The concept of mobile money has revolutionized how African consumers and business owners are making payments and receiving money. Before 2006, when M-Pesa was launched as Africa’s first mobile money platform, the majority of the population relied on money merchants to make transfers. M-Pesa and other providers are changing the game by allowing people to do the same, but more efficiently and sometimes even without owning a smartphone, writes Afrinection’s West Africa Ambassador Michael Alimo. All one requires, is a mobile device that is active on a local mobile network that is offering a mobile money service.

Many people wonder why mobile money has taken off in Africa as opposed to for instance Europe and North America. The reason is simple: the North has always had a much higher banking penetration rate than Africa. Africans are simply not accustomed to traditional banking processes because they never had access to banking infrastructure, including bank accounts.

Cheaper and faster

The bulk of African business owners – especially those in the informal sector – have always been financially excluded from the mainstream economy, which is all about bank accounts. This has impacted their growth potential. According to the International Growth Centre, up to 75% of adults in Sub-Saharan Africa do not have bank accounts.

This is where mobile money comes in handy. One of its main benefits is that it demands little in terms of documentation and administration. Besides that, making mobile money transactions is cheaper, faster and more convenient than ordinary banking. Sub Saharan countries, as a result, have dominated the global mobile many market since 2006, when M-Pesa was rolled out in Kenya. Since then, the platform has been rolled out in Tanzania,  Mozambique, Lesotho, Egypt, India, and various Eastern European markets.   

Whilst this provider remains one of the dominant players in Africa, other mobile money service providers have joined the crowd, including Airtel Money and MTN Mobile Money.

Some statistics: over the past 11 years, mobile money providers in Africa have attracted some 200 million users in at least 36 jurisdictions. This makes the continent a true leader in terms of mobile transactions, with East African countries such as Kenya, Uganda, and Tanzania topping the list. Ghana and Nigeria have recorded tremendous growth, too.

43 million transactions daily

All in all, the number of mobile money users in Africa has grown from 57.8 million in 2012 to 101.3 million in 2016. A staggering 40% of the adult population in Kenya, Tanzania, Zimbabwe, Ghana, Uganda, Gabon, Paraguay, and Namibia are using mobile money actively.

mobile money report shows that an average of 30,000 mobile transactions GSMAThere is more. In terms of transactions, the 2016 were processed per minute last year, equalling 43 million per day. The data also suggested that African mobile money collectively earned over USD1 billion. A recent M-Pesa report has furthermore indicated that its transactions between 2016 and 2017 were worth USD530 million. MTN Group recorded about half of that amount during the same period. These figures are expected to double over the next decade, if not sooner.

Financial inclusion

The key benefit of the introduction of mobile money is that it has significantly improved Africa’s financial inclusivity, per capita incomes, and resilience.

A study sponsored by the SWIFT Institute and carried out by Tufts University in the US suggests that mobile money has boosted access to credit and increased cross-border remittances. Financial inclusion rates in Kenya are more than double those in other sub-Saharan countries, thanks to high M-Pesa penetration. Between 2006 to 2015, the share of Kenyan adults using formal financial services tripled from 26.7% to 75.3%. Adults totally excluded from formal financial services dropped by more than half, falling from 41.3% to 17.4 percent.

African households are also able to share risk in terms of money transfers, invest and save. This is good news for everyone involved. 

About the author: Michael Alimo from Ghana is Afrinection's West Africa Ambassador. He is an experienced writer and passionate about Africa and entrepreneurship.

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