Reforms can unlock mobile money growth in Africa
In sub-Saharan Africa, supportive, forward-looking policies can open bigger markets
MOBILE money has changed the face of financial services forever. It has driven significantly greater financial inclusion in emerging markets around the world, positively impacting whole communities and economies. By the end of 2018, there were more than 866 million registered accounts in 90 countries – up 20 percent from 2017.
The mobile money industry processed transactions worth $1.3 billion (R18.69bn) a day in 2018, with digital transaction values growing at more than twice the rate of cash.
The impact of mobile money cannot be underestimated. Only a few years ago, it was unthinkable that keeping money in digital form could become more important than cash.
Sub-Saharan Africa has far and away the highest concentration of registered mobile money customers worldwide, accounting for almost 46 percent of the total. While Asia led global growth in mobile money, with 90 million new accounts opened last year alone, sub-Saharan Africa still saw strong growth despite its significant user base, adding more than 17.5 million new accounts in 2018.
In 13 African countries, more than a third of adults are active mobile money users. It’s gaining momentum in West Africa in particular, with 54 percent of the combined adult population of Ghana, Ivory Coast, Benin and Senegal using mobile money.
While mobile money providers in African markets continue to see growth in registered accounts, rates will inevitably slow as the majority of the population gains access to mobile money. There is, however, a huge opportunity to unlock growth and increase financial inclusion in the continent’s mobile money sleeping giants: Nigeria, Ethiopia and Egypt.
These markets are Africa’s three most populated, with a combined adult population of more than 242 million, but citizens in each market have limited availability of mobile money services and low rates of financial inclusion.
The reasons for this vary. In Nigeria and Egypt, regulation has limited the range of providers that can offer mobile money services, resulting in lower levels of investment and fewer innovative products and services.
In Ethiopia, restrictions on competition, low levels of internet connectivity, and limited consumer trust and financial literacy have created barriers to uptake and market entry.
Only by creating a regulatory environment that encourages investment and provides a supportive environment for innovation can mobile money thrive in these markets. But change is coming. Regulatory innovation introduced last year in Nigeria and Egypt promises to harness the potential of mobile money to drive financial inclusion, and reforms and an ambitious financial inclusion strategy in Ethiopia have been attracting the attention of both mobile network operators and other industry players.
Our research shows that these reforms could spark a wave of adoption in these three countries, leading to more than 110 million new mobile money accounts in the next five years, helping to achieve the financial inclusion targets set out in their respective national financial inclusion strategies.
Mobile money growth in sub-Saharan Africa also requires a progressive and balanced approach to taxation. Mobile is already one of the highest taxed industries in the region and the situation is especially complex for mobile money providers, who encounter three layers of taxation: general taxes, mobile sector-specific taxes, and mobile money taxes. Last year, industry concerns intensified regarding the introduction of taxes on mobile money transactions throughout the region, particularly in markets such as Uganda, Kenya, Zimbabwe and Gabon.
The future of mobile money growth in sub-Saharan Africa hinges on a supportive, forward-looking policy and regulatory environment that will power a new phase of growth. That requires active collaboration between all parties – mobile money service providers, governments and mobile operators. Together, we can unlock new growth to bring the social and economic benefits of mobile money to those who have traditionally been under-served by the financial system.
Akinwale Goodluck is the head of subSaharan Africa at GSMA.