Haiti’s mobile redemption

August 15, 2013, 9:00 AM UTC

FORTUNE — David Sharpe doesn’t mind doing business in Haiti despite its reputation for being one of the world’s most dangerous countries. Back in the early 1990s, the ex-U.S. Marine was in Somalia during Black Hawk Down and the former Yugoslavia during some of the bloodiest fighting in Bosnia.

But now Sharpe, a 40-year-old executive with wireless provider Digicel Haiti, faces perhaps the toughest challenge of his life. As the country picks itself up from the 2010 earthquake that killed more than 250,000 people, he needs to convince its unbanked masses, many of whom are illiterate, to embrace the digital age with mobile financial services more sophisticated and advanced than anything available in North America or Europe.

How is the mission going so far? “We had a bumpy start, but Haitians love their mobile phones,” says Sharpe, sitting in his hilltop office overlooking the late-morning haze blanketing the capital Port-au-Prince. “They may not buy a meal, but they will top up their Digicel account,” adds Sharpe, whose crisp white shirt hangs loosely over his lanky frame.

Digicel has found the pulse of a market most wireless carriers would not touch with a 20-foot barge pole, accumulating 700,000 customers for its TchoTcho mobile wallet and a subscriber base of 4.5 million since 2006. “When we first arrived, only 5% of Haitians owned a mobile phone, today that number is more like 75%,” says Sharpe, whose company is a subsidiary of the $2.5-billion Digicel Group, owned by Irish billionaire Denis O’Brien.

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Digicel’s achievements in Haiti are commendable, but not exactly surprising given the parent company specializes in doing business in some of the most difficult and hazardous corners of the world. It has operations in more than 30 countries across the Caribbean, Latin America, and the South Pacific, including El Salvador and Papua New Guinea.

Even so, few would have guessed that the poorest country of the Western Hemisphere — a nation of 10 million that for decades has toiled under an oppressive combination of natural disasters, dictators, and military coups — could end up being so lucrative for Digicel. The Haitian operation made an impressive $86-million profit on revenue of $439 million in 2012.

“Digicel has proven itself to be a strong and efficient operator with high margins,” says industry analyst Jacob Steinfeld with J.P. Morgan in New York. “They are usually at the forefront in terms of trends but will not pursue technologies or equipment that don’t make sense financially.”

The future looks even brighter, not least because Sharpe, head of the TchoTcho team, wants to more than double his customer base to 2 million by March 2014. The key to achieving that goal is an aggressive build-out of his agent network, mainly gas stations and grocery stores, which TchoTcho subscribers can use like bank machines.

“We’re a tremendous catalyst for change,” says Sharpe, whose boyish face belies a super-competitive streak. “Before we came along, Haitians had all this money in their pockets and under their mattresses. They lived day to day. Now they’re saving for the first time.”

Many observers, including the Washington-based U.S. Agency for International Development (USAID), view Digicel’s mobile wallet as a game-changer that is dramatically accelerating economic development and helping transform a country that desperately needs some good news.

“The fact that a mobile wallet was launched at all in Haiti is a huge success,” says Steve Olive, deputy director of USAID’s Port-au-Prince office, who helped jumpstart the initiative along with the Bill and Melinda Gates Foundation. “It’s making financial products available to people who were previously outside the banking system.”

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The latest version of TchoTcho — which means “pocket money” in the local Creole dialect — was launched in 2011 in the wake of the devastation surrounding the 7.0-magnitude earthquake.

Domestic money transfers, payroll, and basic banking services were first to go live. It immediately became apparent that giving Haitians the ability to instantly transfer money from one mobile phone to another — anywhere in the country without a banking intermediary — was a killer app. Whereas before, people had to endure long bank lines and pay for expensive wire transfers to send cash from the city to family or a friend in the country, Haitians could now remit up to $25 with a few simple text commands for just 15 cents. (To boost adoption rates, Digicel allows customers to transfer up to $2.50 three times a day for free.)

Domestic transfers have become a huge hit for Digicel Haiti, with $960 million being sent and received each year on the TchoTcho platform.

The service has since expanded to include mobile bill-payment and point-of-sale purchases and will soon allow customers to receive international remittances on their handsets, bypassing middlemen such as Western Union.

But it’s the ability to distribute humanitarian aid that is perhaps TchoTcho’s biggest accomplishment of the last 12 months because it is has already changed tens of thousands of lives. The USAID’s Food for Peace and the UN’s CARMEN program for housing repair are among the early adopters, along with the Haitian government’s Ti Manman Cheri, which pays a monthly stipend to poor women who keep their children in school.

In all cases recipients are provided with a mobile phone and a TchoTcho account so they can automatically receive monthly e-vouchers that they redeem for groceries or other supplies, circumventing distribution centers, long lines, and risk of theft or misappropriation. “E-vouchers keep things much tighter because you can track how aid is spent,” says Karl O’Conner, a Dubliner in charge of special projects. “If you distribute cash, there are no guarantees.”

Will TchoTcho, Digicel Group’s most advanced mobile-wallet solution to date, be rolled out in other countries where it does business? And could it become the model for the automated distribution of social and humanitarian aid worldwide? “Haiti is an incubator,” says Sharpe. “What we learn here will be used in other countries.”

Says J.P. Morgan’s Steinfeld: “Once they introduce a successful service, Digicel Group will usually try to replicate it in other markets.”

In the meantime Sharpe, whose Haitian wife Paula last month gave birth to son Quentin, has to figure out how to expand his network of agent retailers by a factor of at least three. That’s what it will take if TchoTcho is to become as ubiquitous as the orange Digicel umbrellas that protect company reps selling airtime from the hot Port-au-Prince sun. Is that too big a mountain to climb in nine short months in a country with few sure bets?

“Digicel is a marketing machine,” says Sharpe. “We always find a way to get where we need to be.”