20 September 2002

Top Story

During the presentation of an African smart card project earlier this year in Ivory Coast, the audience laughed in disbelief. Africa still largely deals in cash only so the idea of a fancy form of electronic cash seemed ludicrous. Who could trust it? was the question on everyone’s lips.


But wait a minute. Isn’t that what people do when they buy "pay-as-you-go" cell phone cards and scratch cards for internet access. It doesn’t take too much imagination to see this type of payment system being extended. An interesting project in Tanzania is testing these boundaries. News Update spoke to its initiator, John Kyaruzi at Dar es Salaam University.


How did the project get started?


It was a research initiative. I was doing a Phd, working with the Tanzania Central Bank on automating payment systems. I got interested in the issue of turning poor countries into cashless societies. It’s more expensive to pay with cash. I motivated the guys at the Central Bank to spearhead a smart card project. However it never took off so I began to do it as a University project. I asked the University to sponsor the project and the Vice-Chancellor agreed. We got funding from the Carnegie Corporation (US$400,000) to acquire the basic system.


How did it get to the next stage?


I told them I would develop the software for the system. I got 100 graduates from Computer Sciences, bright people, and got them to write the apps. We then demonstrated it. At this point people said forget the experiments, let’s do it for real. So the idea is to make every student carry a smart card with multiple apps. For example, we wanted to use the card to control access to the University’s computer network.


In the first instance, the non-financial apps became more important. Access to university parking. Student details. Allowing the African Virtual University to control who uses which of its services.


How’s it be implemented at the University?


In the next three weeks, all 3000 first year university students will be issued with the cards. We did a pilot with selected staff and used it primarily as a form of manual ID. We’ll start with the library system that will have automatic gates opened by the card. The app will also collect statistics automatically on how many students use the library at different times of the day. It will be integrated with the existing library barcode systems. When you take out a book, the barcode will be scanned against your card. Eventually it will be used in the University’s eating facilities.


What’s the cost?


For 10,000 cards its US$7 per unit but the price will come down with volume. The minimum memory is 16K but we actually got 64K. With maintenance costs, it works out at about US$10 per unit.


How will you recover the cost from the user?


The business model is micro-payment. We will charge a very small amount on each transaction. Obviously there will be a penalty if someone loses it so there will be a US$20 replacement fee. And the card has a minimum life of ten years.


How might it be used more widely?


Well for example if a person in one of the rural areas needs to see a specialist doctor they have to travel all the way to Dar es Salaam. Well if their data went on to the card, they could have a basic consultation over the internet with the doctor viewing their details from the card. It’s not ideal but it does offer the extension of medical advice.


Another example. If you sell your coffee, again you travel long distances. Often when you carry the cash back with you, you get robbed. With the smart card, you can sell the coffee, get the money on the card and get the cash from a petrol station in or near to where you live. It’s a hybrid system but it becomes much cheaper.


What about card loss and security?


With a card like Mondex, if you lose your card, you lose your money. These cards are auditable so if you lose your card you can go to the supplier and block the card and retrieve the outstanding money on it. My card works on an offline model. So for example the petrol station will have an offline reader. The owner can then either take it to a bank to download his or her cash or send it by phone once a day or more.


So how did the financial apps find their way back in?


We continued soliciting banks to become partners. They all wanted me to prove it to them. Finally we managed to convince CRD Bank. It will acquire the system and offer it to its customers. It invested heavily in POS systems in stores and petrol stations. These were either issued for free for leased to them therefore it was cheaper for the merchants. Like a credit card, it should be able to be entered by the customer.