Business
Mobile money use in Africa results in increased revenue for utility companies
An Oxford University study has revealed how the use mobile technology in Africa has dramatically increased the amount of money that water utility companies actually receive from the customers they bill.
According to World Bank data, water utility companies across Africa had been losing around US $500 million a year due to ineffective billing and petty corruption.
The study shows how the amount paid by customers in Tanzania rose by between 5 percent and 69 percent in 2011 after mobile money services were introduced in 2009.
The study focussed on one of Africa’s fastest growing cities, Dar es Salaam in Tanzania, where half of the population now subscribes to some form of mobile technology.
Traditionally water users had to make journeys to the public utility offices where they face long queues before handing over cash to pay for their water bills.
Under the new system, water utility users were given the option to pay their water bills from any location, at any time, and at any point in the billing cycle via mobile money services or pay points at local shops. Mobile money and banking services are SMS/text message-based payment systems that allow customers to deposit, withdraw, transfer and store money though accounts linked to SIM cards.
Wireless pay point networks rely on people handing over cash at mobile-enabled devices at shops like pharmacies, grocery stores or gas stations.
In Dar es Salaam, by the end of 2011 over one quarter of customers had tried mobile methods and over 15 percent of all payments were made via mobile money and wireless pay points.
Mobile subscriptions in Africa are expected to reach over 700 million by 2016. At present, penetration rates are 69 percent in Kenya and 42 percent in Uganda so the implications of the study are significant.
Speaking at the Skoll World Forum at Oxford University on Friday, Dr Rob Hope, Director of the Oxford Water Futures Program at the School of Geography and the Environment at Oxford University, said: “Insights from the Wireless Water analysis in Dar es Salaam provide new evidence of significant and untapped opportunities to improve the performance of water utility companies across urban Africa.
Such mobile enterprises provide faster and more secure payment transactions and through improving financial performance, this should drive up the quality of service provided by water companies.”
Researcher Aaron Krolikowski, from the School of Geography and the Environment at Oxford University, said: “Water utility companies in Africa had often struggled to provide satisfactory water supplies to meet the demands of their rapidly growing cities. This challenge was even greater when you factored in the amount of money lost due to the many layers of bureaucracy traditionally involved in revenue collection.
Mobile technology has transformed the way payments can be made, increasing efficiency and transparency, lessening the potential for theft, bribery and collusion.”
The researchers analyzed water utlity company data of one million water payments using different payment methods, and conducted interviews with water customers, water sector officials and people working in the telecommunications industry.
The report is entitled ‘Wireless Water: Improving Urban Water Provision Through Mobile Finance Innovations’. The research is funded by the Skoll Center for Social Entrepreneurship, Green Templeton College and the Clarendon Fund.
The water utility in Dar es Salaam, Tanzania, introduced mobile-enabled payment methods in 2009 to improve customer service, expand revenue collection, and incorporate new technologies into its operations.
The utility company has since become a leader in Africa as it continues to identify ways to improve public service provision through the use of mobile-enabled payment mechanisms. Mobile water payments are also being used across the world in countries like Uganda, Kenya, Swaziland, Ghana, Cambodia, and the Philippines.