When someone in a far-flung rural mountain village in Afghanistan wants to transfer money to family in another part of the country, there are few conventional banking options. A new text-based payment service, backed by the country’s banks and telecom providers, now offers a simpler, more convenient alternative.

In 2008, telecommunications company Vodafone and Roshan, an Afghan telecom provider, teamed up to launch a mobile-phone payroll service called M-Paisa for the Afghan National Police. Now M-Paisa has been expanded so that anyone with a mobile phone and an M-Paisa account can transfer money across the country for a small fee.

The consultancy Frog Design was commissioned to study the implementation of the M-Paisa payment system in Afghanistan. Jan Chipchase, executive creative director of global insights at Frog Design, presented details of the work during a keynote presentation at the Mobile World Congress in Barcelona, Spain, on February 17.

With irregular bank hours, but a high mobile penetration, Afghanistan is, in some ways, ideal for mobile payments. “The gulf between what’s there now and what could be there if it is successful is enormous,” says Chipchase.

Similar mobile payment systems have been very successful elsewhere. The first system designed for cash transfer via text messages, called M-PESA, was launched in 2007 by Vodafone and Kenya’s telecom provider Safaricom. Since then, other mobile money transfer systems have cropped up in several countries in Africa and Asia. ZPESA in Tanzania, Obopay in Senegal, and Easypaisa in Pakistan are variations on the M-PESA theme. But of all these systems, M-PESA has seen the most dramatic growth and success. It is now used by about 55 percent of Kenya’s adult population for paying everything from electricity bills to school fees.

Setting up a system of mobile payments in Afghanistan proved to be especially complicated, according to Chipchase’s two-week survey. Sporadic attacks on cell-phone towers by the Taliban have crippled coverage in parts of the country, and the regime has decreed that cell towers be turned off at night.

“The elephant in the room, of course, is war,” says Bill Maurer, director of the Institute for Money, Technology and Financial Inclusion at the University of California in Irvine, which funded the study. Fotini Christia, a political scientist at MIT who has studied civil war in Afghanistan, notes that many rural areas lack cell-phone coverage to begin with.

Another stumbling block is the lack of cash trade in certain parts of the country, where people still trade in commodities such as goats and gold. Many rural Afghans still lack a basic education, limiting their access to the text-based M-Paisa service.  

Christia agrees that these issues are real obstacles to M-Paisa. “People still trade in kind, in a week’s supply of crops,” she says.  “If it was to pick up, it’s more likely to pick up in urban centers rather than anywhere else.” 

However, Maurer says, all the most important ingredients are present in Afghanistan. The country has just four banks and four telecom providers, which made the system easy to set up. “If you have a few players, put them in the room together, and they can make it happen,” he says .

Crucial to M-Paisa’s success will be “agent networks”—places where people can put cash into the system and draw it out again, says Tavneet Suri, an economist at MIT who has been studying the adoption and impact of M-PESA in Kenya. Setting their agent network up early in the game was one of the Kenyan M-PESA’s strengths, she says. “I think a lot of their success has been in placing their agent network up and running,” Suri says. “And it can’t be just in the city. [The agents] have to be everywhere.”

But Suri notes that other mobile payment systems modeled on M-PESA in Pakistan and Tanzania have grown more slowly. “Everyone’s trying to find the magic that makes this work,” says Maurer. “It could be that there isn’t any magic—that Kenya’s the anomaly and the rest is just a slow slog. It took 4,000 years to develop banking institutions, and we’re all impatient when this system’s in its fourth year.”