Protecting your Finances from the impact of COVID 19

By Emmanuel Allottey

Africa has the highest mobile penetration in the world. Financial institutions are falling behind in their quest to provide universal access to financial services. Mobile financial services (MFS) offer a range of financial transactions ranging from payments and current accounts, to savings, loans, investments, and insurance. Mobile money, enables customers to send, receive, and store money using their mobile phone, is a subset of MFS that is provided mainly by mobile network operators.

The unprecedented growth of Mobile Financial Services has created a new paradigm in the access to financial services in Africa. In 2019, 50 million mobile money accounts were created through mobile phones according to reports. Mobile phones give people the advantage of a bank account but without the restrictions of a branch-based system and with cheaper fees. Access to these services has helped bridge the wage gap between the rich and the poor and increase the quality of life.

The mobile money model is an ecosystem that operates through an agent. The mobile money agent supports cash-in/cash-out transactions as well as person-to-person fund transfers, mobile phone airtime purchases, and bill payments. The agent generates a majority of its from fees charged to the customer for each transaction. Mobile financial services provided a lifeline in Zimbabwe, during a period of monetary challenges and economic decline. Today, 85% of all transactions volumes in Zimbabwe are being performed through mobile money.

The success of MFS in markets such as Kenya have created impressive gains in financial inclusion. In 2006, 14% of Kenyan population had bank accounts, currently the proportion of Kenya’s population with access to formal financial services stands at over 83 percent, driven largely by mobile technology, according to a survey part-conducted by the central bank. Kenya is currently ranked third on the continent after South Africa and Seychelles in terms of access to financial services. South Africa’s access stands at 90 percent while Seychelles stands at 95 percent. The success of MFS is under threat from several challenges including fraud, system failure, weak data security and privacy, and safety of customer funds.

Financial inclusion is increasing in Africa, however there are still many who remain unbanked. Closer collaboration between Financial Institutions, Mobile Network operators and regulators is required to create an enable environment for a sustainable financial system. The continued growth of Mobile Financial Services will accelerate the achievement of Financial Inclusion in Africa.

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