Mobile Money Adoption Is Central To Africa’s Post-Covid Convalescence

The deployment and uptake of mobile tech-driven financial services are key to supporting national and social development priorities in Africa. These digital innovations can positively impact the GDP of emerging or developing markets as they help in cost reduction, credit access, and connecting previously excluded consumers. 

These findings come from the Digital Finance Platforms to Empower All study released last week by Vodafone Group, Vodacom Group, Safaricom, and the United Nations Development Program (UNDP). The report emphasizes that mobile technology can help African countries accelerate the progress, as well as the impact, of financial inclusion. 

The analysis was carried out as part of the three telecommunications operators’ Africa Connected project, one aimed at driving sustainable development through collaborating and closing the gaps that are hampering progress in key local economic sectors. 

The analysis was conducted as part of the three telcos’ Africa Connected campaign, an initiative to drive sustainable development through collaboration and help close the divides that prevent progress in Africa’s key economic sectors. 

An econometric modeling research that surveyed 49 markets in Africa, Asia, and Latin America, it discovered that countries that have been able to witness success in mobile money services have a yearly GDP per capita growth rate of up to 1 percentage point higher compared to countries where such platforms are either not introduced or unsuccessful. 

Considering previously available World Bank data on the link between economic growth and poverty reduction, this GDP per capita growth means markets that have witnessed successful mobile money adopting cycles can reduce overall impoverishment by about 2.6 percent. 

The impact is potentially staggering; the report referenced the International Finance Corporation’s (IFC) estimate that digital finance has the potential to boost the annual GDP of emerging economies by USD 3.7 T by 2025. 

“As the post-pandemic economic recovery continues, with the cost of living and climate crises intensifying, governments are encouraged to leverage mobile financial services to strengthen financial inclusion, which increases economic resilience and furthers sustainable development,” the report reads.

Additionally, “when managed correctly, mobile financial services can not only drive financial inclusion, poverty reduction and economic growth, but can also accelerate progress around the SDGs more broadly.”

Digital Finance Platforms to Empower All surveyed M-PESA users in Kenya (the African mobile money capital) and Tanzania. The results, which were extrapolated to Ghana and Mozambique, revealed that 17.6 million users [in these 4 considered countries] had no access to formal financial services before mobile money was introduced in 2007. 

What’s more? 98 percent of the businesses surveyed informed that the mobile money service helps them with doing business, with faster, more secure payments and online enablement as the main advantages. 95 percent of them indicated that they use M-PESA for at least half of their daily business transactions. 

Commenting on the report’s discoveries, Sitoyo Lopokoiyit, CEO of M-Pesa Africa and Chief Financial Services Officer at Safaricom, said:

“Mobile financial services platforms like M-Pesa are vital drivers of financial inclusion in society which can improve individual life chances and enable enterprises to launch and expand, bringing wealth and jobs into developing economies. 

There remain though barriers both to accessing platforms—including digital literacy and smartphone accessibility—and to developing the—with an un-level regulatory playing field for non-traditional financial services providers in many countries.”

Sub-Saharan Africa currently accounts for almost 70 percent of the global USD 1 T transacted via mobile money, thanks to activities by actors such as Safaricom, Wave, and MTN. The region saw a 40 percent growth to USD 697.7 B in processed payments, putting it comfortably ahead of East and South Asia’s USD 156.3 B.