Mobile telephony goes from strength to strength

The growth of the sector is phenomenal – in numbers, in jobs created and in the economic development it is driving.

Today, more than 350m Africans – 30% of the continent’s population – have mobile phones. Seven countries (Botswana, Gabon, Libya, Morocco, Seychelles, South Africa and Tunisia) have more mobile phones than people. Investors plan massive upgrades, new infrastructure and innovative services, as prices of handsets and access move steadily downwards (see Mobile Telephony No. 10 p.19314).

The continent is now the second-largest market in the world – having supplanted Latin America – and behind only Asia.

South African-based Pieter de Villiers, chief executive of Africa’s largest mobile messaging provider, Clickatell told International Business Times that Africa’s mobile operators and banks have been quick to realize that while 60 % of Africa’s population has no access to banking facilities, over 50 % of the adult population in Africa has access to a mobile phone, which makes the move to mobile-banking a natural transition.

Image credit: Africa-Confidential.com

Mobile Banking

Mobile financial services have brought mobile phone operators and banks together to take advantage of the exponential growth in mobile handset ownership in Africa. In almost all sub-Saharan African countries, a huge and vibrant informal cash economy exists. Africa already has 51 mobile money systems in place. According to the providers from whom subscription data are available, there are now more than 40 million African users.

The rapid expansion of mobile money systems is creating new opportunities for micro- and small enterprises (MSEs) – particularly in low-income countries – to access financial services according to an UNCTAD (United Nations Conference on Trade and Development) report: Information Economy Report 2011: ICTs as an Enabler for Private Sector Development.

Banking through mobile phones allows for real-time transfer and the receipt of small amounts of funds at low cost. They can reduce the costs of processing and administering small loans, thereby alleviating a significant disincentive for lenders to extend credit to MSEs.

To develop further certain challenges need to be met:

  • Develop ‘interoperability’ between operators for money services
  • Introduce tiered systems, with higher transaction and balance limits as well as higher security measures for small business users
  • Enable cross-border transfers – households that receive remittances are more likely to start entrepreneurial activities
  • Learn from early adopters. In Kenya, for example, Musoni became the world´s first MicroFinance Institution to rely entirely on mobile money for both disbursements and collections.

M-Pesa Model

Developed jointly by British software firm Sagentia and Kenya’s Safaricom with the help of a British grant, M-Pesa banking services are a success story. Pesa means ‘money’ in Kiswahili and M (for mobile)-Pesa offers a savings facility of up to Kenyan Shillings 50,000 ($490) and easy access to wire-transfer and remittance services. By 2010, more Kenyans had M-banking accounts than traditional ones. Safaricom announced in April a partnership with Western Union to allow customers to transfer money from abroad; remittances reached an estimated $40bn across the continent in 2010.

At least $1.05bn (more than Sh1.7trn) is transferred monthly through M-Pesa in East Africa, reports The Citizen, Arusha and worried IT experts say robust cyber laws and an effective regulatory framework are needed.

Kenya, Tanzania, Uganda and Rwanda currently have a combined active mobile subscriber base of 43.3m. Of these, Kenya has the largest share with 18.7m, followed by Tanzania (11m) and Uganda, (8.7m). Rwanda has the smallest with only 1.6m active subscribers.

South Africa’s Informa Telecoms and Media estimates that 360m users will manage their finances through mobile banking by 2014.

Find out more with the following back issues of the Africa Research Bulletin

Somalia. Al shabaab demands Zakat (Economic, Financial and Technical Series, Volume 48, Issue 9)

Kenya. 4 g is coming (Economic, Financial and Technical Series, Volume 48)

Mozambique. Movitel’s Entry (Economic, Financial and Technical Series, Volume 48)

South Africa. Launch of mLab (Economic, Financial and Technical Series, Volume 48)

Kenya. Mobile Banking and Security (Economic, Financial and Technical Series, Volume 48, Issue 7)

Africa. Cheap cell phone access (Economic, Financial and Technical Series, Volume 48, Issue 7)

Ghana .Mobile Money Insurance (Economic, Financial and Technical Series, Volume 48, Issue 3)

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