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March 30, 2012updated 04 Apr 2017 4:14pm

Afghanistan takes to m-payments

A visionary mobile operator is pioneering mobile payments and banking in war-torn Afghanistan, where 97% of the population is unbanked Roshan, the largest mobile operator in Afghanistan, teamed up with Vodafone Group to launch the M-Paisa mobile money service in November 2008, based on the UK-based telcos M-Pesa mobile payments platform

By Robin Arnfield

A visionary mobile operator is pioneering mobile payments and banking in war-torn Afghanistan, where 97% of the population is unbanked. Robin Arnfield reports


Roshan, the largest mobile operator in Afghanistan, teamed up with Vodafone Group to launch the M-Paisa mobile money service in November 2008, based on the UK-based telco’s M-Pesa mobile payments platform. Paisa means ‘cash’ in the Afghan languages Dari and Pashto.

M-Paisa works on basic mobile handsets such as the Nokia 1100, says Zahir Khoja, director of mobile money at Roshan. “It doesn’t require any application to be downloaded to the handset,” he says.

As of March 2012, Roshan had 1.2 m registered users for M-Paisa and during calendar 2011 processed $24m worth of mobile payments on the platform. Roshan has around 6 m mobile phone subscribers.

“M-Paisa has been growing at double-digit rates,” says Thor Hauge, vice president, head of global sales at Western Union Mobile, which is partnering with Roshan on international mobile remittances to Afghanistan.

“Afghanistan has a population of around 30 m,” says Zahir Khoja, director of mobile money at Roshan. “But the country’s 17 banks have a total of just 300 branches. The majority of the population is in rural areas, while the banks are based in the cities. Because the penetration of mobile phones in Afghanistan is very high, mobile is a tool for providing financial services to the unbanked.”

Although Roshan is a for-profit business, it also has a non-profit element which is committed to working for the social development of Afghanistan. Its majority shareholder is the Aga Khan Fund for Economic Development (AKFED), with a 51.00 % stake. Monaco Telecom International (MTI), a subsidiary of Cable & Wireless Communications, owns 36.75 % and Swedish-based telco TeliaSonera 12.25 % of Roshan.

“Introducing banking-type services using mobile phone technology such as M-Paisa will serve as a catalyst to improve the quality of life in Afghanistan,” says Khoja. “Our aim with M-Paisa is to educate people about financial services.” Bringing unbanked Afghans into the formal banking system will enable them to save for their healthcare and their children’s education, which will reduce poverty in the country, he says.



Traditionally, Afghanistan has been a cash-based economy. “Cash is problematic in that it is risky and lacks transparency in terms of having an audit trail,” says Khoja. “The Central Bank of Afghanistan wants to have transparency on where money in Afghanistan is used, and how it is used.”

In common with other countries in the region, Afghanistan has an informal cash-based value transfer system called Hawala (Arabic for transfer). Based on trust relationships between senders, recipients and money brokers, Hawala has no documentation and, therefore, no audit trial.

“Roshan follows very strict KYC (know your customer) guidelines for mobile money,” says Khoja. “To apply for an M-Paisa wallet, you need to show your Afghan passport or your Taskera national ID card. Taskera cards are available in every Afghan village, so this means that everyone has access to a national ID card.”

Khoja says that Roshan finds and screens agents before allowing them to provide M-Paisa payments. “There are some Roshan airtime top-up merchants who are also M-Paisa agents,” he says. “But we have a lot of M-Paisa agents who aren’t Roshan airtime resellers. We look for agents in high-traffic locations who have a good number of customers and strong cash inflows and outflows. Agent liquidity is important to ensure users’ cash-in and cash-out needs are met. If an ATM in the US runs out of cash, it’s likely there will be another ATM down the street with money. But, if an M-Paisa agent runs out of cash, there may not be another agent nearby.”

Roshan is partnering with licensed Hawala agents in its rollout of M-Paisa, Khoja says. “M-Paisa is working to leverage the Hawala tradition while adding convenience, speed and transparency to money transfer transactions.”



Services offered by M-Paisa include mobile person-to-person (P2P) transfers, direct payroll deposits, microfinance loan disbursements and repayments, Roshan airtime top-up, and point-of-sale merchant payments. Users receive discounts from merchants for paying for purchases via M-Paisa.

M-Paisa clients can either use SMS on their mobile phones or access the system via IVR (interactive voice response). However, although Roshan offers access to Internet applications such as Facebook and Twitter using a GPRS (General Packet Radio Service) connection on basic cellphones, it does not provide a Web version of M-Paisa. GPRS is a standard for mobile data services on 2G and 3G mobile networks.

“We have private employers, government agencies and NGOs (non-governmental organisations) using M-Paisa to make salary disbursements,” says Khoja. “Organisations will use M-Paisa anywhere that it is difficult to pay people’s salaries. For example, the Afghan National Police use M-Paisa to pay staff in remote areas where there aren’t bank branches. The advantage of using M-Paisa is that people receive their salary in full and on time. With mobile payments, you eliminate the need to use people to transport salaries, so the money doesn’t get stolen.”

Khoja says that Roshan has relationships with microfinance institutions that distribute loans to recipients via M-Paisa. “Recipients can repay their loans via M-Paisa,” he says. “Using M-Paisa reduces the time required to disburse a loan and also to repay it. M-Paisa’s advantage for the lender is that people often don’t repay their loans, not because they don’t want to or don’t have the money, but because they can’t get to the loan office in time to repay the loan. So, by overcoming the challenge of the long distance between borrowers and microfinance institutions, M-Paisa makes it easier for borrowers to repay their loans. Also, the lender can communicate with the borrower via cellphone. For example, it can send an SMS message to say the loan repayment is due or past due. The lender could also say: ‘you have been a very good customer, do you want to increase the size of the loan?’”

