IBM Helps Sweeten Earnings for Kenyan Sugar Cane Cutters

Kenyan sugar cane cutters are earning more money because of a mobile phone banking system supported by IBM.

A sugar cane farm would shut down for two or three days a month to let cane cutters travel to a branch and wait in a long queue to deposit their pay, said Keriri Muya, director of operations and technology at Family Bankin Nairobi. With the introduction of mobile banking, the cane cutters can keep working and monitor their pay deposit on their phones after work. They can also use their phones to  get cash from local agents, buy at local shops, or transfer money to other individuals.

Just five years ago banking transaction in Kenya were manual. People often budgeted an entire afternoon for a trip to a bank branch to check their balances or to make a deposit, withdrawal or payment, explained Anthony Mwai, country general manager for IBM in East Africa. Branches closed down entirely for two or three days for end-of-month accounting.

As banks use mobile connectivity to expand their reach into a population that didn�t have  access to banking before, the banks know they have to upgrade their IT.

Family Bank has recently implemented an Oracle FLEXCUBE core banking system running on IBM hardware and the IBM AIX operating system. That may look like overcapacity now, but Muya said the bank wants to expand to 10 million customers over the next few years, not only in Kenya but also in Southern Sudan, Uganda, Tanzania and Congo DRC. Kenya is a regional leader in financial services and he expects the popular mobile channel will be a key to its growth throughout both Kenya and neighboring countries.

�Banks realize they can provide these services on the mobile phone and that has driven the increase in their number of customers. That growth in the number of customer accounts has driven them to modernize their core banking software to handle the volumes and integrate their transaction banking with mobile channels. They have had to get modern.�

Banks realize it is too expensive to build branches to reach customers across rural areas, and now they don�t need to.�

Half of Family Bank�s one million customers have registered for mobile banking.

�We are trying to get everybody registered for mobile because it is very convenient for them and good for us. It relieves crowded banking halls and it is a cheaper channel for us to do transactions,� said Muya.

In some ways the banks are catching up with an African mobile finance service run by a mobile phone company.   M-PESA, launched in 2007, provides banking transactions without the need to visit a bank branch by using mobile phones and 19,500  agents where customers can deposit and withdraw money, pay bills, purchase airtime and transfer money to other users and nonusers. It is run by IBM Global Services for Vodaphone.

�M-PESA has taken the banking sector by surprise,� said Muya, noting that it has registered 17 million people in four years.

�That is huge; if you add up all the banks in Kenya, they have around 9 or 10 million customers, and banking here has been going on for 100 years. The fact that all these people are registered for M-PESA shows there is a lot of potential.� After overcoming some technical challenges, Family Bank has linked to M-PESA so customers can move money back and forth from their bank accounts to M-PESA.