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Over 100 million Africans had mobile money accounts in 2016, and that figure continues to rise. The continent is leading the way globally in this nascent market and changing the way the world looks at money. But challenges persist around interoperability and accessibility.
Africa leads the world in its adoption of mobile money. According to the GSMA’s 2016 report on Sub-Saharan Africa, the region accounted for over half (50.5 per cent) of global mobile money deployments. What’s more, over 40 per cent of the adult population is using mobile money on an active basis in seven countries: Gabon, Ghana, Kenya, Namibia, Tanzania, Uganda and Zimbabwe.
Global consultancy McKinsey claims in a September 2017 report that the continent’s money market falls into three main groups according to the number of registered accounts: the “sleeping giants” of Morocco, Egypt and Nigeria; “maturing” nations including South Africa, Cameroon, Ivory Coast, Zimbabwe and Botswana; and “mature” countries like Tanzania, Kenya, Uganda, Rwanda and Ghana.
This relatively new sector is being driven mainly by the major telcos on the continent. However, a rising bunch of innovative startups are expanding the technology beyond its core functionality of sending, receiving and storing money with a mobile phone.
These tools have extended mobile money more into the sphere of mobile financial services (MFS). It includes things like airtime top-ups, bill payments, mobile-enabled insurance, mobile savings services, international payments and mobile credit services. According to the GSMA report, there were 60 mobile money-enabled insurance services in 17 African countries by June 2016, and 18 savings services in 10 countries, for example.
These are enabled through a network of agents sitting on the frontline. In fact, the GSMA report claims that a 10-fold increase in agents between 2011 and 2016 to over 1.5 million could be responsible for the soaring popularity of these services.
This is good news on many levels for African countries. The GSMA report says that as revenue continues to rise, the commission distributed to the mobile money agents has driven greater employment and income generation for SMEs. For example, between September 2015 and June 2016, mobile money revenue in Sub-Saharan Africa grew by 27 per cent, while leading operators in the region paid out nearly half (47 per cent) of their revenues in commission, amounting to over $400 million in 2016.
The mobile money phenomenon is providing the unbanked rural poor with the chance for greater financial inclusion, helping them access savings and loans for their small businesses. It has even helped 52 per cent of refugees from Tanzania’s Nyarugusu refugee camp receive cash donations, money transfers from their home countries and wage payments, according to some reports.
That’s not to mention the impact it can offer providers of essential services, and ultimately their customers. The GSMA report claims mobile money helped the Dar es Salaam Water and Sewerage Corporation increase revenue collection by 38 per cent in 2013. In the Ivory Coast, over 99 per cent of secondary school students paid their fees via mobile money in 2015-16, and in East Africa mobile money enabled the sale of over 500,000 household solar power kits by April 2017.
Mobile money is clearly transforming the lives of individuals and communities across the continent. But in so doing it offers innovative fintech and other businesses fresh opportunities to tap into a newly banked population. The McKinsey report claims that margins on payments in Africa remain among the highest in the world, at around 2 per cent of the transaction value.
However, the market is not without its challenges. The first is the age-old problem of internet access. Despite the strong growth of mobile money services in Africa, mobile data penetration remained at just 16 per cent in 2017, according to the Alliance for Affordable Internet. Although the race is on to get more Africans online, via innovative initiatives like Google’s Project Loon and Facebook’s Internet.org, progress remains sluggish.
McKinsey blames regulatory constraints and market fragmentation as other major challenges – claiming 18 firms hold mobile money licences in Nigeria alone. This is where standardisation and interoperability will become increasingly important. The ITU is pushing for new standards to reduce roaming costs and charges on mobile financial services, and the GSMA has created a harmonised set of mobile money APIs to improve best practice and reduce fragmentation.
This should spur further take-up of mobile money. But already there are some great examples of success in this area:
The African mobile money market has come a long way in a short space of time. The innovation and dynamism of a relatively small number of companies has shown how financial technology can change lives and open the door to new business opportunities. The good news is that this is just the beginning. The GSMA claims that if providers manage to hit activity rates of just 40 per cent, they could add another 118 million users.