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Banking the Unbanked – the Case of Mobile Money in Nepal

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Banking the Unbanked – The Case of Mobile Money in Nepal ANDREAS TORBIÖRNSSON JOHAN PERSSON Master of Science Thesis Stockholm, Sweden 2013 Banking the Unbanked – The Case of Mobile Money in Nepal Andreas Torbiörnsson Johan Persson Master of Science Thesis INDEK 2013:99 KTH Industrial Engineering and Management Industrial Management SE-100 44 STOCKHOLM Examensarbete INDEK 2013:99 Banking the Unbanked – The Case of Mobile Money in Nepal Andreas Torbiörnsson Johan Persson Godkänt Examinator Handledare 2013-06-12 Staffan Laestadius Cali Nuur Sammanfattning Detta examensarbete undersöker spridningen av informations- och kommunikations- teknik (ICT) i utvecklingsländer. Fallet som undersöks är ‘Mobile Money’ i Nepal. ‘Mobile Money’ har nyligen introducerats i Nepal och har potentialen att förbättra livet för miljontals människor. Syftet med denna uppsats är att undersöka de dominerande affärsmodellerna i Nepal samt vilka drivkrafter och hinder det finns för att ‘Mobile Money’ ska spridas inom landet. För att möta syftet genomfördes en fältstudie i Nepal tillsammans med en omfattande litteraturstudie inom ICT spridning och ‘Mobile Money’. Intervjuer med intressenter inom ‘Mobile Money’, observationer samt information från databaser från t.ex. Världsbanken har använts som datakällor. Resultaten av studien visar att det finns både hinder och drivkrafter för ‘Mobile Money’ i Nepal och att inställningen hos landets institutioner, i detta fall Centralbanken, har en stor påverkan på spridningen. Införandet av teknik i en ny kontext, eller land i detta fall, visade sig vara en komplex, multidimensionell process. En lösning i Nepal skulle dock kunna vara att förbättra den institutionella attityden och göra regleringarna mer tillmötesgående. Nyckelord: Informations- och kommunikationsteknik (ICT), ICT for Development, ICT spridning, ‘Mobile Money’, Nepal i Master of Science Thesis INDEK 2013:99 Banking the Unbanked – The Case of Mobile Money in Nepal Andreas Torbiörnsson Johan Persson Approved Examiner Supervisor 2013-06-12 Staffan Laestadius Cali Nuur Abstract This thesis investigates ICT diffusion in the context of developing countries, more specifically in the case of Mobile Money in the Asian country Nepal. Mobile Money has recently emerged in Nepal and has the potential to improve the lives of millions. The aim of the thesis was to examine the dominant business models in Nepal and the barriers and drivers for the future diffusion of Mobile Money in Nepal. This was done through a case study consisting of a field study in Nepal and an extensive literature review in the field of ICT diffusion and Mobile Money. Interviews with stakeholders in the Mobile Money business ecosystem, observations and databases from organizations such as the World Bank were used as data sources. The results show that there are both barriers and drivers for Mobile Money and that the attitudes of institutions, in this case the central bank, have a high impact on diffusion. The introduction of a technology into a new context was affirmed to be a complex, multi-dimensional process. However, in the case of Nepal, one of the solutions could be to improve institutional attitudes and make the regulations more accommodating. Key-words: ICT for Development, ICT Diffusion, Mobile Money, Nepal ii This study has been carried out within the framework of the Minor Field Studies Scholarship Programme, MFS, which is funded by the Swedish International Development Cooperation Agency, Sida. The MFS Scholarship Programme offers Swedish university students an opportunity to carry out two months’ field work, usually the student’s final degree project, in a country in Africa, Asia or Latin America. The results of the work are presented in an MFS report which is also the student’s Master of Science Thesis. Minor Field Studies are primarily conducted within subject areas of importance from a development perspective and in a country where Swedish international cooperation is ongoing. The main purpose of the MFS Programme is to enhance Swedish university students’ knowledge and understanding of these countries and their problems and opportunities. MFS should provide the student with initial experience of conditions in such a country. The overall goals are to widen the Swedish human resources cadre for engagement in international development cooperation as well as to promote scientific exchange between unversities, research institutes and similar authorities as well as NGOs in developing countries and in Sweden. The International Relations Office at KTH the Royal Institute of Technology, Stockholm, Sweden, administers the MFS Programme within engineering and applied natural sciences. Lennart Johansson Programme Officer MFS Programme, KTH International Relations Office ! iii "#$%&'()*+,)%-.! This Master’s thesis has truly been a journey from the beginning to the end. Thanks to our supervisor and the support from SIDA, we have not only been able to finish our Master’s degree in Industrial Engineering & Management, but also been able to travel to Nepal for an eight weeks field study. The Master’s thesis has not only been the ending chapter of our time as students at the Royal Institute of Technology (KTH), it has opened our eyes for a new world outside of Sweden and Europe. First, we would like to thank Cali Nuur, our supervisor at KTH, for his guidance and valuable insights. This thesis would not have been the same without him. Next, we give thanks to Katak Malla at Stockholm University for introducing us to Nepal and giving us valuable contacts there, as well as telling us part of his most interesting life story. Katak was introduced to us by Cecilia Schött and Madeleine Beck, who also spent some of the time in Nepal with us. Thank you for giving your inputs on Nepal and for the company on the journey. We would also like to thank our seminar group led by Staffan Laestadius. Thank you for all interesting thoughts and feedback. Another person who has contributed with his expertise and given a reality check on the thesis is Gunnar Camner from the GSMA. Thank you for your insights. Of course, we would also like to give our thanks to Lennart Johansson and Sida for granting us the possibility to do the thesis as a Minor Field Study. Last, but absolutely not least, we give a multitude of thanks to all people in Nepal who have received us with open arms and told us their stories. Ajay Shrestha, thank you for showing us Nepal and giving us access to your valuable network of contacts. Another person in Nepal to whom we owe thanks is Ram Sapkota, who told us his story and let us go and stay at his family’s house in the rural parts of Nepal. Thank you for all the support, this thesis would not have been possible to make without you. Andreas Torbiörnsson and Johan Persson iv /01()!&2!3&%-)%-.! 1! Introduction ............................................................................................................ 1! 1.1! Background ....................................................................................................... 1! 1.2! Problem Statement ............................................................................................ 3! 1.3! Research Questions ........................................................................................... 4! 1.4! Delimitations ..................................................................................................... 4! 1.5! Outline of Thesis ............................................................................................... 4! 2! Methodology ........................................................................................................... 6! 2.1! Case Study ........................................................................................................ 6! 2.2! Research Design ................................................................................................ 7! 2.3! Quality of Research and Limitations .............................................................. 10! 3! ICT-based Development, Diffusion Mechanisms and Mobile Money ............ 12! 3.1! Development and ICT ..................................................................................... 12! 3.2! Technology Diffusion ..................................................................................... 15! 3.3! Mobile Money in Developing Countries ........................................................ 19! 3.4! Summary ......................................................................................................... 37! 4! Contextual Setting of the Thesis ......................................................................... 38! 4.1! Socio-economic Context ................................................................................. 38! 4.2! Financial Sector .............................................................................................. 44! 4.3! Telecommunication ......................................................................................... 49! 4.4! Summary and Discussions .............................................................................. 51! 5! Mobile Money in Nepal ....................................................................................... 54! 5.1! History and Mobile Money Market ................................................................ 54! 5.2! Summary and Discussions .............................................................................. 59! 6! Drivers and Barriers of Mobile Money in Nepal .............................................
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