8.10.2024

Mobile money continues to drive financial inclusion in Africa

Diego Gutierrez, Chief Officer of International Markets, Vodacom Group

In the last decade, mobile money has emerged as a transformative force in Africa, reshaping the continent’s financial landscape.

As we observe its trajectory, it becomes evident that mobile money services are not just a technological innovation but a critical tool for driving financial inclusion across the continent.

According to the GSMA, over half of registered global mobile money accounts are located in Sub-Saharan Africa, with US$2.3 billion transacted per day. The region stands as a testament to how technology can leapfrog traditional barriers and create unprecedented opportunities for millions.

Africa’s financial landscape has long been characterised by a considerable proportion of the population being unbanked or underbanked.

Although account ownership has grown in Sub-Saharan Africa over the past decade, still less than half of adults in the region have an account.

Factors such as limited access to physical bank branches, high transaction costs, and stringent account opening requirements have historically excluded vast segments of the population from formal financial systems.

Mobile money platforms, such as M-Pesa, are changing this narrative, offering opportunities to transform economies and people’s lives.

Launched in 2007, and currently Africa’s largest fintech, M-Pesa is enabling users to store, send, and receive money using their mobile phones, effectively bringing financial services to the fingertips of millions who previously had no access.

The convenience, affordability, and widespread adoption of mobile phones have allowed mobile money to bridge the gap between the formal financial sector and the unbanked population.

Our Africa.Connected report on digital financial inclusion on the continent highlights that the impact of mobile money platforms like M-Pesa is greatest among people living in rural communities, those in lower socio-economic groups and historically excluded groups like women and people living with disabilities.

The research also suggests that successful mobile money adoption can boost economic growth. In action, these digital tools empower individuals to tap into funds to transform their lives, from furthering education to starting a new business.

By facilitating financial transactions, mobile money has stimulated economic activity across various sectors, enabling businesses to operate more efficiently and reducing the reliance on cash-based transactions.

Take Amanya Kuchio, one of the founders of Nairobi-based errands and delivery company Femme Logistics. M-Pesa simplifies the process of monitoring her accounts, providing greater visibility of her business during a particular period – be it over a week or on a specific day.

According to Kuchio, when her team manages cash, it is inevitable that money can be accounted for but when customers use their phones for payments, it is much simpler to not only use her services but also manage her own bookkeeping.

Her experiences align with the findings of a survey in the aforementioned Africa.Connected report, which found that M-Pesa boosts business growth by enabling faster payment of suppliers and/or employees and by making it easier, cheaper and safer to sell goods and/or services online.

While this example illustrates how mobile money has brought financial services closer to the people who need them the most, enabling them to participate in the formal economy and improve their livelihoods, there are several hurdles to broader success. In some economies, restrictive regulatory environments and red tape can unintentionally inhibit the benefits offered by mobile money.

Similarly, rising taxation – on devices and mobile money transactions – is preventing people, especially those from poorer communities, from using these services because they are now less affordable.

A lack of financial and digital literacy remains another major obstacle.

Governments, regulators, and private sector players must work together to create an enabling environment that supports mobile money innovation while addressing these challenges.

Repeatedly, we have seen that individuals and businesses that are excluded from formal financial systems are at a major disadvantage.

Unable to access basic financial services, like credit or insurance, they are ill-equipped for unexpected circumstances or sudden economic shocks and are most at risk when things go wrong.

Mobile money opens new opportunities for everyone to participate in the global economy, boosting socio-economic development and empowering underserved populations in the process.

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