Demetria wakes up before dawn to set out on a four-hour journey by foot and bus through the Ugandan countryside to the closest city (cost: $2). Once there, she waits in line at the bank to deposit her child’s school fees in the school’s account (cost: $1.50). Two hours later, she emerges with a receipt that must be hand-delivered to the school, about two hours away by bus (cost: $1). When she arrives at the school, the headmaster sees that she has only paid half of what she owes. Her child will be permitted to attend school, but she must pay the balance within three weeks. Demetria returns home (cost: $1) just in time to begin the evening chores, having spent all day paying the school fee.
All told, Demetria spent $5.50 to pay school fees and lost potential earnings of about $3. And to make matters worse, she will need to repeat the entire process in just a few weeks.
Mobile money could make this process far cheaper and easier. If the school accepted mobile money, Demetria would be able to pay her child’s fees in a matter of minutes without ever leaving home. If she were unable to pay the full amount, she could make subsequent payments in the same manner. If other family members supported her child’s fees, they would also be able to submit payments directly to the school using mobile money to ensure the funds were spent on education. A digital savings product could help Demetria plan and save for the next term’s fees in a secure mobile money account. And if an emergency were to hit, access to digital credit could enable her to disburse payments using mobile money so that her child could continue going to class.
It sounds great, so why aren’t schools accepting mobile money on a larger scale?
Other than Cote d’Ivoire, where 99 percent of secondary school registration payments are made with mobile money, mobile money is not commonly used for school fee payments. Take Uganda and Kenya, for example. Both countries have relatively high levels of mobile money activity, yet very few schools outside of urban centers accept mobile money.
In Uganda, the mobile money infrastructure is still developing. The agent network is still such that people living in rural areas often have to travel some distance to reach an agent. That can certainly negate some of the benefits of using mobile money. There is also a lack of familiarity with mobile money among rural customers, so the process of paying school fees would require a customer to first register for a mobile money account and then figure out how to use it. These considerations are common to many markets where mobile money is still nascent.
Beyond these structural factors, the real linchpin seems to be the schools themselves — not for lack of interest (though in some cases there are those who benefit from maintaining less transparent cash transactions), but for lack of systems and capacity. Shifting from cash to digital transactions is not an easy feat for any organization (ask microfinance institutions). But to do so at a rural school with inconsistent access to electricity, spotty mobile connectivity, and no computer is particularly difficult. Given these realities, it is not enough for mobile network operators like Safaricom or MTN to create a “Pay School Fees” option in their mobile money menus and hope that parents and schools use it.
An opportunity exists for companies to fill this gap and help drive the adoption of mobile money for school fee payments. What would this look like? The core of the solution could be a simple app running on an inexpensive smartphone or tablet at school. Through the app, a school could issue invoices to parents and others who support a student’s education. Payments could be made via mobile money and charged a typical mobile money transaction fee (most likely less than the total cost of cash payment) or potentially discounted or zero-rated. To help families get ahead of payments, financial incentives or rewards could be provided to those who prepay for the next term. The payment could include a unique student identity number, making it easy to correctly allocate the funds and reconcile payments against student accounts.
At the school, the bursar would no longer have to sort through stacks of paper receipts and meticulously record those payments in a paper ledger. Instead, the school would review a balance sheet in the app to see which students have paid and which have not. The app could also be used for other important tasks, such as recording attendance. Eventually, schools could also use the app to manage outgoing payments, such as teacher salaries and vendor payments, so that it would become a financial hub for the school.
A number of revenue options exist for this simple solution. A company could take a percentage of the transaction fees, charge schools a fee, make money on the float (where regulation allows), or cross-sell other financial services using the transaction data generated through the payments. The key to any of these scenarios is driving adoption among parents. Schools could support parents by hosting training sessions on mobile payments and walking them through their first transactions. As BRAC observed during a pilot in Bangladesh, parents may become more comfortable with mobile money and even begin using it for other purposes within a short period of time. This type of regular use would drive demand for additional agents closer to where people live, helping to resolve today’s challenge of agent proximity in rural areas.
With all these pieces in place, digitizing school fees could make life easier and less expensive for schools and families while encouraging people to use mobile money and related services. This would be a win-win for education and financial inclusion.
Economic and social challenges of rural and semi-urban schools using mobile money platforms for school fees payment also affect the ability of learner's families to take full advantage of this cost effective product. For the average Ugandan rural family household income, a phone is a luxury. There is a huge gender digital divide too; women who often pay fees, are less likely to own a phone, and more likely to share the use of one. Lack of infrastructure phone tower network, electricity to charge the phone requires a trip to a trading center or investment in a home solar system. Solving consumer demand and economic needs first to keep at par with the pace of technology advances is critical.
Great points, Jacqueline. There are still so many basic challenges facing mobile money adoption and usage, starting with mobile phone ownership! I'm encouraged by the idea, though, that schools could provide a touch point to help individuals learn how to use mobile money and to guide them through their first few transactions. Providing both a regular use case (school fees) and a trusted partner to support usage (schools) may help speed the adoption process in locations where the other basics like cell phone ownership and network coverage are in place.
Excellent article! I think the major factor of schools not jumping on mobile money solution is schools (some of them) benefiting out of maintaining less transparent financial transactions system, as suggested in the article. Hence, some regulatory nudge is also needed to fix such issues.
Thanks, Sanchin. I agree with your point about a regulatory nudge. I think widespread adoption among public schools will likely depend on government intervention. As far as I've seen, Cote d'Ivoire is the only example where national governments have stepped in to develop and promote mobile money school fee payments. If anyone has other examples, I would love to know!
That's very good article and best practice of Mobile Money.
The critical convincing point is the level of technology literacy of rural parents. At another point is about the coverage of the internet facilities.
Thank you for this article. I have a team here at UCSD that is working on precisely this issue in Benin, and we will hopefully be launching a tech-based solution later this year. We should chat!
Thanks Lauren for this article. I've stepped away from mobile payments for a few years but this brings me right back to my experience trying to integrate a M-PESA solution in Kenyan schools. The challenges we were facing was a reluctance to participate from the school itself. 1. There was a fear that if something went wrong the school would be held accountable. 2. the function of the busar would not change with mobile money, but the skills required to carry out those functions would, which over time would lead to busars being higher paid, more skilled workers which resulted in a fear and resistance from busars we spoke with. 3. The magnitude of training and change required. Many of the schools we were working with were boarding schools which of course is where most savings would be, as your example shows. But because parents are not in any central location, the training required to help them grasp the new payment modality becomes cumbersome.
Therefore, I think the gap for service providers is large. A service provider would need to train parents, train schools, offer some on going phone based support, and be ready to continuously modify the technology solutions since most markets are still immature and change their fees/functions/APIs etc quite frequently.
Thank you for this article. We planning to implement that in Swaziland. Please can we chat