Mobile Money Experience, Driving Financial Inclusion in West Africa

Mobile money has been heralded as one of the means to drive financial inclusion, which is an enabler towards achieving several of the UN Sustainable Development Goals, one of them being eradication of poverty. A success story, widely publicized, has been in Kenya with the m-Pesa, showing notable long-term effects on poverty reduction especially among female-headed households. Mobile money being fiat currency stored and transacted via the mobile phone without the need for a bank account. According to the most recent information in the World Bank Findex database, the number of adults in Kenya with an m-Pesa mobile money account is greater than the number of adults with a bank account, the percentage of adults with a mobile money account being the highest in Africa. Kenya also has the highest percentage of adults with access to formal financial services in Africa. With the future of finance and money being mobile first, it can be said that Kenya has leapfrogged many developed countries in terms of medium for personal financial transactions, it is easier to pay for your taxi ride fare with your mobile phone in Nairobi than in New York.
What about other African countries — the state of financial inclusion, leveraging the mobile phone, and use of mobile money? The Findex database shows a high level of financial exclusion in Sub-Saharan Africa. In Africa’s most populous country, Nigeria, the number of adults with access to formal financial services was noted to be below 50%. Nigeria became Africa’s largest economy three years ago, though lost that status back to South Africa in August 2016. Last month, I visited Nigeria and Ghana to get first-hand experience of mobile money in the West African region. Both countries are the two largest in that region, and have similar economic profiles and social backgrounds. They also have high levels of mobile cellular subscriptions, thus, a significant opportunity to drive financial inclusion via the mobile phone, and for increased mobile financial services.
Although I had lived in Nigeria and subsequently visited many times, it was only in December 2016 during a visit that I learnt of the presence of mobile money in Nigeria. Earlier that year, I had begun exploring blockchain and its applications to address financial inclusion, and wondered how cryptocurrencies like bitcoin could be used for financial transactions in Nigeria. One could say it is a huge leap from cash transactions, however, access and use of mobile money can help ease the transition to a stable cryptocurrency, which is expected to be widely used in the future.
Walking along the streets of Abuja, the capital city of Nigeria, last month, I had imagined mobile money locations will be as ubiquitous as the stalls for buying mobile phone recharge cards to top up for prepaid voice and data, such was the situation I understood exists in Nairobi. The presence of mobile money operators, agents, or their stores in Abuja was not obvious. Online research I carried out showed that there were over twenty mobile money operators, comprising of banks and other companies, none of which was a mobile network operator, the likes of MTN, Airtel, Globacom, and Etisalat. Paga, a mobile money operator, was recommended by some people I spoke with who work in the financial sector. While Paga had a mobile money wallet app one could install on a smartphone, the issue was opening an account and making a cash deposit. The wallet provided functionality to transfer funds from a bank account, however, that will not be useful for persons without a bank account. I found out that Paga agents were located in post offices in Abuja which explained why I had not observed their presence earlier. The post office will seem an odd location for mobile money agents as there tends to be one post office per District, the National Post Office website lists twenty post offices in Abuja. At a post office I visited to open a mobile money account, I was told to provide a utility bill and two pieces of government issued identification, similar KYC/AML (Know Your Customer / Anti-Money Laundering) requirements to open a regular bank account. I don’t live in Nigeria so I was unable to present a utility bill, that ended my attempt to open a mobile money account while in Nigeria. Though I understand the need for KYC verification, such stringent requirement could be a deterrent to those currently excluded from formal financial services, for whom mobile money was meant to benefit. I can also see the use of mobile money by a tourist who will not want to carry around large amounts of cash.

