Mobile Banking in Africa: An Overview

An estimated 2.7 billion people in developing countries have no access to financial services, according to the African Development Bank. In Africa, only 20 percent of African families having bank accounts, according to

Ethiopia, Uganda and Tanzania each have less than one bank branch per every 100,000 people, compared to 100 in Spain. Namibia has more than four bank branches for each 100,000 people, Zimbabwe more than three and Botswana nearly four bank branches per 100,000 people.

Sub-Saharan Africa has the lowest deposit institution penetration in the world standing at an average of 16.6 percent  compared to 63.5 percent in other developing countries, the ADB says. “It is this gap in the financial services market that is creating a unique niche for mobile phone banking to develop on the continent, enabling a growing number of people to access financial services for the first time,” ADB says. Even Africans with bank accounts often face high charges for moving their cash around, due to high transaction costs. It is this gap in the financial services market that is creating a unique niche for mobile phone banking to develop on the continent.

But mobile phone penetration has exploded since 2000, as it has elsewhere in the developing world. In 1998 there were less than two million mobile phone users in Africa, ADB says. The number grew to over 400 million in 2009.

Banks and other providers now recognize the potential of reaching millions of prospective customers, especially the rural population who account for more than 60 percent of Africa’s total population and have no access to banking services.

Among the barriers to traditional banking are the hurdle costs to open an account. “In some countries the minimum deposit can be as high as 50 percent of per capita gross domestic product, for example.

The suitability of a mobile phone to function as a virtual bank card is fairly obvious. The subscriber identity module (SIM) card inside most if not all GSM phones is in itself a smartcard, and assuming suitable security mechanisms are used, can function as the memory for the bank customer’s personal information number and account number.

The mobile phone may serve as a point of sale terminal. The mobile phone can also be used as an ATM or as an Internet banking terminal.

The M-PESA mobile money transfer service that has become something of a “poster child” for mobile banking in Africa was launched in 2007 with 900,000 subscribers. In 2010 M-PESA had 12 million customers. The number of M-PESA clients grew by 61 percent from 7.38 million in July 2009 to 11.89 million in July 2010, which is about 30 percent of Kenya’s population.

In July 2010 there were 19,500 M-PESA agents. The number of M-PESA monthly transactions increased from 0.35 million in July 2007 to 16.75 million in July 2009, and the monthly value rose from USD14.2 million in July 2007 to USD536.6 million in July 2009. While the amounts of cash being transferred are often small, the sheer volume of business results in large overall movement of funds in the network, says ADB.

As at January 2010, cash deposits and withdrawal transactions at M-PESA outlets amounted to USD650 million per month while the average transaction was only about USD33.19 M-PESA financial services have low value and high volume, and are generating both significant returns and job opportunities. The services carry a minimum cost of about USD 0.46 (KES35) per transaction. Where a bank transaction in Kenya range from USD1 to USD3, M-PESA transactions cost USD 0.12 to USD 0.15.

M-PESA “International Money Transfer” provides financial services between Kenya and the UK, as well, ADB notes.

In August 2009, Safaricom was authorized to transact foreign exchange business by the Central Bank of  Kenya (CBK) while the UK partners were authorized by the UK Revenue & Customs (HMRC) to transact in international remittances. Following the successful pilot and launch of M-PESA IMT between UK and Kenya, Safaricom will be expanding the services to allow remittances to Kenya from other relevant markets, starting with East African countries.

M-KESHO, a  partnership between Equity Bank and Safaricom, allows opening of mobile banking accounts with no account opening fees, minimum balances or monthly charges.

M-KESHO accounts earn interest and have no limit on account balances. Other features of the account include microcredit facilities (emergency credit availed through MPESA) and micro->insurance facilities.

M-KESHO clients can open accounts at either Equity Bank branches or at a subset of some 5000 M-PESA agents at which Equity Bank will place a bank representative and transact at any of the 17,000 M-PESA retail outlets.

In February 2009, Zain launched ZAP Mbanking service in East Africa, allowing customers to send and receive money directly to their mobile handsets from banks anywhere in the world. It is targeting over 100 million people in Kenya, Tanzania and Uganda. In September 2009, ZAP expanded mobile banking service run in partnership with CitiBank and Standard

Chartered Bank. ZAP allows subscribers to withdraw cash, pay for goods and services, and make money transfers to third parties. More than 10 million subscribers are already using these services within East Africa.

In January 2010, Zain expanded its ZAP mobile commerce service to Niger, Sierra Leone and Malawi. Zain is working with National Bank of Malawi and NBS Bank in Malawi, EcoBank in Niger, and Zenith Bank in Sierra Leone, ADB says.

South Africa is by far the country where mobile banking is most widely used on the continent. Still, about half of South Africa citizens don’t have bank accounts. Nearly 40 percent are either unemployed or work informal jobs paid in cash. Bank charges are high and banking regulations are so strict – such as proof of regular income – that they prevent many poor people form having formal bank accounts. Moreover, most South Africans live in rural or semi-urban areas where access to a bank is very limited or non-existent.

First National Bank of South Africa has over two million customers and attracts about 90,000 on a monthly basis. In 2009, FNB mobile banking customers made 56 million transactions worth the value of ZAR7.2 billion. Customers can send money to anyone in South Africa, whether they have an account with FNB or not.

South Africans often paid couriers the equivalent of USD30 to USD 50 per transaction to deliver cash to relatives. Now they can do it for only USD0.50 through Wizzit mobile bank networks.

Flash Mobile Cash by Eezi gives home shop owners the tools to be the bank for communities where formal banking infrastructure does not exist. The home shops, equipped with shared-phone ATMs, enable communities to withdraw, deposit or borrow small amounts of cash from their local township residence. The shopkeeper, as the banker, transacts using a GSM enabled device supplied by Shared-phone. “

The MTN Banking MobileMoney Account in 2010 announced plans for a fully-fledged bank account on mobile phones, with an optional credit card. The service will be extended to the 20 countries where MTN operates, including Uganda, Nigeria, Cameroon and Ivory Coast, which combined have over 90 million mobile phone users.

South Africa’s largest mobile phone operator Vodacom has teamed up with Nedbank to unveil an M-PESA mobile-based cash transfer service, similar to the successful one >operating in Kenya. It will initially allow users without access to bank accounts to transfer money using handsets and eventually pay bills and buy goods.


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