The other type of MobileMoney

 

The Economist

January 18, 2013

 

The use of pre-paid mobile-phone minutes as a currency.

Mobile money in Africa comes in different flavours. The sophisticated sort, exemplified by services such as M-Pesa in Kenya, allows account-holders to transfer legal tender electronically to fellow account-holders by entering commands on a mobile phone. Popular though such services are, they have not stopped an older form of mobile money flourishing. This sort uses pre-paid mobile-airtime minutes as a de facto currency that can be transferred between phones, exchanged for cash with dealers who rent out phones, or bartered for goods and services.

Pre-paid minutes can be swapped for cash or spent in shops most easily in Côte d’Ivoire, Egypt, Ghana and Uganda, says Chris Chan of Tranglo, a Malaysian firm that facilitates “airtime remittances” to mobile phones. Airtime is commonly used as money in Nigeria, too. Hannes Van Rensburg, Visa’s boss for sub-Saharan Africa, says this is partly because regulators there have made it difficult for banks to offer the newer form of mobile money.

But even in places like Kenya, airtime minutes are still being used as currency. Unlike mobile money, airtime’s value does not rely directly on a government’s stability or ability to hold down inflation by, say, showing restraint printing money. Opening a mobile-money account typically requires waiting for days after showing your ID. In contrast, airtime can often be purchased and sent immediately and anonymously. Because many telecoms firms in Africa and elsewhere transfer minutes nationwide free of charge, airtime is especially useful for settling small debts.

In Zimbabwe, for example, American banknotes have largely replaced the hyperinflation-ravaged Zimbabwean dollar. American coins are scarce, however, so pretty much everybody in Zimbabwe transfers airtime in their place at least occasionally, says Oswell Binha, president of the Zimbabwe National Chamber of Commerce in Harare. Zimbabwean shoppers are tired of being given sweets in lieu of change, so shopkeepers who give airtime rather than yet another “$0.63-worth of chocolates” have a competitive advantage, Mr Binha says. Yo! Time, a Harare-based start-up that simplifies these retailer-to-shopper airtime payouts, processes more than 9,000 payouts a day for clients; six months ago the figure was 2,000.

The use of airtime as currency is fuelled by the growing ease of sending minutes abroad. A Dublin firm called ezetop, for example, sells airtime for 238 telecoms firms via the web, text messaging and about 450,000 shops in 20 countries. The value of international airtime transfers has doubled from $350m in 2011 to $700m in 2012, estimates Berg Insight, a consultancy.

Some authorities are concerned about airtime’s use as money. As one industry executive puts it, network operators are, in effect, “issuing their own currency” and setting its exchange rate; central banks tend to dislike such things. Others worry that airtime could be used by criminal or extremist groups to move money covertly. According to a senior official at the Financial Action Task Force (FATF), an intergovernmental body in Paris, it appears that some groups buy top-up scratch cards in one country and sell the airtime in another.

The FATF is studying over 50 instances of “suspicious” dealing in airtime from the past two years and plans to issue new guidelines early this year. It is likely that countries and firms will be asked to set rules to obtain more data on buyers and sellers. Transfer caps may also end up lower. But such rules must be set against the good that tradable airtime still does.

 

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