Case Two BMW: Bringing Financial Services to Rural Africa

Full participation in the twenty-first century economy requires access to financial services. However, this access is a luxury for many citizens of African nations. Due to the long distances between bank branches and the lack of rapid, cost-effective transportation to the urban areas in which banks are typically found, fewer than 10 percent of Africans participate in formal banking. Those who do often face time-consuming inefficiencies.

A new company, MobiKash Afrika, hopes to change this by empowering people in Africa with a secure and independent mobile commerce system that is easy to use. In planning its system, MobiKash established several standards:

The service must be independent of specific mobile telephone operators.

The service must be independent of specific banks or financial institutions.

The service must work with all bill issuers.

The service must not require the use of a smartphone.

MobiKash offers its members five services, all accessible from a mobile phone: loading money into their MobiKash account from any bank account, paying bills, sending money to any other mobile phone user or bank account, managing a bank or MobiKash account, and obtaining or depositing cash. Only the last pair of services requires members to visit a physical location where cash can be handled, but that site doesnt have to be a bank. MobiKash agents in market towns, convenient to rural areas, can handle transactions that require cash. Approximately 3,000 MobiKash agents operate in Kenya. Account holders dont even need to visit a bank to set up their MobiKash accounts: in fact, anyone with a mobile phone to whom a MobiKash user sends money becomes a MobiKash user automatically.

MobiKash charges for some services. Withdrawing cash costs 25 to 75 Kenya shillings (Kshs) (about U.S. $0.30 to $0.90), for withdrawals up to Kshs 10,000 (about U.S. $20), with higher fees for larger withdrawals. Paying bills from a mobile phone incurs a fixed fee of Kshs 25, no matter how large the bill is. The largest fee that MobiKash charges is Kshs 350 (about U.S. $4), for cash withdrawals in excess of Kshs 75,000 (about U.S. $900). This fee schedule is consistent with the financial resources of MobiKash users and the value those users place on each financial service.

The MobiKash system is based on Sybase 365 mCommerce software. Several factors contributed to this choice, including the local presence of Sybase in Africa with experience in similar applications, its understanding of how to integrate with African financial institutions, and the systems ability to work with any mobile telephone. It operates from an existing Sybase data center in Frankfurt, Germany.

MobiKash services expects to expand in east, west, and southern Africa, starting with Zimbabwe. It is working with Masary, an Egyptian e-wallet firm, to cover northern Africa as well. Work is also under way to support intercontinental fund transfers to and from North America, Europe, and the Middle East. As for the future, CEO Duncan Otieno said, We see MobiKash in the next five years playing with the international or global mobile commerce space in at least 40 countries. The plans for building this network are already in progress.

Critical Thinking Questions:

Firms can base m-commerce systems on commercially available software, as MobiKash did here. Alternatively, they can write their own software. List three pros and cons of each approach. Do you think MobiKash made the right choice?

What challenges does a company like MobiKash face when they try to penetrate different national markets in developing countries? Why might Kenya be a good choice for the launch of m-commerce operations in Africa?

Contrast your m-commerce needs with those of a typical rural African. Would you find the MobiKash offering attractive in full, in part (which parts?), or not at all?

Submit the assignment to Dropbox.