THE PLACE OF MOBILE MONEY IN AFRICA
Mobile money is when payments are made through mobile phones using SMS text messaging. People can receive, send and store money using their mobile phones. People convert cash into e-money (or e-money into cash) at stores or agents. Mobile phones can be used to send money to other people, pay bills or pay for goods. In some countries mobile money can be used for savings, loans and insurance. Some governments allow school fees, taxes and licences to be paid for using this method. It has become popular because it easy to use, instant and secure. These transactions require a phone signal in order to work.
MOBILE MONEY IN AFRICA
Mobile money is very popular in Africa and its use has been growing quickly. In 2016 there were about 1.5 million agents in Africa. In Sub-Saharan Africa there are more mobile money registered accounts than the total number of bank accounts. In Gabon, Ghana, Kenya, Namibia, Tanzania, Uganda and Zimbabwe more than 40% of the adult population use such accounts on an active basis.
In Africa mobile money is mostly used to pay ‘person-to-person’ and to buy airtime (mobile credit). Using this method to pay bills is becoming more popular. In Cote d’Ivoire 99.3% of secondary schools students paid their annual school fee in 2015-16 this way. Mobile money can also be used to send remittances; this is money that is sent by a person from one place to another, usually a foreign worker sending money back home to their family.
BENEFITS OF USING MOBILE MONEY
Mobile money is useful for people who do not use a bank account. It can be used to keep money safe. Businesses can convert their cash like this overnight to keep it safe. People can change cash to mobile money before going on a journey to protect their money against robbery. It can be used to send money to somewhere far away without the need to trust someone to deliver it.
When financial institutions offer services using mobile money there can also be many benefits. People can get small loans using, this is a type of ‘microfinance’. They can use these loans to help their businesses. For example, by buying new equipment such as a sewing machine people can increase their profits. These loans can also be used to help households make purchases that can improve their lives, such as buying an off-grid home solar system.
Mobile money can be used to help reduce corruption and tax evasion because it is easier to trace than cash transactions.
In Sub-Saharan Africa there is a smaller gender gap of mobile money users than in some other emerging regions meaning more people can experience the benefits of mobile money. Currently rural areas use mobile money less than urban areas. There is potential to bring benefits to these rural areas by increasing the use of mobile money.
Mobile money also has challenges. It relies on good mobile signal and there have been some issues with the infrastructure needed for mobile money. Mobile money also requires training for agents and education for customers. There has sometimes been problems with agent ‘liquidity’ which describes the ability of agents to convert cash to e-money and e-money to cash at any given time. Regulation by different governments also impacts the use of mobile money.