VZCZCXRO4556
PP RUEHDBU RUEHIK RUEHPOD RUEHPW RUEHSL RUEHYG
DE RUEHBUL #2020/01 2041121
ZNR UUUUU ZZH
P 231121Z JUL 09
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC PRIORITY 0337
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC 0851
RUCNAFG/AFGHANISTAN COLLECTIVE
RUEHZG/NATO EU COLLECTIVE
RUEABND/DEA HQS WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHNR/AMEMBASSY NAIROBI 0068

UNCLAS SECTION 01 OF 04 KABUL 002020 
 
DEPT FOR SRAP, SCA/FO, SCA/RA, AND SCA/A 
DEPT PASS FOR AID/ANE 
DEPT PASS USTR FOR DELANEY AND DEANGELIS 
DEPT PASS OPIC FOR MORRIS 
DEPT PASS FOR TDA FOR STEIN AND GREENIP 
USOECD FOR ENERGY ATTACHE 
CENTCOM FOR CSTC-A 
NSC FOR JWOOD 
TREASURY FOR MHIRSON, ABAUKOL, AWELLER, AND MNUGENT 
COMMERCE FOR HAMROCK-MANN, DEES, AND FONOVICH 
 
SENSITIVE 
 
SIPDIS 
 
E.O.  12958 N/A 
TAGS: ECIN ECPS ETRD EINV EFIN AF
SUBJECT: Using Connection Technologies to Promote US Strategic 
Interests in Afghanistan:  Mobile Banking, Telecommunications 
Insurance, and Co-Location of Cell Phone Towers 
 
REF: A) Kabul 268 
 
¶1.  (SBU) SUMMARY: In a series of meetings from July 8-12, 
Ambassador Wayne, Coordinating Director for Development and Economic 
Affairs, visiting SRAP Special Advisor Ashley Bommer, S/P staffer 
Jared Cohen, and Econoff met with officials from Roshan 
Telecommunications Company, Afghan Wireless Communications Company 
(AWCC), US Forces-Afghanistan's strategic communications staff, Da 
Afghanistan Bank (the central bank), and the Ministry of 
Communications and Information Technology (MCIT) to discuss three 
innovative proposals for telecommunications development: a) mobile 
phone banking; b) an insurance scheme for mobile service providers 
(MSPs); c) and placement of mobile phone towers and other 
infrastructure on secure locations like Forward Operating Bases 
(FOBs), other coalition forces' installations, and Afghan government 
secured bases.  Government of the Islamic Republic of Afghanistan 
(GIRoA) officials were largely supportive of these proposals, but 
noted some potential concerns including MSP reliability, lack of an 
information communication technology LAN, and insurgent threats to 
MSP employees outside of secure bases.  Roshan, the largest mobile 
service provider with a claimed 40% market share, enthusiastically 
supports these proposals and is poised to develop agreements with 
the USG and GIRoA in order to begin implementation.  Embassy 
supports development of all these new communications technologies 
and will work to bring all key GIRoA stakeholders into discussions. 
The visitors from SRAP and S/P have been working hard and well to 
make progress on these issues.  END SUMMARY. 
 
******************************** 
Mobile Banking:  Bringing Modern 
Banking to Rural Communities 
******************************** 
 
¶2. (SBU) BACKGROUND: Mobile banking is progressing rapidly in 
Afghanistan where the large majority of the population remains 
unbanked.  In mobile banking, customers can transfer money using SMS 
communication.  Recipients then collect payments through certified 
mobile banking agents (reftel).  Roshan, so far the only provider, 
has 50,000 customers to date in its now eight-month old M-Paisa 
program.  USAID is partnering with Roshan to support a mobile 
banking pilot program where microfinance institutions can partner 
with Roshan agents to collect microfinance loan payments.  Currently 
there are only 300 commercial bank branches and 150 microfinance 
institution branches in all of Afghanistan.  Most of these branches 
are located in provincial capitals.  Marrying mobile banking and 
microfinance loan payments offers hope for reducing the cost of 
delivering financial services in Afghanistan and reaching 
underserved rural populations where the construction of a brick and 
mortar branch is cost prohibitive. 
 
¶3. (SBU) Roshan currently has a pilot project with the Ministry of 
Interior to issue salary payments using M-Paisa to Afghan National 
Police in Wardak province.  Roshan officials told Econoff that they 
have received numerous requests from other GIRoA agencies for pilot 
salary dispersal programs.  Roshan said the Ministry of Energy and 
Water is interested in developing a system for paying energy bills 
using M-Paisa.  US Forces-Afghanistan (USFOR-A) is interested in 
using mobile banking for salary payments to contractors.  Despite 
this enthusiastic response, Roshan complains that the central bank 
is inhibiting M-Paisa expansion by arbitrarily limiting the number 
of M-Paisa agents to 500 and only authorizing one pilot program at a 
time with GIRoA agencies. 
 
