Mobile banking: a new way of doing business in Haiti

SAINT-MARC, Haiti — Adeline Alexandre does a steady business selling Haitian staples at Fifi Boutique, a little hillside shop off a dirt street with potholes the size of bathtubs.

Sardine cans, buckets of rice, jars of cooking oil and stacks of empty Coca-Cola bottles fill her shelves — along with a glaring reminder that she, like Haiti, remains in the financial dark ages.

Her cash register is a splintering wooden drawer filled with crumpled bills and tarnished coins. It sits behind the counter on a gray bucket seat that had been torn from a car and dropped on the store’s concrete floor.

“I’ve always done it that way,” she said. Perhaps not for much longer.

Haitian telecoms and banks are racing to sign up residents like Alexandre for mobile banking plans through which payments are made electronically from mobile phone to mobile phone. The money is stored in an “electronic wallet” — the phone’s SIM card — instead of that wooden drawer.

At least two major mobile phone providers have launched mobile banking programs, partnering with major Haitian banks and international aid agencies. The competition is spurred by a $10 million reward from the William and Melinda Gates Foundation and the U.S. Agency for International Development (USAID). The money, dispersed in two awards in December and next spring, will go to the company that records the most transactions.

Cash to mobile phone may seem an incongruous transition for a woman like Alexandre who owns a shop with not a Visa sticker to be seen and for a country where only 10 percent of residents have bank accounts.

But mobile banking has been successful in developing countries across the globe. Kenya’s M-Pesa service, which mobile banking promoters hold up as the poster child of success, has 9.5 million users, nearly half of the roughly 20 million mobile phone users there.

The service has long been forthcoming in the developed world. In the United States, banks have seen an uptick in the number of users in recent years as smartphones have become more prevalent. A 2009 study by financial services company Mercatus LLC found that 11 percent of 1,100 people surveyed were using their mobile phones to access their bank accounts or make payments.

Backers are expecting it to spread more rapidly in Haiti. “This technology has the potential to leapfrog traditional financial services,” said USAID Haiti Mission Director Carleene Dei in a statement to GlobalPost.

The benefits for the poorest can be numerous: Many never before had access to a bank branch or held an account. Their banking history can be used to help secure loans or apply for other financial services. It’s more secure than handling cash. And it’s cheaper than a traditional bank account.

“I’ve met people who’ve never walked into a bank before,” said Kokoevi Sossouvi, who runs financial services for the aid group Mercy Corps, which is incorporating mobile money in a food aid program for 20,000 people in Saint-Marc and surrounding areas. “This is a safe way for them to have access to a full suite of financial services. Our goal is financial inclusion.”

It’s not a purely altruistic endeavor. “There is a business reason behind it, obviously,” said Jean-Robert Desrouleaux, consultant with Unibank, one of two major Haitian banks partnering with mobile phone providers.

For a country in which there are only two bank branches for every 1,000 people — compared to 50 or more in some developed countries — the mobile model is a growth opportunity for banks and mobile phone providers.

“We’ve reached a slow growth period for cell phones, a plateau,” said Alex Bouchereau, who is overseeing mobile banking for Voila, one of Haiti’s largest mobile phone providers. “Within a year, we’ll see significant growth as this takes hold.” The country’s largest mobile phone company, Digicel, which launched its own mobile-banking service with Scotiabank, estimates 35 percent of the 10 million residents had mobile phones in 2010.

Neither Bouchereau nor Desrouleaux said how much their companies will charge for the service. Mobile banking costs an average of $3.90 per month in other parts of the world, according to a study by the World Bank. 

That’s about 19 percent cheaper than traditional banking, but it could be significant for Haitians, 80 percent of whom lived on $2 a day before the January earthquake killed at least 230,000, left more than 1 million homeless and crippled the economy.

“Life has gotten more expensive. … Before, three milk cans sold for 10 gourdes. Today, one milk can sells for 40 gourdes,” said Duthard Charles, 54, as he checked out a mobile banking demonstration recently. Charles has a bank account but he can’t make withdrawals because he keeps only the minimum balance.

Much the way mobile phones spread in communities that never had landlines, supporters believe mobile banking can surpass bank accounts, credit and debit cards in developing countries.

“It has the potential to be transformative and reach people who have never had access to financial services,” said Sarah Rotman, analyst with the World Bank’s Consultative Group to Assist the Poor.

Although other developing countries have embraced mobile banking, Rotman said Haiti has potentially unique challenges. Because the economy is largely informal, it will be difficult to find a critical mass of merchants who can act as mobile agents. Those agents are points of contact where users go to withdraw from and deposit to their mobile accounts.

“You need some formality and professionalism so that the clients can build trust in the system,” she said. Merchants in Haiti “may be a little below the level of formality that’s needed.”

Convincing Haitians is another challenge.

Oregon-based Mercy Corps is incorporating mobile money into a food aid program that gives families $40 per month to buy beans, rice, cooking oil and corn.

Instead of distributing paper vouchers, Mercy is sending money to mobile bank accounts. A shopper will visit an approved store, buy food and, instead of paying cash, type a series of numbers into their phone — including the amount and a secret code — and the shopkeeper will receive a message that the money has been transferred. The shopkeeper can buy elsewhere using the electronic balance or cash out the balance at a local bank.

In principal, it’s a simple combination of traditional shopping and sending a text message. In reality — especially in a country in which four in 10 adults can’t read — setting up such a service is more difficult.

In a Baptist church two hours north of the capital, Port-au-Prince, about 60 Haitians gathered to hear Sossouvi pitch the service. She treats them like luddites.

“Have you ever sent minutes to another person on the cell phone?” she asks.

“Yes,” they respond tepidly.

“Good. Instead of sending minutes you’ll be sending cash. That’s the idea. Is it a good idea?”

“Yes,” the response grows with the mention of cash.

“Does it sound hard?”

“No!”

“You won't have to worry about finding the vendors because Mercy Corps is finding them for you. We will do that work. … We will supply the SIM card. The SIM is very important because that’s the place the money will be stored.”

At this, the crowd seems confused. A man in the back of the room shakes his head and crosses his arms. The questions that follow range from what happens if the bank folds to whether they have to spend the money at one store or if they can shop around.

Whether mobile banking can spread through Haiti will depend largely on how readily groups like those in Saint-Marc embrace it.

Sossouvi said it’s about “changing their mindset.”

“Instead of having someone put all their money all year into a raising an animal and selling it — when things could go wrong, like the animal could get sick and die — we’re trying to get them to put it in the bank,” she said. “We have people here storing money under their mattresses. Mobile banking here in Haiti will take off because the need for financial services is so great.”