“P2P is a primary application on M-Paisa, which will continue to grow as people learn how to use M-Paisa for sending money from their homes via cellphone,” says Khoja. “Workers need to send money when they receive their salary, to their family back in the village where they come from. The advantage of using M-Paisa to move money around Afghanistan is that you don’t need to leave your job and travel back to your village with cash.”

Selling Roshan airtime on M-Paisa is a big market for the mobile operator, Khoja says. “It’s very convenient for a Roshan customer to be able to top up their Roshan airtime without needing to go to a Roshan agent,” he says.

An important element in Roshan’s marketing for M-Paisa is to explain to consumers that e-money is the same as cash, says Khoja. “We do a lot of grassroots events in Afghanistan to educate people about M-Paisa,” he says. “People experience M-Paisa for the first time when their salaries are paid direct to their cellphone, and then they realise they can do things using M-Paisa such as sending money electronically to relatives.”


Electronic Money Institution licence

In April 2011, Roshan received an Electronic Money Institution licence for M-Paisa from the Central Bank of Afghanistan (Da Afghanistan Bank), marking the first issuance of this type of licence in Afghanistan. Roshan had been operating under a Money Service Provider (MSP) licence since introducing M-Paisa in 2008. Roshan says that EMI licences add an additional layer of protection for mobile money service customers, agents and partners over and above that provided by MSP licences.

“There are other Afghan mobile operators who’ve applied for EMI licences so they can offer mobile payments,” says Khoja. “I think it will be a good thing for other Afghan mobile operators to offer m-wallets, as this will help the mobile money market grow in the country.”

The Afghan regulator does not stipulate that a mobile operator wanting to offer mobile wallets needs to have a bank partner participating in its mobile money service. However, any money that a customer deposits into their M-Paisa account is backed by an equivalent account held by M-Paisa in a trust account with a bank.

“If a customer deposits, for example, $100 in cash at one of our agents, the agent then has to deposit $100 into an M-Paisa trust account,” says Khoja.


Western Union

Western Union announced in February 2012 that it had signed an agreement with Roshan to enable international remittances to be sent to M-Paisa mobile wallets in Afghanistan. “Western Union is currently working on the technology integration for the service with Roshan and its partner Vodafone,” says Western Union’s Hauge.

“The advantage of people outside Afghanistan being able to send mobile remittances to Afghanistan is that people in remote rural areas will be able to receive money in their M-Paisa wallet without needing to visit an agent,” Hauge says. “To remit funds to M-Paisa in Afghanistan, senders will have the option of visiting a Western Union branch, or using the website or a Western Union mobile money transfer app on their smartphone. They’ll need to supply the name of the recipient, their city and country and their cellphone number so we can perform KYC checks on the recipient and sender. The transfer will occur in real time, and the recipient will get an SMS message saying they have been sent some money to their M-Paisa account.”

“We will be rolling out the international mobile remittance service with Western Union at the end of April, after we complete the final integrations,” says Khoja. “People anywhere in the world will be able to send money to Afghanistan to M-Paisa wallets via Western Union. There are large Afghan communities in the US and Europe, for example Germany, and also Pakistan, who send money back to their families.”



In August 2011, Roshan formed a partnership with Vancouver, Canada-based prepaid payments technology vendor VendTek Systems to add extra functionality to M-Paisa. VendTek is providing an application called the Connector which enables M-Paisa customers to send e-money to and from their Afghan bank accounts. The application also enables Afghan banks to offer mobile banking services to their customers, says Nurez Khimji, VendTek’s chief financial officer.

“The banks’ customers will be able to use their cellphones to do account balance enquiries, transfers, mobile top-up, and pay for electricity bills,” Khimji says. “We also intend to offer bank customers a mobile point-of-sale purchase capability as well as the ability to deposit or withdraw cash from their accounts at M-Paisa agents.”

“There are some applications that are needed for the Afghan market that are not available on Vodafone’s M-Pesa technology platform, and this is where VendTek is helping us,” says Khoja. “VendTek is supplying an application layer on top of our M-Pesa-based platform.”

Banks will be able to use the Connector to provide mobile banking services without having to get their customers to sign up for M-Paisa m-wallets, says Khimji. In addition, they will not be required to use Roshan as the mobile operator.

Unbanked M-Paisa users will also benefit from the Connector. “Roshan will be offering payment services to M-Paisa m-wallet users who don’t have bank accounts, such as bill payments, via the Connector,” says Khimji.

“The Connector is ready and Roshan is working with its bank partners to integrate it,” says Khimji. “The application will go live by May or June 2012. Bank customers will be able to perform mobile banking transactions, using the Connector, by SMS, IVR, a Web interface or USSD Unstructured Supplementary Service Data).” USSD is a protocol which enables GSM-based cellphones to communicate in real-time with a service provider’s computers.

Licensing the Connector to Afghan banks forms a key part of Roshan’s mission to encourage financial inclusion in Afghanistan, says Khoja. “The Connector’s bank integration capability will enable Afghans to access basic, convenient and transparent financial services without needing to visit physical bank branches,” he says. “Roshan recognizes this as a pillar in the redevelopment of Afghanistan. Our plan is to integrate M-Paisa with all Afghanistan’s banks, so that we can offer our customers freedom of choice for which bank they transfer their money to.”

Over time, Khoja expects to see people who have mobile wallets getting bank accounts. “But the people need to learn to trust the banking system, so that they can open savings and loan accounts with banks,” he says.


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