JONESBORO, Georgia — Mobile money in Africa was responsible for two-thirds of global mobile money exchanges as of December 2018, with numbers going beyond $25 billion. Sub-Saharan Africa had around 135 mobile money implementers and 338 million users. With mobile money, users can use their mobile phones to transfer money without a bank account. Deploying mobile money in Africa grants those in extreme poverty the chance to participate in financial transactions without a bank. Using mobile money in Africa has certain advantages.
Advantages of Mobile Money
Since the impoverished are usually “unbanked,” those in poverty do not have a place to store their money. Mobile money gives people in extreme poverty a digital way to store their funds and transfer them securely. By using electronic money, people do not have to worry about theft or losing their money.
Mobile money provides a new level of accessibility as people in rural areas no longer have to travel long distances to make or access payments. This service only requires a cellphone and mobile coverage, allowing people who meet these two requirements to receive money from anywhere in the world.
Mobile money fees for transfers are much lower than those of banks. Sometimes there are no fees involved at all.
Migrants use mobile money to financially support their families back in their home countries. “The amount remitted by migrants from sub-Saharan Africa reached $48 billion in 2018.” Nigerian families received $25 billion worth of remittances, which is nearly four times more than official development assistance and foreign direct investment put together. Kenyan research reports that access to mobile money improved household consumption per capita and savings, leading to a reduced poverty rate. This improvement led to 196,000 households climbing out of extreme poverty, which equates to roughly 2% of all Kenyan households.
Africa’s Changing Economic Landscape
A little over half of the world’s mobile money accounts are in sub-Saharan Africa. These changes in Africa’s economic landscape were already emerging but COVID-19 only sped up the adoption of this new trend. African governments have focused on making it easier for people to create mobile money accounts to improve their economies.
For example, Rwanda’s leading bank told telecoms to relax restrictions for signing up, enabling a large spike in the number of exchanges, which doubled just a week after the country initiated a lockdown. The government initiated the lockdown in March 2020. By the end of April 2020, mobile money exchanges amounted to three million per week — five times the norm before the pandemic set in. This encouraged other African governments such as Kenya and Zambia to follow suit by relaxing restrictions and waiving fees.
Sub-Saharan African users are using mobile money for more than just personal exchanges between two persons. Transactions incorporating third parties have multiplied by four times in volume and grown two times faster in value in 2018 in contrast to 2010. The expansion of digital transactions comes from an increase in partnerships with banks, businesses, money transfer operators and governments to revolutionize transactions and boost the economy.
The Emerging Mobile Money Market in Africa
Various mobile money service providers have taken notice of this emerging market. One of the mobile money services changing everyday transactions in sub-Saharan Africa is Stripe, a U.S. startup that purchased Paystack, a Nigerian transaction platform. Paystack has earned the name the “Stripe of Africa” because of its mission to improve online and offline exchanges for users in the area.
Chipper Cash, a startup based out of San Francisco that provides no-fee mobile transactions for seven African countries, received $30 million worth of funding from Bezos Expeditions and Ribbit Capital. With the funding, it plans on expanding its services and geographical reach. WorldRemit is another transaction platform based in the United Kingdom. It acquired Sendwave, an online remittance service focused on countries in East Africa.
Mobile money in Africa is positively changing the continent’s financial landscape because it brings benefits that accelerate poverty reduction in Africa.
– Solomon Simpson