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28 Jul 2016 00:00
M-Pesa and other mobile money success stories draw attention to the critical role of the private sector in expanding financial inclusion.
Most of the world’s mobile money services are based in Africa. In Uganda, Cameroon, Zimbabwe, Guinea and 11 other African nations, more people use digital accounts than traditional banking accounts.
Through digital financial services, Africa’s mobile network operators (MNOs) and telecoms have revolutionised our economy.
But now is the time to move beyond mobile money and build a fully integrated, fully inclusive digital economy.
The challenge of building something new on this scale is considerable.
MNOs were in a perfect position to start us down the path. They had distribution models and infrastructure well-suited for reaching people in rural and remote areas, where demand for affordable, accessible financial services is the highest. And they knew from experience that people at the bottom of the economic pyramid should not be overlooked as customers.
After all, millions of poor people were already proving to be productive mobile phone subscribers. As long as fees were low enough, MNOs foresaw that these same people would also make productive consumers of financial services.
And they were right. In the spring of 2015, Kenyans passed more than $29-million through their digital accounts every day, according to the Communications Authority of Kenya. By the year 2020, the mobile money industry in Africa is expected to be worth more than $14-billion, says Ibid.
Without question, African businesses should continue to develop and diversify products and services available to low-income customers. But it’s also necessary for the public and private sectors to invest, together, in a digital ecosystem that supports these products, their providers, and their customers.
It starts with regulations. African MNOs and telecoms would not be the mobile money leaders they are today had African governments not made it possible for non-banks to provide financial services. By setting a path for new players to enter the market, regulations set the stage for competition and innovation.
Even with supportive regulations, businesses face technical and other hurdles as they head to market. For this reason, competitors must also be collaborators.
The challenges of building digital and agent networks, ensuring system security, and addressing financial illiteracy are all much more manageable when taken on together. Sharing knowledge and resources will lower the costs of entry for all players and give each one the best shot at success.
One particular form of collaboration is now bearing fruit in Tanzania, Rwanda, and Madagascar. In each of these markets, all mobile money providers are interoperable with each other – meaning, a customer subscribing to one service can transact with customers on any other service. Why would competitors build bridges to each other’s products like this? Because interoperability makes the industry as a whole more valuable to customers, which makes them more likely to sign up for accounts and use them regularly: good for customers, good for providers.
Ultimately, this line of collaboration can and should go even further. Banks should be included, so that all financial providers in a country comprise a single, frictionless digital financial system. Merchants and commercial services will have to join the digital ecosystem as well, so that customers can pay for all the things they need in life without using cash.
It is a different world than the one we live in now. And it will take all of us to get there. But in the end, the reason we should intensify our collaboration and investment – and the reason our efforts stand a good chance of succeeding – is that everyone benefits from an economy that includes everyone. Providers benefit from millions of new customers. Governments benefit from more productive and self-sufficient populations. And newly “banked” individuals benefit from secure and convenient tools for saving and spending money.
We are on our way. Every day, digital financial services are more integrated in African lives and economies. Before long, Africa will be more than the home of mobile money. It will be a vibrant and efficient digital economy – and an even brighter example for all the world to follow.
Ayo Ajayi is director of the Africa team at the Bill & Melinda Gates Foundation
This article was updated by the author on August 1 2016.
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