African Banks Misjudge Consumers At Bottom Of The Financial Pyramid

Commercial banks in Africa saw little opportunity in reaching out to impoverished residents living across the continent. Destitute locations, high risk and unstable incomes were reason enough to convince financial institutions there was no potential profitability. 

They were wrong.

At present, there are 81.8 million consumers around the world who have signed up for mobile money services. Nearly 60 million of those consumers reside in the rural areas of Sub-Saharan Africa. Thirty-four out of the 47 countries in this area offer some form of mobile money services, and this number will only continue to grow as new entrants make their way into the market.

According to a 2012 GSMA survey reported in Ghana Web, there are twice as many mobile money users in the Sub-Saharan than there are Facebook users. If a service doubles the amount of Facebook accounts, then it probably has a lot of potential.

In addition to outnumbering Facebook accounts, mobile money accounts also exceed the number of consumers who have a bank account living in Kenya, Madasgascar, Tanzania and Uganda.

There are over 520,000 mobile money agent locations, which also means there are just as many mobile agents as there are Western Union outlets in the region.

Mobile money facilities are more accessible to Africans living in rural areas where bank branches are far and few between. Older citizens living in isolated villages can easily send and receive cash to family living in another village. Mobile money agents are pervasive and commonly within walking distance.

GSM Mobile Economy 2013 report found that there are 2.5 billion adults around the world who still do not have a formal bank account nor are they realistically able to find basic financial services. Traditionally, banks were the only way for people to formally save money, apply for credits, or make other transactions such as money transfers.

The advent of mobile money services has empowered previously neglected consumers and transformed their lives. It has unlocked the excluded customer base, the poorest among whom are found at the bottom of the pyramid. Mobile money has mitigated financial exclusion by finally catering to the previously unbanked Africans.

In addition to increasing the access to financial services, mobile money is also helping to build the quality of life in the rural areas of Africa. Such services have presented a new channel for students to pay for school fees. Parents who worried about making payments for children in boarding school no longer have trouble. The need to travel has been eliminated, and they are now able to easily transfer money via mobile phones.

Traders and farmers are reaping the benefits of mobile services. Traders must frequently travel long distances to buy farm produce for their shops at home in the city. Often times, traders will run out of money while away, and the ability to receive cash through phone transfers has saved time and money.

In Ghana, mobile network operators are even providing consumers with life insurance for mobile money users. In Kenya, Ghana web reported that one provider lets customers save and borrow using their phone, and even lets them earn interest on balances. If approved, some can even apply for emergency loans.

Banks were slow to recognize the business potential for consumers in emerging markets. This could explain why telecoms and MNOs are racing for partnerships, and the rapid emergence of mobile money services in Africa and around the world.

To read the full story at Ghana Web click here

To read the full GSMA report click here.


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