The reason for the dearth of mobile money services seems to be the framework adopted by the Central Bank of Nigeria. Guidelines on Mobile Money Services in Nigeria, which were approved by the Central Bank in 2009, presented two models for implementation, bank-led and non-bank-led. The non-bank-led model stipulated duly licensed corporations to deliver those services, however, stated that those corporations be other than a deposit money bank or a telecommunication company. If banks are not making significant effort to ensure financial inclusion for all, it is inconceivable that the regulator opening up another channel for banks will make much difference. Banks already provide online banking services for their clients with bank accounts. Competition and interoperability were two reasons given by the Central Bank of Nigeria for pursuing models excluding mobile network operators.
In less than a week later, I was in Ghana, my first visit there. Arriving at Kotoka International Airport in Accra, the capital city of Ghana, and seeing I could not readily use my Nigerian Airtel line even though Airtel also operates there, I decided to buy a SIM card to avoid racking up roaming charges on either my Nigerian or Canadian mobile account. Other mobile operators in Ghana are MTN, Vodaphone, and Tigo. I went with an Airtel SIM card simply because my Nigerian mobile carrier was Airtel. Incoming messages on the need to register the SIM card prompted me to walk to an Airtel office near where I was staying in Accra. Office and store signs I saw during my walk, which noted mobile money services, gave me a sense that knowledge and use of mobile money was more widespread in Ghana than in Nigeria. At the Airtel office, I was able to set up a mobile money account in about five minutes after presenting my passport and cash I wanted to deposit, I had converted some of my Dollars to Cedis at the airport. One piece of government issued identification was sufficient, and it did not have to be Ghanaian government issued.
Despite the prevalence of mobile money offerings in Accra, the process to carry out some mobile money transactions was not as smooth as I hoped. A drawback was the lack of interoperability between types of mobile money. I could not pay for the Ghanaian traditional wear at the Arts Craft Centre with my Airtel Money nor could I pay for drinks later on at Vida e Caffe via my Airtel app. The seller at the Arts Centre used MTN Money while Vida e Caffe could only take Slydepay, a mobile money wallet that allows payment via a QR code. Both issues could be rectified, the first by going to a nearby agent to withdraw cash from my Airtel Money account, the second by downloading the Slydepay app onto my smartphone and connecting my mobile money account to it. However, the latter will not be easily addressed by a farmer in rural Ghana who may just have a feature phone. In the market I passed along the 1km walk from the Arts Centre to Vida e Caffe near the National Theatre, traders were aware of mobile money but referred me to a mobile money agent in the market to withdraw cash if I wanted to make a purchase.

In addition to Slydepay, I downloaded Expresspay, another mobile money wallet I learnt was being used in Ghana. Both also allow credit cards to be added and offer merchant payment functionality.

The widespread mobile money services in Accra seem to be due to the mobile money framework currently in place. Ghana earlier pursued a bank-led model similar to Nigeria’s, however, in July 2015, Bank of Ghana revised the framework, opening up mobile money services to mobile network operators. Since then, the number of mobile money accounts, agents, and transactions has jumped significantly. The ease of opening a mobile money account in Ghana does not indicate a watered-down KYC/AML compliance framework. Bank of Ghana adopted a tiered KYC framework as part of the new mobile money model. The minimum tiered KYC account has a maximum daily transaction amount of GHS300 (approx. US$70).
While the change in the Ghanaian mobile money regulatory framework led to positive results which the Central Bank of Nigeria can look to, it does not mean that there aren’t aspects Ghana can draw on from Nigeria. A key component of Nigeria’s framework is interoperability, absent in Ghana. Without mobile money interoperability, the full spectrum of benefits cannot be achieved. The ease of cash payments has to be replicated. The problematic piece in Nigeria’s framework is the exclusion of mobile network operators which hinders the ability to reap the financial inclusion benefits of mobile money considering the extensive mobile phone usage. Nine mobile network companies operate in Nigeria, albeit four of them dominate, there is also the tendency for residents to have more than one mobile phone line with different operators to deal with sporadic mobile network outages. Access to clients’ call and internet traffic data can be viewed as an unfair advantage mobile network operators have over banks, in addition, the use of such data could infringe on client’s privacy. This can be mitigated by creating a separate legal entity from the telecommunication entity, with appropriate regulations.
Africa is on its way to leapfrog traditional banking and finance with mobile, though there are factors that can impede or speed up the process. They include, regulations, identity, mobile wallets, interoperability, open APIs, agent banking, mobile broadband access, client protection, data ownership. Regulators are crucial, their role is to ensure financial stability as well as enhance public trust in the financial system. There is also the moral imperative to ensure everyone is included and reap the benefits from being part of the financial system, which helps alleviate the growing inequality and the associated consequences. This demands a more robust regulatory framework in each country, as well as regulators to work together. Regulators can also enable innovation, such as in identity, actually digital identity. Underpinning the adoption of mobile money and achievement of financial inclusion is identity. Digital identity will also drive the future of money globally.
While feature phones currently represent over 50% of mobile phones used in Africa, there will be a rapid shift to smartphones as prices continue to drop. With smartphones, come mobile wallets and various financial related apps. This bodes well for the provision of new and varied financial products that benefit those at lower income brackets. The rich graphical user interface of smartphones combined with audio tailored to the society and demographics being served will certainly go a long way to enhance financial literacy and capability, change behaviors, and in turn aid the achievement of financial health and economic inclusion.
As smartphones proliferate in Africa, will banks make more concerted effort to target the segment of the population excluded from formal financial services? Will mobile network operators utilize mobile money to offer other financial services such as savings, credit, investment, and insurance? So far, uses of mobile money have been mainly for cash-in / cash-out transactions, air time top up, and P2P transfers, though bill payments have steadily been increasing. Will the significant opportunities presented to expand mobile financial services and enhance financial inclusion in Africa trigger an increase in flow of investments to the region?
As I cover financial inclusion and impact investing in the work I do, and travel the West African region, I will provide regular updates on the impact and evolution of mobile money and mobile financial services in that region.
Originally published on Innovfi’ s blog page at www.innovfi.com.
