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The role of mobile financial services in achieving financial inclusion in Africa

Africa is at the forefront of mobile banking. It is also one of the continents with the lowest levels of financial inclusion. Because of the penetration of the mobile phone in the telecommunications sector, mobile banking has taken off successfully in some parts of Africa, especially in eastern and southern African regions.

In sub-Saharan Africa, 36 countries out of 54 have mobile banking services. These include for example, Côte d’Ivoire, Ghana, Kenya, Madagascar, Mali, Nigeria, Niger, South Africa, Senegal, Tanzania, and Uganda.

With roughly 2.5 billion people globally in lower- to middle-income countries who have no access to banking services, the potential is clear. According to a 2016 GSMA study, more than half a billion people across Africa are now subscribed to mobile services, adding more than US$150bn in economic value to the African economy.

Over the last decade, Africa has witnessed high mobile telephony penetration and high uptake of mobile financial services in a number of countries. Mobile telephony has reduced geographical constraints, transaction costs as well as assisting commercial banks to have a cost efficient expansion strategy. A number of factors such as mobile phone penetration, financial and conventional infrastructure development, population density, regulation, and the appetite of private players to pursue the opportunity, tend to drive variation in mobile financial services.

In most African countries, mobile phone banking is taking services to remote areas where conventional banks have been physically absent or too expensive to use. Subscribers can now open accounts, check their balances, pay their bills, transfer money, and buy basic everyday items, all using their mobile phones. Mobile banking is 19% and 54% cheaper compared with traditional banks and informal options respectively. It is also technologically the safest, quickest and cheapest method of transferring money, and for conducting both personal and business transactions.

According to data, there were 557 million unique mobile subscribers across Africa at the end of 2015, equivalent to 46% of the continent’s population, making Africa the second-largest – but least-penetrated – mobile market in the world. Africa’s three largest markets – Egypt, Nigeria and South Africa – together accounted for around a third of the total subscriber base.

This has made financial services accessible to more people than the traditional banking industry ever had. In addition, many other African countries also experienced robust mobile penetration and the number of unique mobile subscribers is forecast to reach 725 million by 2020, accounting for 54% of the expected population by this point.

The regulatory environment is key to the adoption and spread of mobile banking in Africa and other regions globally. The industry needs to be regulated appropriately, balancing the need for deeper financial inclusion and the KYC imperatives, with anti-money-laundering considerations – especially on cross-border remittances.

In many African countries, banks and mobile network operators are also competing to tap the market of the unbanked population. This is leading to the expansion of financial services to mobile subscribers by providing mobile financial services to the unbanked. Thus, a necessary condition for mobile banking to expand is for regulators, especially central banks, to put in place supportive regulatory regimes. With the increased access to mobile banking and financial services comes the ability to do business in sectors such as the agricultural industry, which accounts for 25% of GDP. Mobile banking allows countries to immediately bring financial services to the masses in a cheap, accessible way – lowering costs for the financial institutions as well as for those who use the services. In the coming years, mobile money, electronic payments and new banking technologies will continue their significant contribution to sustainable economic development in Africa.

Jean-Claude Bastos de Morais is founder and CEO of Quantum Global Group.

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