Afghan Police Paid by Phone to Cut Graft in Anti-Taliban War
Afghan Police Now Paid by Phone
Adek Berry/AFP/Getty Images
Afghan National Policemen attend a shooting course at Camp Leatherneck on the outskirts of Lashkar Gah in Helmand Province on Feb. 17, 2010.
Afghan National Policemen attend a shooting course at Camp Leatherneck on the outskirts of Lashkar Gah in Helmand Province on Feb. 17, 2010. Photographer: Adek Berry/AFP/Getty Images
Afghan Police Now Paid by Phone
Shah Marai/AFP/Getty Images
Afghan policemen keep watch at the site of a suicide attack at the gates of the Kabul City Centre.
Afghan policemen keep watch at the site of a suicide attack at the gates of the Kabul City Centre. Photographer: Shah Marai/AFP/Getty Images
In the dusty village bazaar in Jalrez, eastern Afghanistan, Asif Shahrukhi is getting help from Microsoft Corp. (MSFT) founder Bill Gates to convert his mud-brick mobile-phone shop into a virtual bank.
Shahrukhi offers money transfers for 45,000 people in the Jalrez Valley through a system created by Vodafone Group Plc (VOD), the world’s biggest mobile-phone company, to offer banking services in Kenya. The Interior Ministry says a pilot project to pay police via phone in areas without banks will be expanded this year to cover 5 percent of the 110,000 officers nationwide.
The change “brings me more money because it has stopped the people who used to steal part of my salary every month” said Khair Muhammad, a Jalrez policeman.
Corrupt bureaucrats who used to skim as much as 20 percent from state employees’ salaries have opposed the government’s shift to electronic payments through banks and mobile phones, said Hanif Atmar, a former interior minister.
Repeating Vodafone’s African success amid Afghanistan’s war will mean overcoming Taliban threats in addition to corrupt bureaucrats, said Shahrukhi, the agent in Jalrez for Roshan, the Afghan cell-phone network that’s building the banking system. “We can’t even bring a computer to the shop to help with our work because the Taliban are against computers and they would try to kidnap or kill us,” Shahrukhi said.
Last year, fear of Taliban attack or robbery led Shahrukhi to stop bringing in the cash supplies needed to pay Jalrez’s 45 policemen at his shop. The officers, who get the cash by showing text messages on their phones that verify the money transfers, now must drive to Roshan agents in other towns to be paid.
Resignations, Desertions
The U.S. military says ending official pay-skimming may boost morale and effectiveness among the government’s rural employees, including security forces. Expanding the police, which last year lost 23 percent of personnel through casualties, resignations and desertion, is key to U.S. plans to withdraw American soldiers beginning in July.
In another push to develop the financial system, the government is on track with its plan to sell longer-term bonds this year, central-bank spokesman Aimal Hashoor said yesterday, to diversify funding sources away from the more than $30 billion in international assistance the country has received.
Roshan got advice and funds from the London-based GSM Association, a trade group that received a $12 million grant from the Bill & Melinda Gates Foundation, to help launch its banking service, called M-Paisa. The foundation is spending more than $500 million to help the world’s poor to save money.
“Opening up the movement of money is the first step to financial inclusion and alleviating poverty,” said Zahir Khoja, Roshan’s M-Paisa director, from Kabul.
$3 Savings
In Kenya, customers typically save three hours of time and $3 in costs for each transaction and put the money back into their businesses, said Seema Desai, who heads cell-phone banking development at the GSM Association.
“If mobile money for people without access to banks can work in Afghanistan, maybe it can work anywhere,” Desai said in a phone interview. Roshan and its competitors struggle against three-mile-high mountains that block signals, Taliban attacks on cell-phone towers and a national power grid that produces less electricity than Greenland.
Only 7 percent of Afghanistan’s 30 million people have bank accounts and 1,000 have credit cards, according to the central bank. At least 40 percent have mobile phones, Desai said.
900 Million?
The government’s adoption of M-Paisa to pay rural police is a key advance for Roshan in building the mass customer base that cell-phone banking needs to be profitable, Khoja said by phone. Rather than mass-marketing the service, “the way to instill trust in our system is to let people receive their salaries by phone,” he said.
The 100 million mobile-phone bank accounts in use worldwide may grow to 900 million by 2015, said Carol Realini, executive chairwoman of Obopay Inc., a Redwood City, California, company that helps provide the service in Senegal and India.
Madrid-based Telefonica SA (TEF), Europe’s second-largest phone company, in January formed a joint venture with Mastercard Inc., the world’s second-largest electronic-payment network, to develop mobile-phone banking in Latin America. Visa Inc. is developing a cell-phone payment system for India. In Afghanistan, Newbury, England-based Vodafone Group Plc sold Roshan its Kenya- tested technology to run M-Paisa.
Vodafone and Telefonica, among the biggest European investors in Africa and Latin America, are seeking to make up for declining revenue in their home markets by capturing booming demand for mobile-phone services in emerging-markets where fixed-line networks are less developed.
Cash Only
Vodafone is up 6.5 percent this year and Telefonica 6.1 percent, outperforming the 3.6 percent rise in the 21-company telecommunications subindex of the Stoxx Europe 600 Index.
Afghans are harder to sell on mobile phone banking, Khoja said, because after 30 years of war citizens have little trust in financial institutions or anything but cash. In September, thousands of Afghans pulled deposits from Kabul Bank, the country’s biggest, after authorities found it had lost hundreds of millions of dollars through illegal loans to shareholders.
While Afghanistan’s Taliban guerrillas avoid using M-Paisa because it’s subject to government control, the service “is good for the Afghan people,” said Taliban spokesman Zabihullah Mujahid. Still, agents such as Shahrukhi are at risk because “we will attack wherever police or the army are getting their salaries,” Mujahid said via cell phone.
Second-Most Corrupt
The corruption that cell-phone banking is helping reduce undermines public support for President Hamid Karzai and helped put Afghanistan alongside Myanmar as the second most-corrupt to Somalia among 178 countries in last year’s survey by monitoring organization Transparency International.
Afghanistan’s old system for paying rural employees dispatched cash-laden clerks from Kabul, and corrupt officials skimmed 10 to 20 percent of the salaries, said Atmar, who served from 2006 to 2008 as education minister.
“We removed 12,000 ‘ghost teachers’ from the payroll in one year,” he said on Feb. 26 at his home in Kabul.
Atmar, as interior minister from 2008 until June, asked Roshan, officially known as the Telecom Development Company Afghanistan Ltd., to help pay police.
“We faced resistance from corrupt officials in the provinces and in Kabul, some of whom had probably been stealing,” he said.
To contact the reporters on this story: Eltaf Najafizada in Kabul, Afghanistan at enajafizada1@bloomberg.net; James Rupert in New Delhi at jrupert3@bloomberg.net
To contact the editor responsible for this story: Peter Hirschberg in Hong Kong at phirschberg@bloomberg.net
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