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Matsvimbo Dida : Financial  Inclusion Matters

The recent growth of mobile money world-wide enabled millions of people who were otherwise excluded from formal financial systems, to now perform financial transactions relatively cheaply, securely, reliably and more efficiently. Researches have shown that improvement in number of adults with accounts from 2011 to 2015 was aided by mobile money. Significant account penetration was registered in Sub-Saharan Africa. Account penetration refers to the rate at which bank accounts are opened.Mobile money has increasingly been used in Sub-Saharan Africa to provide financial services beyond the limits of bank branches. Mobile phones have gained popularity due to their convenience, their capability to reach the unbanked adults such as the poor, women, youth and those living in the rural areas. In addition, they are generally more affordable than financial institutions. There is, however, no established direct relationship between ownership of mobile phone and improvement in bank accounts at financial institutions. For instance, about 20 percent of adults who had mobile money accounts in four countries namely, Cote d’lvoire, Kenya, Tanzania and Uganda were noted in a research conducted that they did not have bank accounts. This speaks volumes of the relationship between mobile money accounts ownership and ownership of bank accounts.

People will always go for products which give them higher “utility”. They will operate mobile money accounts with Mobile Network Operators (MNOs) only without opening bank accounts if they get higher utility of financial products at MNOs. In financial inclusion terms this is referred to as ‘quality.’ Quality of a financial service product is the degree to which the product satisfies the needs of the customer. So mobile money will only result in increase of bank accounts if the banks themselves have something to offer to the unbanked population. Experts argue that financial inclusion requires that banking services should be relevant to the needs of the unbanked people if financial exclusion is to be reduced. They also argue that irrelevant products or services do not lead to utilisation and the unbanked turn to informal financial services. Financial products which are effective in improving financial inclusion are measured by their degree of access, usage, quality and improvement of consumer welfare.

Why mobile money is

becoming the way of life

Researches have shown that 50 percent of consumers look at their mobile phones more than 25 times a day while 25 percent look at their mobile phones more than 50 times a day. Ten percent look at their phones over 100 times a day while 3 percent do over 200 times a day.

When waking up, 90 percent of consumers report that they look at their mobile phones within an hour after waking up. These frequencies indicate that products moulded around the mobile phones are guaranteed of access and will improve financial inclusion if they are of good quality which will ensure usage; all of which should guarantee improvement of welfare of the consumers.

Growth of mobile money

Mobile money has grown from simple cash-in and cash-out transactional services to complex financial services enabling the un-served and the underserved to access banking services. There are different types of mobile financial services as shown below.

Different types of mobile financial services

Mobile finance is a composite term which includes credit, savings and insurances while mobile banking includes the transactions and information channelled through the mobile devices from the financial services provider. The mobile payments are remittances and involve movement of funds from sender to recipient. Banks mostly focus on markets with large scale transactions as a component of their competitive and cost effective business strategy. This view gives way for MFIs and other non-banking financial institutions, but above all, it gives way to informal financial services. The emergency of technological interventions through mobile money assists financial institutions in accessing the remote and the unbanked in a more cost-effective way than do bank branches.

There is growing use of mobile money for savings, credit, insurance and even tax. For instance, Tanzania accepts tax payments sent through mobile money. In Afghanistan, payment of salaries and wages for police and other officials were done through a local version of M-PESA. on-banks like MNOs are well positioned to dramatically increase the reach and range of financial services for the poor and the unbanked.

Why should banks take the lead on mobile money

Despite the challenges faced by banks in economically offering financial services to remote parts of the country and also scarcely populated areas which cannot support the services of a bank, they should kick-up their game, raise tall and be counted on financial inclusion.

They need to embrace ICT for the benefit of both the economy and their survival. This is because when a country considers finance for economic development, MNOs are by far inexperienced and incapacitated in terms of skills. Much they can do is facilitate payments and amass savings from consumers. In terms of efficient utilization of domestic capital, a country gets more productivity from consumer savings at banks than those kept by MNOs.

This is because banks manage lendable resources (including consumer savings) more productively than MNOs. This is partly the reason why some countries, through some legal mandates, compel MNOs to operate mobile money services through the support base of their banks.

Please note that this article was written in private capacity of the writer and the views have nothing to do with any institution which the writer may be associated with. The writer is contactable on — [email protected]