Although 700 million people have signed up for a bank account since 2011, about two billion worldwide remain unbanked.
In the developing world, about 54% of adults have a mobile account – increasing per 13% since 2011, according to the Global Findex database. The vast majority of that growth came from people opening accounts at banks or other financial institutions. Just 11% of banking accounts in the developing world are used to both make and receive payments.
Sub-Saharan Africa (SSA) is the only developing region to defy this trend. By harnessing mobile money technology, through mobile money service accounts and the increase in numbers of affiliate bank agents that use mobile phones to reach rural clients, SSA drove up account ownership by a third – to 34%. Mobile money technology is helping in Kenya, Côte d’Ivoire and other countries in region. Overall, 12% of adults in the region have a mobile money account, which is four times the developing world average. It is very important because without it parents squander time waiting in line to pay their children’s school fees in cash, entrepreneurs turn to lenders who charge usurious rates and cash savings get stuffed under a mattress.
Mobile money reveals huge opportunities to build on Sub-Saharan Africa’s financial inclusion progress. Regionally, 350 million adults lack an account. Of them, 155 million say they have their own mobile phone, while 200 million say they have access to one at home. Most are located in West Africa, where mobile money has yet to take off, but 40 million live in East Africa, home to the world’s highest mobile money account ownership rates.
In Sub-Saharan Africa almost a third of account holders – or 12 percent of all adults having a mobile money account. Within this group about half having both a mobile money account and an account at a financial institution, and half having a mobile money account only. Mobile money accounts are especially widespread in East Africa, where 20 percent of adults have a mobile money account and 10 percent a mobile money account only.
Kenya has the highest share of adults with a mobile money account, at 58 percent, followed by Somalia, Tanzania, and Uganda with about 35 percent. In southern Africa penetration of mobile money accounts is also relatively high, at 14 percent. In 13 countries around the world, penetration of mobile money accounts is 10 percent or more. Not surprisingly, all 13 of these countries are in Sub-Saharan Africa.
Within this group, the share of adults with a mobile money account ranges from 10 percent in Namibia to 58 percent in Kenya. And in 5 of the 13 countries – Côte d’Ivoire, Somalia, Tanzania, Uganda, and Zimbabwe – more adults have a mobile money account than an account at a financial institution.
There has been rapid growth in offerings of mobile money accounts around the world in the past three years – the GSMA MMU database reports 259 deployments in 89 countries at the beginning of 2015, up from only 100 deployments three years earlier.
In Sub-Saharan Africa mobile money accounts drove the growth in overall account penetration from 24 percent in 2011 to 34 percent in 2014. In East Africa, where mobile money accounts are most common, these accounts increased overall account penetration by 9 percentage points to 35 percent while the share of adults with an account at a financial institution remained steady at 26 percent.
Using a mobile phone to access an account at a financial institution and make a transaction is particularly common in the 13 Sub-Saharan African countries with the highest penetration of mobile money accounts: in each of these countries close to 40 percent of adults with an account at a Mobile Money. Among the 13 Sub-Saharan African countries where the share of adults with a mobile money account is 10 percent or more, South Africa was the first to have a GSMA MMU mobile money account service start operating within its borders, in 2004.
In Sub-Saharan Africa the mobile phone is increasingly used to extend financial services and overcome the limits of bank branches.
Mobile money accounts, by providing more convenient and affordable financial services, offer promise for reaching unbanked adults traditionally excluded from the formal financial system – such as women, poor people, young people, and those living in rural areas.
Among the different ways that people send domestic remittances, by far the most common one in all developing regions is to use cash, by handing the money directly to the recipient or by sending it through someone else. Sending money digitally through a financial institution – or, in Sub-Saharan Africa, through a mobile phone – is typically the second most common option.
Given the widespread use of mobile money in Kenya, Tanzania, and Uganda, it is no surprise that many people in these countries receive payments for the sale of agricultural products into a mobile money account. In Kenya 16 percent of all adults receive agricultural payments into a mobile money account in the past 12 months and 30 percent receive the payments into a mobile money account.
In Tanzania 23 percent of those receiving agricultural payments (or 12 percent of all adults) receiving them into a mobile money account, including 4 percent who also received payments into a financial institution account. In Uganda 13 percent of those receiving agricultural payments (or 9 percent of all adults) receiving them into a mobile money account, including 3 percent who also received payments into a financial institution account.
In Kenya most people make utility payments digitally: 55 percent made the payments through a mobile phone. Of the 55 percent paying utility bills through a mobile phone, 49 percent did so from a mobile money account and 6 percent through an OTC transaction.
In Kenya and Tanzania using a mobile phone is the most common way of sending and receiving remittances. Among the 53 percent of adults in Kenya who sent remittances in the past year, 90 percent did so using a mobile phone – 71 percent through a mobile money account.
Indeed, using a mobile phone is more common than using cash in most East African countries – and this should come as no surprise, since mobile money was introduced in these countries as a way to make domestic remittances between urban and rural areas more convenient and efficient. When the mobile money service M-PESA started operating in Kenya in 2007, it specifically targeted the domestic remittances market, promoting its services under the slogan “send money home.”
Conclusions
Governments and businesses could help bring tens of millions of adults into the financial system if they stopped making routine payments in cash. Digitizing payments for agricultural goods could cut the number of unbanked by about 125 million, including up to 16 million in Nigeria. Some countries are already moving in this direction. In Kenya, Tanzania, and Uganda, more than 10% of adults receive agricultural payments into accounts, often including mobile money accounts.
In some ways, then, the answers to Africa’s formidable financial inclusion problems are implied by the progress that’s already been made.
Two-thirds of population has a mobile phone and 2.32 billion of smartphone users worldwide in 2017. Furthermore, by 2020 – 7 in 10 of world’s population will use smartphones. By taking advantage of Mobile Money technology, and offering products that are cheaper and more convenient than cash, the region presents the world with lessons for expanding financial access.
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