mobile money - investment opportunities for saccos
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MOBILE MONEY
AN INVESTMENTOPPORTUNITIESFORTHE SACCOS
A Presentation to Field Officers and Financial ExtensionWorkersAt the Regional Field Meetings/Workshops
By Wadriff Abdulfatah
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PRESENTATION SCOPE- Introduction
- Financial Transactions in the Phone-- Investment Costs involved in providingMobile Money Services by the Agent(SACCO)
-- Information Rates and CommissionCharges
-- Treatment of MM transactions in Books ofAccounts
- Challenges/Risks in providing MM services
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INTRODUCTIONThe continual expanding coverage and use of wireless mobile
devices such as mobile phones in developing regions such as Africa
and South East Asia, are leading to increased applications to deliver
financial services, especially to those in remote regions and whose
low income have typically excluded them from the traditional banking
system.
Penetration of mobile services across the world is increasing rapidly.
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INTRODUCTION CONTNIn 1990 there were just over 11m mobile phone users worldwide.
Today, over 3.6 billion consumers own mobile phones. Financial
access for the poor is still an issue in many developing countries.
There are currently approximately only 0.5 million bank branches
globally with only 1.4 million ATM's compared to over 3.6 billion
mobile customers worldwide.
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FINANCIAL TRANSACTIONSINTHE PHONE - CELLFinancial Transactions made through Cell Phones
Mobile financial services are often referred to as m-commerce or m-banking applications. They can be broadly categorized as extensions of
existing bank services delivery or as innovative approaches of
telecommunications providers where the mobile phone network
becomes a medium for financial transactions.
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FINANCIAL TRANSACTIONSCONTNMobile phone network transactions include the use of network airtime
or e-currencies for deposit, transfer of funds or credits, and payment of
services.
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FINANCIAL TRANSACTIONSCONTNMobile phone network transactions include the use of network airtime
or e-currencies for deposit, transfer of funds or credits, and payment of
services.
- Branchless banking models
- Mobile payment systems
- Mobile Payment/Business Development Model
- Air-time transfers
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INVESTMENT COSTSIN MM ASAN
AGENT/SACCOPartnerships between banks/SACCOs/Agent and mobile carriers mean
that both players are into a contractual agreement. However the biggestgainer here could be the banks/SACCOs.
- SACCOs will require very minor upgrades on their systems to transact in
mobile money while the telecoms companies have to invest heavily in
their infrastructure.
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INVESTMENT COSTSIN MM ASAN
AGENT/SACCO CONTN
- The second benefit to the SACCOs is that the telephony companies
will do the work of bringing on board the unbanked clients who the
SACCOs have been reluctant to approach in spite of the stifling
competition in the banking sector.
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INVESTMENT COSTSIN MM ASAN
AGENT/SACCO CONTNTo become an Mobile Money agent, each applicant must be a registered
company and have operating capital worth UGX 3,000,000 (in the caseof MTN) which is held in an account with a Bank, as well as high quality
premises.
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INVESTMENT COSTSIN MM ASAN
AGENT/SACCO CONTN- Agent must be a registered limited company and rovide proof
documents listed below:
- Completed agent agreement
- Certificate of registration/Incorporation
- Copies of Memorandum and Articles of Association
- List of Outlets
- Company bank account details
Minimum outlets is 1 outlet
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INVESTMENT COSTSIN MM ASAN
AGENT/SACCO CONTNPremises and their Maintenance
Mobile Money Companies avails branding and marketing materials for
your outlets.
The minimum branding requirements will be supplied to you on
commencement of business.
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MOBILE MONEYASAN INVESTMENT
OPPORTUNITY
As a SACCO grows and matures, it may find a need
to invest some of its surplus.
Investments can provide income, serve as a sourceof liquidity and can act as a cushion against
unplanned events.
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MOBILE MONEYASAN INVESTMENT
OPPORTUNITY CONTN
Investments Criteria
The fundamental guide to investing is the SLYprinciple, which is based, in order of importance:
Safety, Liquidity and Yield.
If an investment meets the safety
guidelines, liquidity is examined. If
safety and liquidity are satisfactory,
then yield is considered.
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MOBILE MONEYASAN INVESTMENT
OPPORTUNITY CONTN
Safetyin an investment is concerned withthe possibility of a loss. The degree ofsafety changes with time and must beroutinely examined.
Since the members entrust the SACCO with theirfunds, safety is a paramount consideration.
Liquidityis the ability to convert an investment intocash. Rule of thumb, the more liquid the investment, the
lower the yield. Conversely, the more time the investor iswilling to leave his funds in business circulation, makingthe investment less liquid, the higher the return or yield.
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YieldThe commission on mobile money should be
properly calculated and SACCO must include
that in its cash flow.
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IDEAL PROCESSFORMOBILEMONEYINVESTMENTIN
SACCOS
Develop a cash-flow estimate.
Make internal preparations for investment
decisions.
Determine portfolio requirements.
Develop internal controls to manage risk.
Purchase the investment.
Follow-up
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INTERNAL CONTROLSFORMOBILEMONEYRISK
MANAGEMENT
Internal ControlsInternal controls are an integral part of the investmentprocess and supplement the written policies.Appropriate staff should be designated and controlsestablished to:
Ensure that all mobile money transactions are properlyaccounted.Include all new investments in mobile money in reports to the
board and management.Provide for adequate safekeeping of records
Restrict to the degree possible, amounts of investmentsare matched with liabilities.
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ACCOUNTINGENTRY
1. When money is invested
Dr. Mobile Money Investment with the amount invested
Cr. Cash/Bank
2. When Commission is Received
Dr. Cash/Bank
Cr. Commission - MM with comm. received
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TREATMENT IN FINANCIAL STATEMENT