Storing money under a mattress may seem out-dated and fallible to some, however many rural households in Northern Ghana still use this method as a viable substitute for formal financial institutions.
A recent study conducted by the SWIFT institute observed how the use of mobile money could potentially catalyze the increase of financial inclusion of emerging markets, such as those found in areas of sub-Saharan Africa. The researchers in this particular study focused on key stakeholders (mobile phone operators, government officials, consumers and international organizations) in Northern Ghana.
M-money was introduced as new technology in 2005, and since then has grown increasingly popular. It is currently available in eighty-plus countries across the globe. M-money has several advantages such as reducing monetary and transfer costs, flexible accessibility, and interest opportunity. In addition to these values, m-money can better position households to respond to shock such as theft, remittances and tragedies such as droughts. M-money can even be created as a pseudo-savings account, allowing clients to deposit and store small amounts of money. The implications of this research also hoped to convey the possibility m-money has of promoting a savings culture amongst these rural households who have been previously underserved.
So let’s take a closer look at the details of this study and see what insight it has to offer for those interested in mobile payments and the future of emerging markets.
What’s Going On in Ghana?
Let’s get to know life in Ghana a little better. Ghana is classified as a middle-income country and has many formal financial institutions. Despite being a considerably stable economy, the access to credit and saving institutions in rural areas still remain limited. Ghana is also notorious for informal saving organizations such as susu collectors and village saving clubs. These types of services do not typically include interest, but can be costly and often have very strict regulations on when clients can access their money. Some savings clubs only allow clients to access their money once a year. With these poor terms, it seems impossible for these rural communities to effectively react to emergency situations when money must be quickly collected.
There are those who do use some kind of financial organization, and then there are those still using the old hiding money under the mattress trick. This technique only begs for increased theft. An important variable SWIFT revealed in the survey is the high percentage of family members who become migrants. The research reported that over 54 percent of rural households will have at least one migrant member. They will move to urban settings in order to make diversified income and then send the money back home. Sending money back home can be very costly and what’s worse, many of the people who participated in this survey admitted to having this money jeopardized, stolen or lost in transit.
As far as mobile usage in Ghana, SWIFT showed a rapid growth of mobile subscribers, reporting 150,000 mobile users in 2000, which increased to approximately 11 million in 2009. There are currently five mobile phone operators offering some type of m-money service in Ghana, which include Vodafone, Tigo, Glo, Zain and MTN. M-money has been introduced and consistently promoted throughout Ghana as a secure, fast and easy way to save and transfer money. Despite these offers and promising statistics, m-money adoption in Ghana remains low.
What’s stopping Ghana from M-Money adoption and usage?
Considering all of the advantages of mobile money, it seems safe to assume signing up would be an easy decision. But leaving assumptions behind, let’s try to understand better what exactly the barriers are in Ghana. There are many variables that come into play here. In regards to technological barriers, many households in Ghana need to be able to understand how to use m-money and their mobile phones. There remains a community of illiterate individuals in Ghana, as well as those who are not able to read and speak English. This communication barrier poses for a huge problem considering the instructions of use are all in English.
Other factors are demand issues. The households need to establish a trust with the mobile agents, and they must also have an occupation that calls for constant transfers and savings. Other barriers include monetary costs of the product, security of service and of course, access to a mobile phone network. Many households would have to travel outside of their village to access a mobile agent, which can highly decrease motivation. Another issue was the waiting times. The time between registration and use could take up to as long as a month. The registration process even took up to three hours because there was only one mobile agent sent per village.
What can mobile advocates do to promote mobile money in Ghana and other rural households in emerging markets?
As part of the data collection process, the SWIFT researchers conducted simple interventions to break barriers and encourage m-money usage in Ghana. They offered free SIM cards to new users, gave away free mobile phones through raffles and hosted sensitization modules, which discussed in focus groups how to use the product. All of these promotional efforts proved to be successful with encouraging more interest and usage. SWIFT reported that after the first month of registration, only 10 percent of the people used the m-money services, but one month later this number increased to 26 percent. The researchers insisted that the process of promotion and spending time with clients to establish trust and understanding is crucial for future growth.
This study primarily focused on Ghana, however it is implied that future stakeholders can take these results and apply them to other emerging markets. With the technology and innovation booming in the payments industry, it is important that we spread these advantages to all countries, especially those in the rural and underserved.