When police officers in Afghanistan’s mountainous Wardak province began receiving their $200-per-month salaries via their mobile phones in 2009, many wondered why they had gotten a raise. They hadn’t. It turns out their superiors had been skimming from their salaries, which were previously paid in cash.
That anecdote appears in State Department cables describing M-Paisa, a mobile-phone payment system run by Afghanistan’s largest telecom operator, Roshan, that now reaches 1.2 million Afghans and is described by U.S. officials as a potential “breakthrough technology” for the country.
Whether it’s a few dollars under the table or thousands stuffed in a briefcase, cash is linked to corruption at all levels in Afghanistan. According to the United Nations, government corruption is the biggest day-to-day concern of Afghans, looming larger than even poverty or violence. The U.N. estimated that between 2008 and 2009, half of all Afghans paid at least one bribe to an official; the average amount was $160.
The idea now taking hold in Afghanistan is to avoid graft by paying people electronically, using the country’s network of 15 million mobile phones. “Anywhere you have a middleman touching cash, you increase the opportunity for skimming,” says Zahir Khoja, executive director for mobile money at Roshan, which is partly owned by the Aga Khan Fund for Economic Development.
As cell-phone use skyrockets in even the poorest countries, mobile money is seen as a way to extend banking services more broadly. The people with by far the most to gain are the impoverished 2.5 billion who don’t have access to a bank account and can’t reliably receive, send, save, or borrow money.
According to Afghanistan’s banking authority, the country has only about 300 branches and a few dozen ATMs for 34 million people. Less than 5 percent of Afghans have bank accounts. The banks aren’t trusted, either. The largest, Kabul Bank, is embroiled in perhaps the nation’s worst public corruption scandal, which caused a run on deposits in 2010 after $900 million went missing.
“The mobile network is one of the only networks that knit the country back together,” says Kathleen McGowan, senior policy analyst for in Afghanistan for the United States Agency for International Development. The mobile-phone companies, which got going only in the last decade, also constitute Afghanistan’s largest industry and its biggest taxpayers.
M-Paisa (“paisa” means money in the Dari language) allows anyone with a cell phone to receive a payment by phone with just a text message or, because most Afghans are illiterate, a call to a voice-activated menu. The recipient can then obtain cash at an M-Paisa agent. There’s no bank involved; under a special license issued last year to Roshan, subscribers’ funds are kept in escrow-like accounts.
Roshan licensed the technology in 2008 from Vodafone, which developed a successful mobile money program in Kenya that’s called M-Pesa and has 15 million subscribers. The telecom initially had the idea of using the system to make microloans to small businesses. However, at the urging of the U.S. military, Roshan and the Ministry of Interior decided to see if M-Paisa could be used to pay salaries to the beleaguered Afghan National Police.
The pilot project, which began in 2009 with 53 officers, quickly showed the extent of the corruption problem. According to State Department cables made public by WikiLeaks, one frustrated commander demanded that his officers turn over their phones and PINs and attempted to collect their salaries from an M-Paisa agent.
“The comments we got back from [the policemen] were: ‘We like this service because we get more money from M-Paisa,’” says Khoja, who estimates that about 30 percent of the officers’ salaries had been getting stolen.
The Afghan police force faces higher casualties than either the army or the U.S. military, and the Ministry of Interior says paying officers promptly is important to keeping morale up. As part of its anticorruption strategy, the ministry is now expanding the mobile payment program to another 4,000 officers.
Making payments over cell phones would also cut the risk of transporting money around the country. About half of Afghanistan’s 700,000 government employees don’t have a bank account, and in some cases officials fly cash into rural regions to pay salaries. Ghulam Farooq Wardak, Afghanistan’s education minister, threw his weight behind another mobile payment effort, led by carrier MTN, after one of his staff was killed during a cash delivery.
Although the Afghan government recently sought proposals to expand mobile payments, such efforts have moved slowly in part because of “determined” resistance from some bank and police officials, says Loretta Michaels, a Washington, D.C., consultant who worked in Afghanistan with Roshan to implement the mobile money system.
Corruption is a sensitive diplomatic issue with U.S. troops exiting the country, even as tens of billions in aid still pours in. McGowan, the USAID analyst, says electronic payments have the benefit of rooting out graft without singling out specific officials or looking like an “anticorruption crusade.”
Other countries are also experimenting to see whether electronic payments can counter what experts call “money leakage.” India, rocked last year by anticorruption protests, could save $22 billion annually by making welfare and other government payments electronic, according to a study by McKinsey. Officials in Argentina found that issuing electronic voucher cards practically eliminated bribery associated with certain public benefits.
In Afghanistan, experts don’t think mobile payments alone will solve the country’s corruption problem. “The bigger picture is about millions of dollars walking out of the country in people’s suitcases to buy a Dubai villa,” says Michaels. “But it’s going to make a huge difference to individuals—to the rural teacher or policeman who suddenly sees an increase in their salary.”