Study: Mobile levels the banking playing field

Comments (0) Africa, Technology


Mobile phone ecosystems and favorable regulatory environments areeasing access to banking and other financial services in Kenya and other African countries, even among populations that are typically marginalised from banking services. A study of 26 countries led globally by the Brookings Institution gave Kenya the highest rating – a score of 84 percent – for “financial inclusion” of woman, migrants and youth, who often are left out of the financial services system. Four other African nations received relatively high scores: South Africa (78 percent), Uganda (78 percent), and Rwanda (76 percent). Among the other countries ranked were Nigeria (72 percent), Tanzania (68 percent), Zambia (67 percent), and Malawi (61 percent). Ethiopia and Egypt hit the lowest rankings, respectively 53 percent and 49 percent. The rankings were based on four factors: national commitment, the regulatory environment, mobile capacity and adoption of traditional and digital financial services.

Survey finds increased inclusion

A survey conducted by FinAccess echoed that of Brookings showing that the number of Kenyans having access to the banking system had grown by 50 percent since 2006. The study states that in 2016, 75 percent of Kenyans had an access to financing, an increase from 67 percent three years earlier. On the other hand the Brookings Institution study revealed that Kenya’s financial inclusion landscape has benefited from the “country’s vibrant mobile money ecosystem, which features exceptionally high adoption rates – the highest of any country (in the study) by about 23 percentage points.” According to Brookings, Kenya is considered as the most mature mobile money market in the world, driven by the widespread use of the M-PESA service offered by Safaricom. As of 2015, Kenya was one of only 19 markets globally with more mobile money accounts than bank accounts. This success is explaied by government’s commitment to reinforce access to financing opportunities. Kenya’s government is a founding member of the Better Than Cash Alliance, which provides resources to ease transitions to electronic banking. Kenya’s Vision 2030 National Development Strategy highlighted the importance of inclusive finance and set a target for decreasing the proportion of the population without access to financial services.

Governments regulations to allow access to financial services

The country has also implemented regulation designed to lower the risk of fraud, promote competition in the financial sector and increase access to financial services, Brooking said. In a key regulatory change, Kenya enacted in 2009 guidelines to enable banks to name third-party agents such as post offices, markets, pharmacies, gas stations and other businesses in order to make transactions more convenient. In 2014, the government of Kenya launched a Government Digital Payments program to facilitate people-to-government payments through digital channels. By accessing a web portal, individuals can make digital payments for services such as driver’s license and passport applications. The report also pointed out that Kenyan banks have made high-level commitments to financial inclusion.

South Africa put forward

Mobile is also driving inclusion in South Africa that ranked fourth on the Brookings Institution list after Columbia and Brazil. About 70 percent of the population aged 15 or older in South Africa has an account with a mobile money provider or with a financial institution, the report said. However, regulatory challenges have slowed adoption of mobile money accounts. While South Africa does not have a formal policy to promote inclusion, the government has defined it is a priority. The report noted that South Africa has a much more robust traditional banking structure than other countries in the study. South Africa has indeed more than 10 commercial bank branches and about 66 ATMS for every 100,000 adults. Still, a Finscope South Africa survey found that about one sixth of adults in South Africa do not have a bank account or other financial services.

Uganda with large number of mobile accounts

Uganda has committed itself to increasing the number of financially included citizens from 54 percent in 2013 to at least 70 percent in 2017 according to the Brookings report. Recent regulatory changes to promote offerings of financial services through agents should drive increases in access to digital financial services in Uganda, which has already seen a proliferation of mobile money services and has the second highest level of mobile money account ownership in the study. A 2015 InterMedia survey found that about 40 percent of Ugandan adults age 15 and older were financially included, with 35 percent of adults holding mobile money accounts. Rwanda has also benefited from mobile adoption along with the expansion of community savings and credit cooperatives and agent banking locations. A 2016 FinScope survey found that financial exclusion among Rwandans aged 16 and older declined by 17 percentage points in the past four years. Chile, Mexico and Nigeria rounded out the top 10, the report said.

Egypt, Ethiopia ranked lowest

Ethiopia and Egypt both ranked at the bottom of the Brookings Institution list with much lower mobile capacity and adoption of traditional or digital banking services. In Egypt, the report said, adoption of banking services is relatively low with only about 14 percent of those aged  15 or older holding a formal bank account, a level it said was comparable to other countries in the Middle East. While mobile penetration is high, use of mobile money services has not kept pace. The report said Egypt’s political turmoil was likely to slow movement towards better access to banking services. Ethiopia also had low adoption of financial services with only about 22 percent of adults having a bank or mobile money account. While the country has sought to promote financial inclusion, its mobile capacity is also low.

Comments are closed.