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Cell phone banking in Soweto

Gretchen Wilson Jun 16, 2006

KAI RYSSDAL: It’s become known as the Soweto Uprising. June 16th, 30 years ago. Thousands of black African schoolchildren protesting an apartheid government law. That they’d have to learn Afrikaans, the language of their Dutch colonizers. South African police killed hundreds of people that day. Many say the riots were the beginning of the end of apartheid. In the years since, Soweto has been transformed. There are shopping malls now, and restaurants line the streets. But many who live there — especially the poor — still don’t have the economic basics. More now from Gretchen Wilson.

GRETCHEN WILSON: It’s a busy afternoon at this grocery story in Soweto. Today, Jeremiah Mpanza is shopping using his debit card.

JEREMIAH MPANZA: Now I’m putting in my PIN number.

Such a scene would be common in the U.S. But it’s still a novelty in South Africa’s cash-driven economy.

MPANZA: I’m just buying the loaf of bread without carrying money around, that’s what I like the most.

Mpanza’s debit card is attached to a new kind of bank account, one that’s linked to his cell phone. It’s called Wizzit, and it aims to bring millions of poor into the official economy.

Here’s how it works: Mpanza can make deposits at a bank or at any post office. They scan his debit card, take the cash, and then immediately credit his account. He gets a text message to prove it.

Then he uses commands on his cell phone to check his balance, transfer money — even pay his electricity bill. He uses his debit card to buy things or to withdraw cash.

Wizzit director Brian Richardson says millions of South Africans badly need better banking services.

BRIAN RICHARDSON: There are 16 million people that are unbanked. And typically they get their money and it’s put under the mattress. And that is more than just a cliché, that is the reality of life.

For the poor, there are lots of obstacles to traditional banking. High monthly fees are one. Another is the sheer lack of infrastructure. Traditional bricks and mortar banks usually aren’t in townships or rural areas.

As a business, Wizzit decided to skip the bricks and mortar. It uses far-reaching cell phone networks to offer the security of banking to a new market.

RICHARDSON: It’s estimated in South Africa, 35 percent of the unbanked population has got their own cell phone.

Many are breadwinners who work far from home and send money to their families. But in a cash economy, this usually means sending money with a taxi driver. The standard rate to send $50 is about 20 bucks.

RICHARDSON: Now that is just highway robbery for want of a better word, but when you’re faced with no other choice, you’ve got to pay it.

Wizzit doesn’t have monthly charges or minimum balances, but it charges a fee for every service. Richardson says Wizzit customers can do the same transaction for less than 50 cents.

RICHARDSON: So you’re talking enormous savings on something that is an absolute need in the marketplace. And every developing country in the world has got the same issues.

It’s such good business sense that all major banks in South Africa have now launched a cell phone banking component. Angelo Coppola is with MTN Banking. MTN is a cell phone network with about 10 million subscribers in South Africa.

ANGELO COPPOLA: If you could put a phone in everybody’s hand that can afford it, you’re probably looking at 25 million people. And our banking sector doesn’t cater for anywhere near that number. The market is completely underdeveloped.

That’s what excites some economists. They say cell phone banking can build credit histories and fuel new business. Jeremy Leach is with FinMark Trust, an NGO that promotes financial services for the poor.

JEREMY LEACH: What we’re finding from the evidence from economists is that actually greater access to financial services improves economic growth.

And improved economic growth is what Soweto needs. Mpanza runs a youth program here, miles from the nearest bank. But he needs to pay one of the program’s workers. So he’s accessing his Wizzit account on his cell phone with a text message and PIN code.

MPANZA: Start. It is going to give you a message, “Please enter the mobile number of that person.” After you put in the mobile number of that person, you just say “Start,” and everything is done. Simple as that.

WILSON: And what are the advantages of paying your employees this way?

MPANZA: Um, you meet deadlines. That’s the most important one. And everyone is happy.

It also helps keep his family happy. They’re hundreds of miles away. But today he transfers money in seconds and no one has to hide cash under the mattress.

In Soweto, South Africa, I’m Gretchen Wilson for Marketplace.

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