¶4. (SBU) In a July 12 meeting with Ambassador Wayne, S/P's Cohen, 
USAID, and Roshan officals, and Da Afghanistan Bank (DAB) Governor 
Fitrat expressed strong support for mobile banking programs, but the 
Governor cautioned that such nonconventional banking programs carry 
a risk that funds will flow into the hands of insurgent or criminal 
groups.  Fitrat noted that his main concern is the accountability 
and security of the system of agents and of the user registration 
system, since SIM cards are sold indiscriminately.  Roshan and USAID 
explained that mobile banking agents are carefully vetted.  Roshan 
 
KABUL 00002020  002 OF 004 
 
 
said they use established businesses and require their agents to 
have a float of 12,500-100,000 Afghanis (about 250 USD to 2,000 USD) 
depending on the region in order to ensure that customers will be 
able to withdraw money as needed.  Roshan also said that they 
require M-Paisa customers to register for the service with 
government-issued identification, and there can only be one M-Paisa 
account per ID number. 
 
¶5. (SBU) Governor Fitrat appeared increasingly reassured by the 
security features of the M-Paisa service.  In an important 
concession, Fitrat said that MSPs would be allowed to use banks, 
microfinance institutions, and the newly-licensed "hawala" network 
in addition to the 500-1,000 agents that DAB regulations allow each 
MSP.  Fitrat also agreed to facilitate a meeting between financial 
institutions and mobile service providers to discuss their future 
collaboration.  Governor Fitrat said that though Roshan is the most 
responsible actor in telecommunications in terms of security and 
accountability, the other MSPs are not as reliable.  Fitrat stated 
that he intends to implement a "friendly" regulatory framework for 
mobile banking in order to minimize fallout associated with larger 
scale implementation as Roshan expands into the market and other 
MSPs offer the service.  Fitrat is keen to review the Kenyan central 
bank's recent mobile banking regulations as an example for 
Afghanistan and was also examining relevant Philippine regulations. 
 
 
¶6. (SBU) Minister of Communications and Information Technology 
Amirzai Sangin told Ambassador Wayne and S/P's Cohen on July 12 that 
though the Ministry strongly supports mobile banking, GIRoA needs an 
information communication technology law that would institute a 
legal framework for SMS communications.  (NOTE:  The current 
telecommunications law only covers voice communications and basic 
data services.  END NOTE).  MCIT has drafted an ICT law and is 
waiting for the Ministry of Justice to give final approval before it 
goes to the full cabinet and then Parliament.  Additionally, 
Minister Sangin noted that Afghanistan does not have an encryption 
or digital signature system (Afghanistan currently used VeriSign), 
which could make mobile banking customers vulnerable to fraud. 
 
*********************************** 
Insuring Cell Phone Infrastructure: 
Critical Stakeholders Moving Forward 
************************************ 
 
¶7. (SBU) BACKGROUND: Since February 2008 wireless providers have 
suffered losses in revenue and equipment due to attacks on cell 
towers primarily in the South.  Recently, insurgents destroyed a 
Roshan tower in Helmand.  On average, such a loss costs the provider 
$200,000 per tower.  The Overseas Private Investment Corporation 
(OPIC) and the MSPs, particularly Roshan, have discussed setting up 
a facility to provide insurance for operators against insurgent 
attacks on cell phone towers.  Since insurgents demand that MSPs 
power down towers at night in Helmand and Kandahar provinces or 
suffer attacks, the MSPs believe an insurance scheme will mitigate 
their risk in investing further in infrastructure in the South and 
incentivize them to keep towers operating when faced with insurgent 
threats.  Keeping cell phone towers operating at all times will give 
rural populations access to this important communication network and 
erode the Taliban's power to intimidate rural communities.  The 
companies are lobbying heavily and have enlisted OPIC and USG 
support in developing the insurance program.  SRAP's Bommer and 
S/P's Cohen have been working very hard to address this issue. 
 
¶8. (SBU) The MSPs say they need seed money to set up the insurance 
facility and they have identified the Telecom Development Fund (TDF) 
as the best source.  The TDF is controlled by the Afghanistan 
Telecommunications Regulatory Agency (ATRA) by law and is supposed 
to support the expansion of rural telecom access.  Currently, 
wireless providers pay a monthly 2.5% revenue tax to support the 
TDF, and it is estimated that the TDF currently has $18-25 million. 
To date, MCIT has not spent any of these funds for the purpose of 
telecom development.  The mobile telecom providers led by Roshan aim 
 
KABUL 00002020  003 OF 004 
 
 
to gain control of part or all of this fund for the insurance 
scheme. 
 
