Ghana as a Case Study
By Stanley Courage Dugah
There are almost 400 million Global System for Mobile Communication (GSM) subscribers in sub-Saharan Africa, many of whom are registered mobile money users. Take Ghana for instance. Since its introduction in 2009, Mobile Money has become a financial platform which offers financial inclusion for semi-urban and rural dwellers as well as employment opportunities for over 100,000 merchants.
There are more than 16 million mobile money users in Ghana alone with annual transactions of Ghc 35.4 billion recorded in 2015. The industry is growing with MTN Ghana, the largest mobile money operator, recording Ghc 56 billion in transactions for 2016.
Banking the Unbanked
I tried opening a savings account as a high school student in 2006 but couldn’t. As it turned out, to open an account as a student, you need a permission letter from your school headmaster. This was a huge deterrent to me, and probably other students who also wanted to open savings accounts.
In 2006, adults who wanted to open a savings account needed to go to the bank premises, fill in a form and present a utility bill before they were able to access banking services. This tedious process is frustrating for most people. Many rural dwellers who are illiterate or did not receive an extensive education may never be able to access banking facilities because they are simply unable to complete the necessary paperwork. Others may not be willing to travel long distances to open a bank account and simply visit a bank to deposit and withdraw cash as necessary. Banks and other financial service providers abound in cities, but are not readily accessible in small towns and villages. In my own experience, I once travelled 17 kilometers to open a bank account, and had to return home empty handed. This financial landscape left many unbanked and created an unnecessarily frustrating experience for those with access.
Mobile money has changed all this. Mobile Money is a financial platform in which a mobile phone is used to access financial services—to receive money, pay for goods and services, and save money. All you need to create a mobile money account is an ID card.
Today, there is no need to travel long distances to deposit or withdraw money from your account. Mobile money agents and points of sale abound and can be found within walking distance from rural villages to city centres.
With the increasing popularity of mobile money, students no longer need permission letters from their school headmasters to access financial services. Illiteracy and paperwork no longer present a barrier to rural dwellers hoping to open a bank account. Mobile money has levelled the playing field, allowing everyone access to financial services by operating a mobile money account, if not a bank account.
A few years ago, in order to access loan services, petty traders in Ghana and private sector workers, had to resort to credit unions that charged them high interest rates. Now, thanks to the mobile money platform, traders, individuals and other business owners have many options to choose from when looking to secure a loan. Individuals or companies with good credit can now access loan facilities with very low interest rates.
Realizing the dynamics and growing success of the mobile money platform, banks were quick to partner with telecommunication companies to implement systems linking mobile money accounts and bank accounts. Now, it is easy to create an account with your preferred bank, using only your mobile money account details. Mobile money users now have the option to link their bank accounts to their mobile money account and easily transfer money from one account to the other.
To promote saving, MTN has started paying 7% interest quarterly on mobile money account balances, encouraging users to retain money in their accounts. The telecommunication companies, in partnership with selected banks also provide options for users to operate interest earning accounts and access loan facilities. Mobile money users are also able to use their accounts to buy treasury bills, further allowing those who were once excluded from the financial system to participate, ensuring a more reliable financial future.
Ease of payments
Many businesses in Ghana and across sub-Saharan Africa now accept payments via mobile money, and it costs nothing to the individual making the transaction. Costs for using the mobile money services are limited to fees on withdrawals and money transfers. A 1% fee applies to every withdrawal and transfer, but does not apply to payments for goods and services. The ability to pay via mobile money ensures users do not need to withdraw money in order to pay for goods and services. This saves users from paying that 1% fee incurred from transferring money or withdrawing money from their account.
Businesses, petty traders, and individuals now accept payment for goods and services via mobile money. The very computer I am typing on was bought online, paid for via mobile money, and delivered to my home! Mobile money has made financial transactions easy, convenient, and smart for everyone from young entrepreneurs to rural dwellers.
Mobile money platforms present avenues for financial inclusion to those who were previously excluded from economic citizenship. It makes receiving money and payments convenient for everyone. Yet, it is these same conveniences that makes users of mobile money susceptible (especially the uneducated and uninformed) to mobile money fraud.
Examples abound of scams and fraudulent activities within the mobile money system. I once received a call from an unknown number informing me that my account number had been selected as one of ten lucky winners. In order to redeem my winnings of Ghc 10,000.00 I had to make a token payment of Ghc 1,000. I quickly ended the call and reported it to the fraud team of my mobile money operator. Other scams are able to trick unsuspecting users into revealing their mobile money pins, giving the scammers the ability to move the money into their accounts.
While those educated about these types of scams will not likely fall victim to them, many account holders are scammed every single day. This is cause for concern for those wary of using the mobile money service. It also means sufficient time needs to be dedicated towards educating youth on how to use mobile money services. This education should include teaching young users about scams and fraud in order to increase the security and reliability of the service.
The Mobile Money operators have recently started running public ads educating people about the activities of these fraudsters. The hope being that in time these activities will be limited by an increase in user awareness and knowledge of these scams, enabling users to handle mobile money without fear of losing their hard earned money.
What the Future Holds for Mobile Money
The number of mobile money account holders is increasing every day, and most businesses and individuals now accept payment via mobile money thus making a cashless society a possibility within a decade. The popularity of mobile money is now so great that any individual or business that does not operate mobile money accounts will be left behind and unable to continue business as usual. Rural dwellers and the semi-literate in particular are enthused about the possibility for a more inclusive financial future that mobile money is creating. For these reasons, mobile money has been embraced across the African continent and continues to gain momentum daily. Mobile money is here to stay, and is greatly contributing to a robust financial sector in Africa.
All Images Courtesy of Flickr
Stanley Courage Dugah is Ye! Contributor, active writer, and active member of his local community. Stanley shares his stories on wordpress and he has also been featured on News Ghana.