Kenya dominates mobile money, as there are now more than 26.7 million M-Pesa subscribers in Kenya alone, and these subscribers can now use M-Pesa to exchange money through their phones without having to link their electronic funds to a formal bank account. Here's how M-Pesa works: the user obtains a Safaricom sim card and takes cash to be deposited with an M-Pesa agent. If the user wants to withdraw funds, they may do this with an M-Pesa agent as well. To send money to another, the user simply selects 'send money' and inserts the phone number of the recipient. M-Pesa users can also save money, pay bills and link their other bank accounts through M-Pesa. Vietnam must follow suit. 


3 Reasons Vietnam Needs Mobile Money Too

1.) Borrowers would pay less interest. Microfinance institutions ("MFIs") would be able to charge a lower interest rate to microloan borrowers since mobile money would remove the need for MFIs to send loan officers on motorbikes to collect borrower repayments in cash.


2.) International MFIs would avoid wire transfer fees & thereby be able to lend more frequently. This would remove a disincentive for MFIs to provide microloans to the poor and would also enable these MFIs to lend money to borrowers on a more frequent basis. 


3.) Borrowers would be able to safely save money and track repayments on loans. The poor generally do not have access to formal banking institutions. For example, in Vietnam: only 31% have a bank account at a financial institution and only 2% have a credit card. Opening a bank account is expensive, banks are far away and banks are generally uninterested in providing financial serves to poor people. Most poor people have to think creatively when it comes to saving cash (e.g., storing in a safe location at a relative's home). Even then, robbery and physical destruction of cash are real possibilities. Mobile money would also allow borrowers to easily track repayments on their loans through the electronic records in their mobile money account on their phones. This is significant because it would easily allow borrowers to manage their money and save for the future. For example, studies in rural Kenya show that Kenyans who decided to use M-Pesa saw their income increase by 5-30%


Challenges Facing Vietnam's Access to Mobile Money and Greater Financial Inclusion

1.) Government Regulations. Realistic government oversight is key to the success of mobile money in Vietnam. As context, ever since Doi Moi - economic reforms undertaken by the Vietnamese government commencing in 1986 to form a more market driven economy - the Vietnamese  government has passed legislation to help integrate MFIs into the formal banking system. However, it takes anywhere from 1 to 2 years for an MFI to obtain a government license, thereby enabling it to function as a formal banking institution, which in turn permits access to commercial funding from the state banks, among other benefits. This is why there are so few licensed MFIs in Vietnam. Unlicensed MFIs in Vietnam face greater barriers to conducting business in Vietnam, especially when partnering with international organizations that follow alternative procedures and policies. 


By contrast, Mwangi Kimenyi of Brookings’ Africa Growth Initiative and Njuguna Ndung’u, governor of the Central Bank of Kenya (CBK), affirmatively believe M-Pesa's success is due in large part to the Central Bank. Specifically, they stated: “[T]he primary factor [in the success of M-Pesa] is the creation of an enabling environment through the establishment of prudent oversight that guarantees the simultaneous achievement of access and financial stability.” They go on to state that a successful mobile banking sector is dependent upon “a conducive environment for business, private sector-public dialogue in the formulation of policy, prudent oversight that keeps abreast of innovations, and removal of barriers to entry into both supply of mobile telephone and banking services.” Additionally, private entities may have greater resources to venture into more rural areas in order to market mobile money to Vietnam's largely (67%) rural population. Should the Vietnamese government decide to streamline government oversight, facilitate communications and recognize opportunities with private sector mobile telephone and banking services, as was the case with Kenya, Vietnam has a strong chance of harnessing the next M-Pesa and the affiliated social and economic benefits countrywide. 


2.) Mobile Penetration. Africa is considered a "mobile only" continent, as it has 557 million unique mobile subscribers, with smartphones expected to triple over the next five years. “At the end of 2015, 46% of the population in Africa subscribed to mobile services, equivalent to more than half a billion people,” according to The Mobile Economy: Africa 2016 report.  Regarding Kenya specifically: according to the quarterly sector statistics report by the Communications Authority of Kenya (CA), mobile penetration has reached 88%,with over 70% of households in Kenya using M-Pesa, over 50% of which are classified as poor, rural and unbanked. By contrast, 36% of Vietnamese have a smart phone, with significantly lower numbers in rural areas.


3.) Marketing to, communicating with and educating the poor, rural and unbanked. Vietnam's poor are largely uneducated, as mobile money companies will need to streamline their messaging to help them understand and see the value in mobile money. Additionally, 67% of Vietnam's population live in rural areas, as marketing mobile money to these citizens will require additional resources and steady dedication. 


Prospects for Mobile Money in Vietnam

Fortunately for Vietnam, MoMo, a mobile money service of JWT Vietnam, M_Service and Vinaphone (in association with Vietcomb Bank - Vietnam's leading commercial bank) is the most likely contender for widespread mobile money in Vietnam. MoMo was launched by Vinaphone in 2010. Although the mobile money market is still saturated in Vietnam, MoMo was the most downloaded app in the Apple Store in Vietnam in 2015 and service is reportedly growing 30 to 50% per month in terms of transaction volume and user base. Additionally, Standard Chartered Bank and Goldman Sachs recently invested $28 million in MoMo earlier this year. 


Despite Vietnam's country-specific challenges, it is likely only a matter of time until MoMo, or another similar service, becomes the Vietnamese M-Pesa among the urban population before spreading to the unbanked living in more rural areas of Vietnam.

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