Financial Inclusion in Africa: “Things Are Further Behind Than People Think”
Monday, May 11, 2015
Plenty of progress has been made on increasing the size of Africa’s banked population. The trouble is, from the amount of noise that is made about the topic, you would be forgiven for thinking we had fixed the problem when we really haven’t.
According to the World Bank, today, 62 percent of the world’s population has a bank account. In 2011 that figure was 51 percent. In three years, 700 million people became “banked” in some way, and the number of “unbanked” individuals dropped 20 percent to two billion adults. Much of this progress was attributed to mobile money.
Mobile money is clearly a great story, and a tale of African success, but it has perhaps been overemphasized when it comes to its ability to bank the unbanked. Things are further behind than people think, but too often it feels like those of us that say so are yelling against a wind of “we have arrived” when really we haven’t yet.
Africa’s unbanked majority
McKinsey estimates that around 80 percent of the continent’s population remains un-connected to formal financial services. MasterCard says only 2 percent of retail transactions in Africa are electronic, with the rest made possible through the use of cash, and this on the “continent of mobile money”. Is this a huge surprise? Not really. Even in the United Kingdom electronic retail transactions have only recently overtaken cash. Cash is still king in the United States. We must not overemphasize the progress we have made in Africa.
Mobile money has been an exceptional development for the continent. In a couple of cases mobile money has cracked it, and it really has raised the bar in terms of being a proven electronic means of transaction and storage. Yet in terms of “banking the unbanked”, it is yet to really figure out its role. The average transaction value on M-Pesa is $29, which is a lot if you are earning $2 per day. Mobile money has a ways to go to banking those at the bottom of the pyramid.