Mobile Money Revolution in Africa: A Game Changer for Unbanked Populations?   Ernest Amoabeng Ortsin (Legon Centre for International Affairs and Diplomacy) Paper presented at the 8th Annual Conference on Regional Integration in Africa at Lome from July 3-4, 2017.

Presentation Outline Abstract Overview of Financial Inclusion in SSA Mobile Money Kenya M-Pesa Model Mobile Money and Financial Inclusion Conclusion

Abstract The main objective of this paper is to analyze how the growth in the use of mobile money services in Africa is addressing the problem of financial inclusion.

Definition of Financial Inclusion -World Bank “The proportion of individuals and firms that use financial services.”

Definition of Financial Inclusion - Center for Financial Inclusion (CFI) “Access to a full suite of financial services including credit, savings, insurance, and payments” delivered on a platform that is “quality, convenient, affordable, suitable, and provided with dignity and client protection.”

Overview of Financial Inclusion The World Bank’s Global Findex report (2014) indicates that an estimated 2 billion of the world’s adult population are without bank accounts. About 350 million of them, according to the report, are to be found in Sub-Saharan Africa (SSA).

Financial Inclusion Overview Figure 2: Use of financial services is still very limited in emerging markets Adults with an account at a formal financial institution, % High-income Economies E. Asia and Pacific Global EM Europe and C. Asia Latam and Caribbean S. Asia SSA MENA 0 20 40 60 80 100 Source: Global Findex database, Standard Chartered Research

Reasons for not Accessing Banking Services in SSA Figure 1: Reported reasons for not having a bank account Adults without an account, % Not enough money Family member already has an account Too expensive Too far away Lack of documentation Lack of trust Religious reasons 0 5 10 15 20 25 30 35 Note: Respondents could choose more than one reason. Source: Global Financial Inclusion (Global Findex) Database, World Bank, Standard Chartered Research.

Mobile Money According to the Global Findex (2014) 12% of adults in Sub-Saharan Africa (SSA) on the average have mobile money accounts. This is the highest in the world against a global average of 2%. In Tanzania for example, about 17% of adults had accounts in 2011 but this increased to 40% in 2014 as a result of mobile money accounts. Across the SSA region about 45% of people have only mobile money accounts and no financial institution account.

At the time of the deployment of M-Pesa, only about 20 per cent of Kenyans had bank accounts and could be described as being financially inclusive. A decade later, about 93% of Kenyan adults have access to mobile money accounts. Presently, an estimated 40% of Kenyan gross domestic product (GDP) passes through M-Pesa on daily basis.

Critical Success Factors for M-Pesa Regulatory Framework Domestic Remittances 2008 Post-Electoral Violence Variety of Services Smart phones

Replication of M-Pesa Model

Advantages of Mobile Money Fast Convenient Simple User-friendly Ubiquitous

MOBILE MONEY AND FINANCIAL INCLUSION Treasury Bills Interest Earnings on Mobile Wallet Insurance Loans Remittances from abroad Cross border Transactions

Challenges Internet Connectivity Charges Amount Restrictions Theft /Fraud

CONCLUSION The revolution in mobile money brings to the fore two critical questions. Looking at the catalytic role credit cards have played in the economies of advanced countries, and with the hope that Africa was eventually going to follow suit, questions are now being asked about whether Africa would undergo the same trajectory? Also, what becomes of the future of traditional brick and mortar banks? Will they collapse under the weight of the competition from mobile money?

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