Once a wealthy person’s toy with utilities, the mobile phone has become the most ubiquitous gadget in history. It has evolved to become a tool of economic empowerment among developing countries in the world. Mobile phones have allowed information to become readily available, which in turn has made markets more efficient thus helping nurture entrepreneurship in the emerging generation.
The evolution of mobile phones led to the growth of the mobile money industry, which has enjoyed a decade of great achievements. Ever since the launch of M-Pesa 10 years ago, the mobile money sector has enabled people to transact and store money in the digital form. This has encouraged financial inclusion around the world whereby the majority of the people is unbanked. This has had the effect of increasing economic productivity.
In the world there are more than 4 billion mobile phones, the majority of these being in developing countries. The mobile money industry has helped lessen economic inequality by enabling people to pull themselves out of poverty, with a larger number being women and the youth. It has, for instance, enabled small farmers to change from farming for consumption to business.
Apart from this, it has also assisted the economic growth by increasing the GDP, promoting transparency and formalising payments. According to McKinsey’s Global Institute Digital Finance for All: Powering Inclusive Growth in Emerging Economies Report, 2016, widespread adoption and use of digital finance, including mobile money, could increase the GDP of all emerging economies by 6 per cent, translating to $3.7 trillion, by the year 2025.
Popular option
Africa will be lucky because it will get a big portion of this advantage as about half of the registered mobile money accounts come from the continent. A new report by the global organisation for mobile companies, GSMA, says that sub-Saharan Africa has 277million registered mobile money accounts with 100 million being active as at the end of 2016. Globally, the number of registered mobile money accounts stands at 556 million. Back in 2015, the number of mobile money accounts in sub-Saharan Africa even surpassed the number of people with bank accounts, showing how much popular it is in the country.
The rising trend in mobile money can be attributed to the fact that the high number of unbanked people all jumped on the wagon of mobile money. As a result, this has seen the number of the unbanked reduce by 20% – from 2.5 billion to 2 billion. Africa has been one of the biggest contributors to this reduction, with sub-Saharan Africa having 12% of the adults having mobile money accounts as compared to 2% worldwide. For example, in Kenya the share of adults using M-Pesa grew from 40% in 2010 to nearly 70% in 2015. This has seen the financial inclusion of the country grow tremendously over the years.
Mobile money has also been felt well beyond transactions and accounts, as it has been able to integrate with other sectors in order to open a gateway to other financial services for the people. For example, mobile money has brought services like insurance as well as savings and credit. In Kenya, the likes of M-Shwari and M-Akiba are helping Kenyans to save and borrow from their mobile phones.
With government and private sector moving their services online to reach more people, mobile money has also assisted to reduce the need to go to physical locations to pay for services. It also leaves a digital paper trail, which shows proof of monetary transactions.
In addition, mobile money has caused remittances to grow in sub-Saharan Africa, with World Bank predicting the flow to increase to $34 billion in 2017 from $33 billion in 2016. The proportion of the population with mobile phones in sub-Saharan Africa supports this, which is expected to rise from 28% in 2016 to 55% in 2020.
Kenya is a leader in this area, with Kenyans moving Sh316.77 billion via mobile cash out of the $22 billion (Sh2.2 trillion) sent across the globe as of December 2016. It has Kenya accounting for 14.4% of the global mobile money transactions.
The mobile money industry is still in an upward trend and this is expected to keep up over the coming years. According to a report by markets and markets research, the mobile money market size is estimated to grow from $21.15 billion in 2016 to $112.29 billion in 2021. Mobile money is just tapping into its vast potential as more is expected from the sector.
It would be prudent for banks to refrain from competing with mobile money, and instead partner in order to reach more customers. It presents a bright opportunity to start the second wave of mobile developments that will help developing countries expand their economic bases.
