Mobile technology is playing an important role in financial inclusion in Africa. It facilitates access to formal finance and helps smooth consumption. In addition to the positive economic impact, mobile penetration is also a critical benefit for vulnerable households and citizens. These benefits include providing a private social safety net, smoothing consumption, and allowing individuals to save small amounts of money. This may help increase resilience during a crisis, and can lead to increased trade and economic activity, as well as enhanced risk sharing.
Despite its growth, mobile penetration has not been as high in Africa as in other parts of the world. Some countries, such as Zambia, have made significant strides in this area. However, much of the continent still faces infrastructure deficits. Lack of reliable electricity and poor mobile phone coverage is common throughout the region. The lack of infrastructure also impedes the development of an efficient and effective banking sector.
In some African countries, mobile phones have improved communications between businesses and customers. For example, Safaricom, a mobile network operator (MNO), has invested in developing its agent network. Kenyan company M-Kopa has implemented innovative solar panel financing plans using mobile payments. Many banks in Southern African countries now allow their customers to make payments through their mobile phone.
Mobile money, like many other forms of digital payments, has grown at a faster rate than the global average. For instance, Mauritius recorded a 12% increase in receipts during its first year of mobile payment. Similarly, Cote d’Ivoire grew its mobile money users 40% in three years. While these numbers show the potential of mobile money, they also point to some operational challenges.
For instance, the distance of an agent to a household can have an inverse relationship with take-up of mobile money. Agents situated near banks and other “super-agents” can facilitate transactions, while those far from the city or other centres of population can be less convenient. Furthermore, it is essential that the network of agents grows with phone coverage.
Another challenge is agent liquidity. Agents are subject to regulatory restrictions, and many do not have enough float to serve all their customers. Moreover, limited charging opportunities can also limit actual usage. If an individual is unable to open an account due to a lack of identifying documentation, this can discourage financial inclusion.
In East Africa, firms that adopt m-money are more likely to obtain loans and lines of credit. This may have something to do with the fact that m-money has helped poorer households to better manage their financial resources.
Mobile technology is also contributing to the financial inclusion of women. Among the barriers to women’s financial empowerment in Africa are affordability, gender norms, customs, and legal and political rights. Financial inclusion in Africa can also be affected by education, income, and other factors. Developing new tools for safer and more affordable mobile money transactions can strengthen adoption in the region and position Africa for long-term success