The 5 Main MFS Game Changers in Africa

Africa MFS

Impact of MFS extends far beyond financial services in Africa

The impact of mobile financial services in Africa extends far beyond financial; it also has a positive socio-economic ripple effect. Particularly in African countries, digital money enables individuals and institutions to transfer funds instantly and securely without the need for a middleman. It also drives international commerce, supports financial inclusion, and changes the way people shop, handle savings and conduct business.

Here are five permanent ways that mobile financial services are shaping and changing life in Africa.

Building a bright new financial future for Africa’s unbanked

Mobile money offers the underbanked and unbanked access to financial services that were previously out of their reach. This infographic shows the state of financial inclusion in Africa.

Africa MFS

The World Bank‘s view of the state of financial inclusion in Africa

Apart from money transfers, the mobile wallet can also be used to set up savings, loans, mortgages and credit lines, all of which enables users to plan their (financial) future better. A recent example is EcoCash of Econet Wireless in Zimbabwe. This mobile money service allows customers to use the platform to move money into interest-earning savings accounts.

Parrying Dishonest Commerce

In countries rife with corruption, entrepreneurs routinely overcharge for goods and services for their own personal benefit. Since mobile money is cashless, being shortchanged is becoming a thing of the past. Furthermore, a mobile wallet allows tracing all financial transactions thus preventing corruption since all payment amounts and details are evidenced.  By enabling users to transfer money to each other and make payments directly to businesses and service providers, mobile money platforms cut down on corruption by reducing the need to operate in a cash-only economy. This makes those platforms an important tool to cut down on corruption by reducing the reliance on cash-only transactions.

Moving money safely

In Africa, relatives often move from their rural village to a city to find work, sending money from the city where they work to their family members back home. Sending cash and keeping cash at home is risky.  Cashless technology such as MFS lowers those risks substantially. Mobile money transfers are popular since they are easy, quick and safe. It is estimated that mobile money transfers in East Africa reached over $45 billion transactions (compared to just under $5 billion a few years before), which equals around a third of the GDP. The main reason for this increase is, that less than 20% of African adults have traditional bank accounts, but 90% of adults in the region have a mobile money account.

Closing the Gender Gap

Mobile money is also a powerful driver to close the gender gap for financial inclusion. African women are taking greater control of their finances by using MFS. Sri Mulyani Indrawati, the World Bank’s Managing Director and Chief Operating Officer pointed out that women equipped with mobile devices have access to formal savings and credit and can participate more in the economy by setting aside funds for emergencies, for schooling, or for starting a business.

An interesting case study is the village of Sori located on the shores of Lake Victoria in Kenya. This fishing village has a traditional division of labor based on gender: men catch the fish, and the women process the meat, take it to market, and handle finances. The women had to travel by bus to the market in order to sell their fish, which was time and money consuming. After M-PESA was introduced, the women started sending their fish to the market by bus and receiving payment remotely. According to a SIT study, it “emancipated” the women. Before, it took one woman one week to sell two bags of fish in Nairobi. Nowadays, it take one morning to make the sale and send the fish by bus to her customers in Nairobi. The women are investing their savings in their future, such as sending their children to better schools and building themselves more durable homes to withstand the seasonal floods.

Boosting Small Businesses

MFS in Africa

Micro firms are prevalent in Africa (Source: MENON Business Economics)

Mobile money transactions are transforming the economies of African countries, helping entrepreneurs to take their businesses to the next level. Mobile money allows MSMEs (micro, small and medium-sized enterprises), including microbusinesses without banking accounts, to take advantage of the benefits of digital payments.

Entrepreneurs mainly use mobile money to pay and be paid small and large amounts of money, also over long distances, saving cost and time. MFS enables them to manage their working capital and better manage cash to inventory to receivables and back to cash. In Africa, the most popular MFS are those offered by M-PESA in Kenya and Tanzania and MTN Mobile Money in Uganda. Users report that mobile money is a key part of their business, enabling considerable efficiency improvements in their logistics and customer service. New MFS providers keep on entering the market, offering more mature mobile money and payments solutions, such as Kopo which offers mobile money systems as a platform for merchant services such as mobile payment acceptance and merchant cash advances.

The future of MFS in Africa is a bright one, with an expected one billion mobile subscriptions in the fourth quarter of 2016, reaching 1.02 billion by year-end. According to Juniper Research, over 2 billion mobile users will have used their devices for banking purposes by the end of 2021, compared to 1.2 billion this year globally, representing more than one in three of the adult population.

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