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Cablegate: Expanding Mobile Money Services in Afghanistan

VZCZCXRO0900
RR RUEHDE
DE RUEHBUL #3077/01 2761335
ZNR UUUUU ZZH
R 031335Z OCT 09
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC 1808
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC 0894
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHNR/AMEMBASSY NAIROBI 0074
RUEHIL/AMEMBASSY ISLAMABAD 7961
RUEHAD/AMEMBASSY ABU DHABI 1996
RUEHDE/AMCONSUL DUBAI 7064
RUEHDO/AMEMBASSY DOHA 0507

UNCLAS SECTION 01 OF 02 KABUL 003077

SENSITIVE
SIPDIS

DEPT FOR SRAP, SCA/FO, SCA/RA, SCA/A, and EEB/IFD/ODF
DEPT PASS AID/ASIA BUREAU
CENTCOM FOR CSTC-A, USFOR-A
TREASURY FOR MHIRSON, ABAUKOL, AWELLER, AND MNUGENT

E.O.12958: N/A
TAGS: EFIN EINV PGOV EAID ETRD AF
SUBJECT: Expanding Mobile Money Services in Afghanistan

1. (SBU) SUMMARY: Mobile commerce (mCommerce), also known as
mobile money (mMoney), offers an opportunity to increase
rapidly access to financial services in Afghanistan,
particularly in rural areas. Moreover, mobile money, with
proper regulatory safeguards, advances anti-corruption
efforts, for example by establishing a secure system for
police, civil servants, and military personnel to receive
their salaries. It can also help combat illicit financing.
In February 2008, AfghanistanQs leading telecommunications
operator Roshan launched M-Paisa, a mobile payment system
modeled on a highly successful money transfer service in
Kenya. M-Paisa has registered over 80,000 subscribers in
Afghanistan (10,000 of which are active) and is expected to
grow in the coming months. We are encouraging the expansion
of mobile money service in Afghanistan, including piloting an
initiative to link M-Paisa technology with two microfinance
institutions (MFIs). End Summary.

Status of Mobile Money Development in Afghanistan

2. (SBU) In February 2008, AfghanistanQs leading
telecommunications operator Roshan launched M-Paisa, a money
transfer service, to provide registered customers a safe,
effective and affordable means to transfer money using their
mobile phones. The platform, developed in partnership with
Vodafone, is modelled on VodafoneQs highly successful M-Pesa
mobile money transfer service in Kenya. M-Paisa is an
innovative solution for Afghans who do not have bank accounts
or a means to transfer money. The service has over 80,000
subscribers supported by about 600 agents across the country.
3. (SBU) Roshan also plans to apply M-Paisa in other ways to
spur financial sector growth. In addition to piloting
initiatives to facilitate disbursement/repayment of
microfinance loans, Roshan is conducting a trial to facilitate
money transfers for the payment of 47 police salaries in
Wardak province. Roshan plans to expand this program over
time to include the entire Afghanistan National Police (ANP)
and the Afghanistan National Army (ANA). By providing the
Afghan National Security Forces (ANSF) a formal, transparent
mechanism to deliver salaries to their families, mMoney and
services like it that may develop will help mitigate soldier
absences after they are paid and reduce opportunities for
corruption (e.g., salary skimming).
4. (SBU) The Da Afghanistan Bank (DAB, Central Bank) recently
drafted and distributed a comprehensive regulation that covers
the mCommerce sector to protect against systemic risk, ensure
consumer protection, and implement anti-money laundering
measures. The regulation would limit the number of mobile
banking agents, as well as the daily ($600) and monthly
($3,000) remittance amounts per customer. These limits are
not dissimilar to those set in other parts of the world,
including Kenya and the Philippines. Roshan aims to have the
remittance values raised, however, something which will
require further discussion with the DAB Supervision
Department.
Untapped Opportunity for Mobile Commerce in Afghanistan


5. (SBU) Mobile network technology is an innovative solution
for reaching the unbanked in Afghanistan. The rapid growth of
mobile payment technologies in recent years in countries such
as Kenya and the Philippines demonstrates that there is demand
and means among low-income users to adopt mobile technology.
Benefits include improved security, reduced travel costs, and
less queuing time. Telecom companies, banks, and microfinance
institutions realize extending financial services to the poor
through mobile technology can be profitable due to
significantly lower service delivery costs.

6. (SBU) Afghanistan's financial sector needs innovative
methodologies to broaden access to the formal financial
sector. While a formal banking infrastructure is emerging
with 17 registered commercial banks and 16 MFIs, it remains
largely inaccessible to Afghans living in remote areas,
particularly in insecure provinces in the south and east.
Moreover, the microfinance sector reaches less than 15 percent
of the 3.5 million potential clients in Afghanistan. Outreach
to the small and medium enterprise (SME) sector is even lower,
with market penetration of less than 1 percent. Furthermore,
almost 70 percent of the microfinance sectorQs clients are

KABUL 00003077 002 OF 002


urban, with over 40 percent located in the region in and
around Kabul.

7. (SBU) Commercial banks and MFIs recognize Afghan migrant
workers, who typically send money back to their families, need
quick and efficient money transfer services. These
institutions also find it cost prohibitive to build brick-and-
mortar branches in sparsely populated areas of the country, a
problem compounded by insecurity. Road and transportation
networks in AfghanistanQs rural provinces are still being
rehabilitated, remain poor, making it hard for loan officers
to reach out regularly to rural clients and deters travel to
the nearest provincial centers to repay loans. All of these
factors make Afghanistan a good testing ground for mCommerce.

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