Director of Data and Insights, GSMA Mobile Money

Nika Naghavi

"Payments as a platform" will also aid in empowering millions in the region to maximize income generation opportunities, according to the GSMA.  
 

Blog Post

As recently as 2011, more than <a href="https://globalfindex.worldbank.org/">2.5 billion adults globally</a> did not have a formal financial account. Since then, an astonishing 1.2 billion adults have obtained an account with a bank or mobile money service, representing great strides in escaping poverty and boosting prosperity. Progress has been most notable in <a href="https://www.gsma.com/mobilefordevelopment/wp-content/uploads/2019/07/GSMA-Sub-Saharan-Africa-SOTIR-presentation.pdf">Sub-Saharan Africa</a>, where account ownership increased from 23 percent in 2011 to 43 percent in 2017. This great achievement can be attributed in large part to the incredible growth of mobile money.

Mobile money has emerged as the mainstay of financial inclusion in Sub-Saharan Africa. According to the latest <a href="https://globalfindex.worldbank.org/">Findex</a> report, the share of adults with a financial institution account (excluding mobile money) across Sub-Saharan Africa has risen by a modest four percentage points between 2014 and 2017, while the share with a mobile money account has grown twice as fast, increasing by nine percentage points. With 21 percent of adults in the region having a mobile money account, Sub-Saharan Africa is the global leader in the use of mobile money. This finding is confirmed by the GSMA’s own <a href="https://www.gsma.com/mobilemoneymetrics/">supply-side data on mobile money</a>, which shows that Sub-Saharan Africa <a href="https://www.gsma.com/mobilefordevelopment/africa/sub-saharan-africa-the-enduring-epicentre-of-mobile-money-part-1/">remains the epicenter</a> of mobile money.

What has underpinned this success? Regulation calibrated to enable low-cost services for the financially excluded has been crucial. In fact, we’ve found a clear correlation between countries in the region with high mobile money adoption rates and those with <a href="https://www.gsma.com/mobilefordevelopment/programme/mobile-money/introducing-the-mobile-money-regulatory-index-an-interactive-tool-to-measure-the-effectiveness-of-mobile-money-regulatory-frameworks/">more enabling regulatory environments</a>. Industry leaders in these markets adopted a myriad of strategies to drive adoption of mobile money services, but the successful strategies shared some fundamental business characteristics. The most foundational characteristic was investment in building a robust agent distribution network – a powerful model for extending the reach of financial services – which both disrupts and complements traditional “brick and mortar” banking. Mobile money agents across the region are more prevalent than any other channel, with approximately 60 agent outlets per 1,000 sq km, compared to only one bank branch and two ATMs in the same space.
<blockquote>Regulation calibrated to enable low-cost services for the financially excluded has been crucial.</blockquote>
Remarkably, and contrary to predictions, there has been a shift away from using cash toward digital payments. Across the region, people are increasingly using mobile money in diverse ways, extending beyond basic use cases such as person-to-person (P2P) transactions and airtime top ups. Today, millions of consumers are using mobile money in their daily activities: paying for children’s school fees, accessing loans to invest in their farming activities, saving for the financial future of their household, and mitigating financial risks and shocks. Innovative partnerships between mobile network operators and banks, MTOs, governments, and businesses have played a key role in digitizing payments and formalizing the economy across the region. Orange, for instance, has established partnerships with governments to offer a range of person-to-government (P2G) payments via mobile money across <a href="https://www.gsma.com/mobilefordevelopment/resources/championing-a-unified-digital-person-to-government-p2g-payments-strategy-lessons-from-orange-p2g-payments-in-africa/">five of its operations</a> in West and Central Africa (Senegal, Burkina Faso, Côte d’Ivoire, Cameroon and DRC). Another example is the partnership between PayPal and Safaricom, enabling users in Kenya to securely transfer funds between PayPal and M-Pesa.

Despite this progress, there is still a sizeable opportunity to further digitize the economy to drive efficiency and transparency, and to convert informal cash and non-financial assets into the formal financial system. This is where the shift towards a “<a href="https://www.gsma.com/mobilefordevelopment/wp-content/uploads/2019/02/Embracing-payments-as-a-platform-for-the-future-of-mobile-money.pdf">payments as a platform</a>” business model will have a demonstrable impact, not only in growing the ecosystem and incorporating more partners into the mobile money platform, but also in terms of deepening engagements with individuals and businesses. Industry-wide initiatives will also play a central role in driving the digitization of more complex use cases such as merchant payments and international remittances. <a href="https://www.gsma.com/mobilefordevelopment/uncategorized/unlocking-mobile-money-interoperability-and-merchant-payments-across-africa-through-mowali/">Mowali</a>, a joint venture between Orange Group and MTN Group to enable interoperable payments across the African continent, is a great example of industry collaboration enabling customers to seamlessly transact across borders.
<h2>Challenges Ahead</h2>
Sub-Saharan Africa has come a long way in the past decade, but there are still strides to be made in certain markers, and across the wider African continent. Africa’s three most populated countries, Nigeria, Ethiopia and Egypt – home to a combined adult population of over 242 million – have low rates of financial inclusion (below 40 percent) and limited availability of mobile money services. All three markets have had unfavorable conditions for mobile money uptake. We anticipate that recent reforms in these markets could spark a wave of adoption with the potential to unlock over 110 million new mobile money accounts in the next five years, offering a financial future to millions of previously financially excluded people.

Micro, small and medium-sized enterprises (MSMEs) play a major role in economic development across the region. According to the IFC, MSMEs account for roughly <a href="https://www.ifc.org/wps/wcm/connect/2c6289c3-df5e-4f90-b910-2a04e1000922/IFC+SME+Ventures+Final+low+res+30+Nov+2018.pdf?MOD=AJPERES&amp;CVID=mtQwg2S">90 percent of all businesses</a> across Sub-Saharan Africa, and contribute to 78 percent of the region’s employment. Despite this, financial institutions are not currently meeting the majority of MSMEs’ financial needs across the region. We see a huge opportunity for mobile money providers to bridge this gap and offer solutions that can help MSMEs with day-to-day management of their business and financing needs.
<blockquote>Mobile money providers can offer solutions to help MSMEs with day-to-day management of business and financing needs.</blockquote>
Over the course of the next decade, a dramatic rise in mobile internet usage and smartphone adoption is expected in Sub-Saharan Africa. This growth, alongside the shift to “payments as a platform” model, will empower millions of young entrepreneurs, innovators and small businesses to maximize new income generation opportunities and gain new skills. Increased access to financial services is a cornerstone of prosperity, and the future for financial inclusion in Sub-Saharan Africa holds much promise.

<em>Learn more by checking out GSMA's <a href="https://www.gsma.com/mobilefordevelopment/wp-content/uploads/2019/07/GSMA-Sub-Saharan-Africa-SOTIR-presentation.pdf">State of the Mobile Money Industry in Sub-Saharan Africa</a> presentation.</em>

Nika Naghavi

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