Mobile money : Its success in East Africa and how we can learn from it!!!


In December 2016 when I was in Uganda and Rwanda , I saw these small booths even in the remotest part of the 2 countries with ‘MTN Mobile Money’ label on them . I found out that these booths are kiosks for mobile money where agents sit in to help with money transfers. It was really intriguing ; decided to research and realized that all of us should know about this successful program and  lot of economies in the world could learn from it.

What is mobile money?

Mobile Money is a fast, simple, convenient, secure and affordable way of transferring money, making payments and doing other transactions using a mobile phone.

You can use Mobile Money to send and receive money, top-up mobile airtime, pay bills , buy & pay for insurance, pay employee salaries, pay for airline tickets,remittance delivery, micro-credit provision and other goods and services. No need to travel far or wait impatiently to receive or send money.All you need is to Register with a valid photo ID with a service provider that supports mobile money , to be able start using the service.

The service allows users to deposit money into an account stored on their cell phones, to send balances using PIN-secured SMS text messages to other users, including sellers of goods and services, and to redeem deposits for regular money. Users are charged a small fee for sending and withdrawing money using the service.Mobile money is thus necessarily a branch-less banking service. Customers can deposit and withdraw money from a network of agents that includes airtime re-sellers and retail outlets acting as banking agents.

How was the idea born?
Around 2005. Researchers from the UK’s Department for International Development (DFID), the foreign aid arm of the British government, found out that Kenyans were transferring mobile air time as a proxy for money for some time. DFID found potential in this idea and contacted Vodafone who were looking to launch a mobile micro-finance service. It was finally launched in 2007 in Kenya and the programmed was called M-Pesa(M for mobile, Pesa is Swahili for money)

How successful is it?
By 2015 – almost 45% of the GDP was being transacted through M-Pesa in Kenya and mobile money has expanded its reach to 61% of developing markets.M-Pesa has been especially successful in reaching low-income groups.

According to the Global Findex, mobile money has helped reducing the number of un-banked to two billion in 2014, down from 2.5 billion in 2011.

Mobile money has played a critical role to drive financial inclusion in Sub-Saharan Africa. In this region, at least 19 markets had more mobile money accounts than bank accounts in 2015.
According to the Global Mobile Systems Association (GMSA), approximately 255 mobile money services were operating across 89 countries in 2014. Sub Saharan Africa is the region where mobile money is most widely spread, followed by Southeast Asia and Latin America.
There are some countries which has had more modest achievements as they miss an important factor: not everywhere is the service as needed as it is in a country like Kenya. While only ten percent of Kenyans have access to financial services, the equivalent share is 48 percent in India and 46 percent in South Africa, two other markets where M-Pesa operates. So there is less repressed demand in these countries.Also banking is far more regulated in these countries.

What can we learn?
Mobile money has played a critical role to drive financial inclusion in Sub-Saharan Africa.It is extremely useful for rural parts of developing countries where there are no banking services but the reach of mobile phones are much deeper. About 2 billion people with phones but no bank account will gain a lot from mobile money services. But some of the major hindrances to adoption would be : absence of an omni-present operator and banking sector regulations.

Lets be clear though, mobile money cannot be panacea to all financial transactions as it only allows for relatively small amounts of money to be stored and transferred via mobile phones and can’t substitute for opening a bank account or getting a loan for a small business.

But by enabling users to transfer money to each other and make payments directly to businesses and service providers, mobile money platforms cut down on corruption by reducing the need to operate in a cash-only economy. As a result, mobile money empowers individuals and supports entrepreneurial creativity in a less constrained financial marketplace.

Personally I think , some of the most important factors that developing countries should absolutely adopt it:

  1. It helps remittance from urban to rural populations
  2. It plays a big tole empowering woman ( as men have more access to financial services in developing economies and women are more confined to home)
  3. Pensions can be made accessible for old rural population as they are most vulnerable to distance of banking services
  4. It reduces travel to banks ,hence saves money in travel cost for the poor and reduces risk and dangers of piling up savings inside the house as its prone to robbery.

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