Banking on a Mobile Business
Friday, August 12, 2011
It sounds like the lead-up to a bad joke: What do a mobile phone and a bank clerk have in common? Certainly the differences are more obvious than any similarities, but the two do share one crucial likeness: they both provide access to financial services.
Mobile banking is becoming an increasingly popular service across Africa, thanks to a combination of both simplicity and availability. The ability to access basic financial services, such as deposits and transfers, from any mobile phone without requiring a formal bank account offers a potentially revolutionary opportunity for the huge unbanked populations across the continent. Kenya’s Safaricom has been one of the most obvious examples of the success such a simple product can achieve, with its M-Pesa mobile banking service, launched in 2007, boasting over 10 million users with monthly transfers of around $350 million (LE 2.09 billion).
However, a number of other operators elsewhere in the continent are looking to leverage the comparatively high rates of mobile penetration by offering similar services – the multiplier effects of which have the potential to be significant.
The rise of mobile banking services is due in part to a unique confluence of circumstances. In countries across Africa, a number of obstacles limit financial penetration, ranging from geographical inaccessibility and limited branch networks to high costs and a lack of financial literacy. According to the World Bank, there are only 163 bank accounts per every 1,000 adults in Sub-Saharan Africa.
Only 25% of Africa’s population has bank accounts. The range varies, of course, but the lack of financial penetration is clear. An estimated 70% of Nigeria’s adult population does not have bank accounts for example. That figure is 10 million people in South Africa. Similarly, only 7% of Uganda’s population use more than one banking product and in some rural areas of Morocco, banking penetration is less than 5%.
Compare this with the average range of the mobile penetration rate. There are around 400 million mobile phone users in Africa. This number accounts for more than one quarter of the continent’s population. In some cases, such as Gabon, official estimates of mobile usage rates exceed the actual population – pushing 117% in the case of the central African country – and in dozens more, like Algeria, rates are continuing to stretch past 90%. Growth rates are equally impressive – the continent’s mobile market is one of the fastest expanding in the world. In Egypt, for example, year-on-year growth hit 27% in June.
The broader spillover effects of this increased connectivity are well-known. A recent World Bank study in 2009 found that for every 10 percentile point increase in mobile phone penetration, economic growth in a developing country increases by 0.81%.
