Africa has forged a reputation as a
global leader in mobile financial
services. There are relatively few
bank branches across the
continent, and only a minority of
people have bank accounts.
Telecoms companies have stepped
into the gap to provide financial
services to large swathes of the
continent’s population.
Yet even as more customers sign up
to the services, attention is turning
to the next generation of mobile
financial services: in particular
developing savings and lending
services using mobile technology. If
this is done successfully, it has the
potential to transform the financial
landscape for individuals and small
businesses who could gain access to
affordable credit – many for the first
First generation mobile financial
services like MTN Mobile Money offer
a ‘virtual wallet’ on customers’
mobile phones, allowing them to
conduct simple transactions like
sending and receiving money, paying
bills or topping up their phone
credit. These services have brought
tens of millions of Africans into the
formal financial sector for the first
time. According to the GSMA, a
mobile telecoms industry body at
least nine African countries now
have more mobile money accounts
than bank accounts.
And despite the spread of these
services to other parts of the world,
sub-Saharan Africa still dominates
the global market. Of the 203
million registered mobile money
accounts around the world as of
June 2013, 98 million of them were
in the region.
Now, banks are developing savings
services that will leverage the reach
of mobile. Pan-African lender
Ecobank has plans to roll out
mobile-based lending and savings
services. The Togo-based bank plans
to set up mobile savings accounts
with MTN Mobile Money in a dozen
countries around Africa.
“The potential for mobile saving is
enormous,” says George Bodo, head
of banking research at Ecobank.
“It is estimated that there is $1.2bn
in cash stuffed under mattresses or
in biscuit tins across Africa. If these
funds could be leveraged through
mobile banking, they could transform
lending to local businesses, which
currently pay exorbitant interest
Some services have already been
launched. As was the case with the
first generation of mobile services,
Kenya is a leader. Safaricom offers
the M-Shwari service in conjunction
with Commercial Bank of Africa (CBA)
, and the M-Kesho service with
Equity Bank. Also in Kenya, Airtel
has partnered with microfinance
bank Faulu Kenya to offer small,
short-term loans under a service
called KopaChapaa. Kenya
Commercial Bank has its own M-
Benki offering.
Across the rest of the continent,
however, such services are still
relatively rare. The GSMA says there
are 21 services in Africa which link
mobile money to some other banking
products. Of those, only nine offer
loans. Among them is M-Pawa in
Tanzania from CBA and Vodacom,
and Mjara loans in Ghana from MFS
Africa and MTN Mobile Money.
A role for regulators
If the potential for mobile savings
and loans is to be realised
elsewhere in the region, then it may
require encouragement from
regulators. Some, at least, seem
“Theultimate goal is to use these
mobile financial services to start
creating savings. This supports the
ultimate aim of financial inclusion…
but also poverty reduction,” says
Rwangombwa John, governor of the
National Bank of Rwanda.
“Going forward, we are going to have
savings on the mobile services that
are linked to micro-loans, so it is
going to have an even bigger impact
on the lives of the population.”
But some countries are still dragging
their heels. In Sudan, for example,
even basic mobile financial services
are only just starting to gain
traction. Elsewhere, there are
concerns about how to regulate
these services.
“Central banks are becoming
extremely cautious of these
developments in mobile banking,”
says Mr Bodo of Ecobank.
In Nigeria, for instance, there is an
ongoing battle between the between
the central bank and the telecoms
regulator over who should regulate
the mobile platforms, according to
Mr Bodo.
Assuming that such regulatory issues
can be ironed out, the key to a
successful rollout of mobile banking
services is to first of all encourage
more savings via mobile devices. One
factor which augurs well for the
uptake of these practices is the fact
that many customers already save
small amounts just by maintaining a
credit balance on their mobile
money accounts.
Of course, non-bank providers cannot
lend these funds out, so the trick
will be to both encourage customers
to save more and to link their mobile
wallets with the formal banking
sector. At that point, banks can
recycle the accumulated capital and
lend it to local businesses.
“It is not enough simply to save. You
need to get that money to those that
use it for investment,” says Benno
Ndulu, Tanzania’s central banker.
However he believes that in order to
allow savers and investors to meet,
banks and other deposit-based
services still need to be the point of
intermediation. “For us, as we go
forward, it is extremely important
that we make that connection
between the mobile money services
and the banking system,” he says.
The incentive for banks to tap into
mobile services is very strong,
allowing them to connect directly
with the millions of previously
‘unbanked’ citizens across the
“As we go further into connecting
banks to this infrastructure of mobile
money services, the opportunity to
increase the community that saves
with banks and to increase savings is
phenomenal,” Mr Ndulu claims.
Shifting attitudes
The role that the various industry
participants have to play seems clear
enough. However, it will require a
cultural change for some financial
“A few banks have started to
integrate with mobile wallets, but
this is a relatively new trend,” says
John Owens, senior policy adviser on
digital financial services at the
Alliance for Financial Inclusion (AFI),
a non-profit organisation. “Most
banks are still trying to compete
rather than integrate with mobile
wallets, so there is still a ways to
The problem is that many banks
have seen the launch of financial
services by telecoms companies as
unfair competition because, typically,
these new service providers are not
as tightly regulated as the banks
themselves. Attitudes are changing,
but it is a gradual shift.
Consensus is emerging amongst
players across the two sectors, as
well as regulators, on the need to
create “an open ecosystem of
financial inclusion which allows a
variety of players along the value
chain” to participate, says Alfred
Hannig, executive director at the
AFI. “We are looking for very smart
partnerships among mobile money
issuers, payment platforms, banks,
telcos, agent networks and so forth.”
Assuming the industry and the
regulators can build on that nascent
sense of cooperation, there are some
advantages to using the mobile
networks to promote savings and
loans. As technology becomes more
sophisticated and cheaper, it is
easier for companies to roll out a
wider range of services. In addition,
a customer’s mobile payment record
can serve as a relatively simple
credit history, providing an easy way
for banks to evaluate the risk they
are taking on when they lend.
Security risks?
However, with the benefits of mobile
services also come some real risks to
the security and privacy of users –
something that has been recognised
by regulators around the world. In a
report issued last year, the UK’s
Financial Conduct Authority pointed
to several areas of weakness,
including mobile banking apps that
can get infected with ‘malware’ or
other viruses. Others, such as
California-based IT security firm
Guardian Analytics point to the
danger of users being tricked into
downloading fake security apps on
their phones and criminals hacking
into wi-fi networks to redirect
transactions or capture usernames
and passwords.
The risk of fraud is something the
industry is well aware of, and some
measures are being taken. The AFI,
for example, says it has started to
put more effort into the issue of
consumer protection. The AFI has
been running a Consumer
Empowerment & Market Conduct
working group since April 2011, in
which policymakers from around
Africa and beyond can discuss
regulatory issues related to
consumer protection.
The AFI has some protection
principles in mind already. “The ‘e-
money’ funds of the public must be
protected and available for
redemption at all times. They must
be unencumbered and maintained in
the banking system or in liquid
government securities that are equal
to the amount of outstanding e-
money issued,” Mr Owens explains
The way in which Africa forged ahead
with the first generation of mobile
banking services offers reason to
suppose that such hurdles can
indeed be overcome. If that is the
case, then the continent could
emerge as a global innovator in the
next stage of the industry’s growth
as well.



Ambuli Victor.


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