August 8

Jake Kendall

New Data Reveals Massive (Potential) Mobile Money Market for the Poor : Across Africa millions are sending huge volumes of domestic remittances – mostly in cash

A few months back I wrote this quick piece highlighting some preliminary findings from data that was just coming in from a major study the Gallup organization did for us.

Now, the full data set is in and the results are quite interesting.

In collaboration with Gallup, we surveyed 11 countries in Africa (including Kenya) on the payment habits of the adult population. To my knowledge, this is the largest study of its kind – tracking money transfer and payment behavior in the developing world.

In these 11 countries, we found 53 percent of adults – or about 134 million people – made transactions involving distant counterparties in the 30 days before the survey. Sixty percent of those (approximately 79 million people) used only informal, cash-based channels such as informal money carriers, sending the money by bus or traveling friends, or simply carrying cash themselves to deliver it in person. The fact so many people use such bad options illustrates the importance of better money transfer options.

The data also shows that domestic remittances are an order of magnitude more common than international remittances and tend to reach more vulnerable groups such as the poor and rural residents. Thirty-two percent of adults in 11 sub-Saharan African countries — or about 80 million people – received money from family members or friends living in a different part of their country in the 30 days before being surveyed. This figure dwarfs the 4 percent of the total adult population (approximately 10 million people) in the 11 countries who received money from outside their country of origin. While development policy debates and academic research have focused largely on international remittances in recent years, the ubiquity of domestic remittances suggests they are an equal if not more important topic for policy and research.

Finally, the data shows that in bank-based markets, formal transfers through banks are largely the domain of the rich, while the poor use cash almost exclusively. In the emerging mobile money markets like Kenya, Uganda, and Tanzania, mobile transfers are common and are used by the rich and the poor in equal measure (still, however, informal cash-based options are dominant). On the bright side, we find that across the sample, 55 percent of adults own mobiles and a further 22 percent can borrow one. Additionally, 60 percent of those who made only cash-based transfers fell into one of these two categories. This data demonstrates the scope for mobile payments to expand greatly and meet the need for payment services among poor populations across Africa.

Here is a blog post I co-authored with Jan Sonnenschein that has more detail on the potential of mobile options to reach the poor and here is another post specifically on domestic remittances. Finally, the full report can be found HERE.

If you work in development or in delivering financial services to the poor I encourage you to read it and share it. We are currently collecting similar data in South Asia so watch this space!

Education, Technology
Bill & Melinda Gates Foundation, financial inclusion, mobile applications, research