, it requires international finance, a network of participating schools and global marketing. Although this seems rather daunting as companies develop franchises with over 300 schools like Bridge International Academies the possibility of a payment platform becomes feasible.

In Part 1 I briefly mentioned cashless business models, the system works by having a parent load their phone with money and texting the school fees to a specific account.  Most citizens have M-Pesa accounts, they visit shops and provide cash in exchange for the shopkeeper taking a small transaction fee and texting them the balance, essentially their bank account is on their phone. The unique factor is that when parents text the headquarters with their traceable payment administrators can easily see who has paid and who hasn’t on electronic tablets. This facilitates following up with unpaid accounts. Transferring small sums of cash across a broad national or multi national network would have prevented many of the high volume low cost low margin business models that are gripping East Africa. To reach a low price point requires and eliminating corruption in the supply chain.

Education-as-a-service follows the ‘service’ phenomenon that will shift economies in the both developing and developed nations during the next 20 years; citizens are shifting their preference to services on demand rather than goods. As items become more expensive or people put a premium on space Canadians will shift towards a rent vs buy mentality. The reasons for the shift will be different between Canada and Kenya but the trend will be similar overall. In Kenya-Tanzania with rented solar systems and North America with Car2Go. Mobile money simplifies the transitions and facilitates scaling. Education at the Bottom of the Pyramid is only recently adopting as most schools in East Africa are run by sole proprietors with limited knowledge of technology. As the market place become more competitive all schools will accept payments as hundreds of students at hundreds of school is the perfect model for a cashless business model.

So now that you are aware private educational franchises are going cashless using mobile money how do the diaspora communities affect educational attainment?

To my surprise money transfers from Diaspora communities outweigh international aid! Over the past 10 years the remittances have increased from 93 Billion in 2003 to over 500 Billion in 2013. Our increasingly global population means more people are living in new countries, there are fewer immigration barriers and more money is flowing back to their birth nations.

While researching I read several articles on the Philippines, a nation that receives a substantial portion of its GDP from remittances. Small businesses are springing up including internet cafes, and funds are improving the community which now includes brightly coloured homes. Although there are difficulties when parental figures move abroad to work and significant inflows cause inflation making it more difficult for non-recipients as a whole it appears many countries are benefiting from international citizens.

Here are a few other Diaspora facts:
“Canada sends more money, per capita, overseas than other developed countries. (The U.S. is the largest remitter by far, sending nearly a quarter of that global $500 billion: Mexico is their top recipient country, with $22.8 billion, followed by China, which receives about half that.)” – Source: Toronto Star

Click here for Part 3 which examines if money transfers will have a positive effect on education. Furthermore all references and links will be provided.

Kenyan Music Project

Diaspora, Mobile Money and Education

This article is part 1 of a three part series on Diaspora, Mobile money and Education. 

A month ago while reading about new education models being developed in East Africa I came up with a theory: ‘diaspora, mobile money and private sector schools will drastically improve educational attainment in developing countries’. Alone each area is changing economies in rapidly growing countries but together they could facilitate international money transfers to build the generation that will shift continents into high gear.

 

Diaspora are a group of dispersed people living around the world from a country of origin, (ex. Somali diaspora) and they often send back funds known as ‘remittances’ to relatives still living at home. My theory is that if provided with the opportunity to send back funds targeted for specific needs including education (directly to the school) the human capital or education level of emerging markets would increase. While in Kenya I witnessed the increasingly common use of mobile money, and several businesses are running entirely cashless. Most customers are already using a mobile money service (17 of 44 million Kenyans) and “about a fifth of Kenya’s GDP now flows through M-Pesa!”  While living in Canada I’ve had to explain cashless business models to other entrepreneurs and I don’t expect Canadian businesses will shift off cash even while the vast majority of the population carries either credit or debit cards regardless of the efficiencies.

 

Why can’t an uncle pay the school fees of his sister’s kids directly thousands of miles away and receive a confirmation from the school either online or via mobile money ? As education is being privatized and companies including Bridge International Academies are using increasingly advanced technology I predict diaspora will shift to an easy payment method to direct money for education and other basic services including electricity along with sending small sums to relatives.

 

My experience with East African education started in May 2012 when Scott Andrews and I visited a school ICEF, a Vancouver charity supports in southern Uganda. We stayed for several hours, viewed the library, the medical clinic and watched the lunch meal program. With international oversight it ran quite smooth but was donor dependent living precariously on the edge with a couple fundraising events a year. A week later we shifted hotels in Masaka and were located across the street from a public primary school. As I had recently quit my job in Canada to embark on a 1-year trip I spent the first 2 weeks reading and writing on a balcony overlooking the schoolyard. I was surprised at how often the kids were playing in the yard and how little time they spent in the classroom. Also small single operator schools lack the ability to receive payments efficiently for hundreds of children, and are too small to spend resources on curriculum improvements. The Private sector is changing the game in India, Kenya and Peru with business models that provide an improved service in comparison to the public offering and are cost competitive! Think Starbucks for Eduction. Public education in Kenya requires parents to pay small fees or bribes providing low quality but medium cost service. New ventures are using advanced technology to improve efficiency and reduce corruption. Hopefully in ten to fifteen years the private sector will have entered most countries and provide an alternative to failing public systems which will shift donor dollars into other areas of economic development.

 

Click here for Part 2 of the series on Diaspora, Mobile Money and Education.