¶9. (SBU) In prior meetings, MCIT and ATRA were reluctant to allow 
the companies to use the TDF without Presidential or Parliamentary 
intervention.  However, on July 12, Minister Sangin told Ambassador 
Wayne that he supports the insurance scheme and that MCIT and ATRA 
agree in principle to allow the MSPs to use some of the TDF as a 
no-interest loan for seed money for the insurance pool.  Minister 
Sangin noted that the TDF law stipulates that ATRA has the authority 
to change the amount of the revenue tax paid into the TDF. 
Furthermore, MCIT and ATRA agree in principle to reduce the TDF 
revenue tax to 2.0% with the other 0.5% to go into the insurance 
pool.  They also stated that the MSPs could repay the TDF loan as 
the insurance pool grows and did not specify any time frame by which 
the MSPs were required to repay the loan. 
 
¶10. (SBU) Though ATRA Chairman Zakaria Hassan appeared more 
supportive than in prior discussions, he cautioned that the 
companies want to take out more money from the TDF than ATRA is 
willing to allow.  Hassan also said that ATRA, MCIT and the MSPs 
need to work out an agreement to administer the insurance pool. 
Sangin noted that there are few insurance companies in Afghanistan 
and that the largest, the Insurance Company of Afghanistan (ICA), 
has little capacity to work in such a high revenue sector as 
telecommunications.  Ambassador Wayne countered that we could 
explore what USG resources could be brought to bear to provide 
capacity-building training for ICA.  In the meantime, ATRA has 
promised to consult the MSPs and make a final decision in the coming 
weeks.  Roshan is working on drafting a memorandum of understanding 
(MOU) between GIRoA, the OPIC, an as-yet unnamed insurance company, 
and the four MSPs. 
 
********************** 
Using Secure Locations 
For Cell Phone Towers 
********************** 
 
¶11. (SBU)  From July 8-11, SRAP Special Advisor Ashley Bommer and 
S/P staffer Jared Cohen met with US Forces-Afghanistan (USFOR-A) 
officials and the mobile service providers to discuss the 
possibility of placing telecommunications towers on US Military's 
Forward Operating Bases (FOBs) or other secure locations.  Roshan is 
keen to develop this partnership with the USG and sees it as a way 
to promote mutual security, communications, and commercial 
strategies for Afghanistan.  At present, Roshan and USFOR-A are 
drafting an MOU for the co-location agreement.  Under the proposed 
draft agreement, USFOR-A would erect the towers and Roshan would 
lease space.  USFOR-A would be responsible for providing electricity 
supply and Roshan would be responsible for providing the equipment. 
A percentage of the proceeds from the lease agreement would go to 
the local community where the towers are located and Roshan would 
work to eventually transfer ownership of the towers to the local 
community. 
 
¶12. (SBU) Although Roshan officials told USG officials that they are 
ready to sign an agreement with USFOR-A, the other three MSPs have 
demonstrated only mild interest.  Afghan Wireless Communication Co 
(AWCC) was the only other provider represented at the meetings. 
Though AWCC Managing Director Amin Ramin told Emboff that they were 
interested in the proposal, Ramin stopped short of agreeing to 
partner with the USG.  Minister Sangin told Ambassador Wayne that he 
supports the concept but does not believe that building towers on 
secure locations will solve the threat issue because the insurgents 
do not threaten companies when they are building towers.  He said 
companies face insurgent threats when they are transporting 
equipment and workers to cell tower sites.  Sangin said an alternate 
plan would be to have movable cell towers in reserve as available 
replacements when insurgents attack cell towers. 
 
¶13. (SBU) COMMENT: These three proposals together make an ambitious 
plan to promote stable and secure telecommunications using new 
 
KABUL 00002020  004 OF 004 
 
 
"connection" technologies in Afghanistan.  We support their 
development and advocate bringing all key Afghan government 
stakeholders to discussions.  The Ministries of Interior and Defense 
have not so far been included in discussions about co-locating cell 
towers on secure locations but will need to be brought into the 
discussion.  We are confident that the central bank will allow 
expansion of mobile banking in the near future.  MCIT and ATRA's 
growing support for using the TDF for the insurance scheme is an 
encouraging development.  However, since ATRA is independent from 
MCIT and the TDF is solely under ATRA's control, Sangin cannot 
compel ATRA to release the funds if ATRA still has reservations 
about the amount of money taken out of the TDF.  If ATRA continues 
to raise opposition to rolling out the insurance scheme, overriding 
it would require high-level USG engagement to secure a presidential 
decree.  END COMMENT 
 
EIKENBERRY