Mobile technology is changing the way communication and business are done on the continent and the mobile industry has become a player in recent time social and economic development in the region. Mobile technology is now been used to bridge these infrastructural gaps in the region, especially in rural areas.
The combination of mobile technology and innovative business models has had a transformational impact on reaching unbanked and rural households and helped widen financial inclusion in the continent. Mobile Networks Operators (MNOS) and financial institutions have introduced several innovative products to extend mobile banking into remote rural locations.
The massive success of M-Pesa in Kenya and East Africa has continuously attracted the focus of many followers of mobile banking in Africa, as such, there are more coverages on mobile banking in that region. This article will be discussing mobile banking in West Africa with a focus on Francophone countries.
Mobile Money and Transactions in West Africa
Sub-Saharan Africa has the fastest growing mobile penetration in the world with internet penetration rate of 26 % and mobile broadband connection of 33 %. The continent is experiencing an increase in digital inclusion as there were 713 million mobile SIM connections in 2016, which is predicted to increase to 942 million in 2020.
West Africa, a region made up of 15 countries is experiencing fast-growing mobile technology penetration. With 163 million unique subscribers, comprising around 40% of Sub-Sahara Africa subscribers, the region has a mobile penetration rate exceeding the SSA average.
Technological innovation in the region is slow, with 2G accounting for 90% of mobile connections. For data-only operations, 4G networks are being introduced in Ivory Coast, Ghana and Nigeria, but those services are primarily limited to a few major cities as Smartphone usage accounts for only 20% of total connections.
Though more people live in the rural area (54 %) in West Africa and their dispersion among vast geographical areas makes the provision of financial services outside of the urban areas both difficult and not cost-effective, the mobile banking sector in the region is fast growing. There are now more than 3 times as many mobile money subscribers (92m) as Facebook subscribers and presently 471,000 mobile money agents in West Africa. In a period of 5 years (2011 – 2016).
With a population of approximately 375.9 million people in 2017, GSMA, in their State of Mobile Money in West Africa Report 2016 indicated that West Africa global share of active costumers accounts increased from 1.4 to 38.6 million (6 – 16 %), transaction volumes increased from 32 to 119 million (2 – 9 %) while transaction values increased from $93 million to $3.1 billion (2 – 14 %).
The region makes up one-third of all active accounts in sub-Saharan Africa today, compared to less than 10% five years ago. Also, the number of live mobile money services has more than doubled in the last five years from 25 services in 11 countries to 57 services in more than 15 countries. Governments in the countries are promoting the use of mobile technology to provide banking services of the unbanked populace as 13 countries out of the 15 countries already have enabling regulation allowing both banks and non-banks to offer mobile money.
Though, mobile money in the region is still dominated by basic use case as three-quarter of transactions are airtime top-ups and domestic Phone-to-phone transfer respectively: Airtime top-ups were 68.2 % by volume of transaction and 77% by value while the domestic Phone-to-phone transfer was 25.2 % by volume and 6.6 % by value.
International Remittance (IR) Dominance
East Africa has the far more mobile money account than West Africa. Mobile banking is widely used in East Africa while it is still in the growth stage in West Africa. As of June 2012, there were 81.8 million mobile money customers, of which almost 57 million were in sub‑Saharan Africa, of which East Africa had 48.5 million registered users and 9.7 million active accounts (compared to West Africa’s 7.8 million registered users and 720,000 active accounts).
In East Africa countries of Uganda, Kenya and Tanzania, there are more mobile money accounts than bank accounts, and more than 40% of their adult population have mobile money accounts compared to only Ghana in West Africa (The African Report. No. 94., 2017). This does not reflect in IR transaction when compared with West Africa which comfortably dominates in the sector.
GSMA in their 2016 State of Mobile Money in West Africa reported that West Africa has 23 live IR corridor connecting 10 countries and 4 out of 10 global services with the highest IR transaction value are in West Africa. Despite these impressive stats, IR transaction in the region both in volume and value lags far behind airtime top-ups and domestic Phone-to-phone transfer transactions.
The volume of international remittances (IR) transitions was 1.2 % only above bulk disbursement (0.6 %), but the value of the transactions was the third highest in value (6.3 %) after airtime top-ups and domestic Phone-to-phone transfer. Notwithstanding, the region accounts for 62.8% by volume and 47.6% by value of global mobile money based IR far above East Africa (19.9% by volume and 22.3 % by value), though the region has far lower levels of financial inclusion and mobile money usage than East Africa, as reported by International Growth Centre in 2014.
The IR success in the region is driven by low prices and strong cross-border collaborations among MNOs in the region. The average mobile money IR cost in West Africa is far cheaper than that of traditional money transfer operators by an average of approximately 60 %.
Mobile Banking in the West African Economic and Monetary Union (WAEMU)
According to the Global Economic Governance Programme, 2016 Conference report, collectively the banking penetration rate in WAEMU (comprising 8 member states: Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo) was 14.15% in 2014. Extended to accounts opened in postal banking services, microfinance institutions and electronic money issuers, the total figure reaches 55.05%. The mobile phone penetration rate in WAEMU countries grew from 52% in 2010 to 75% at the end of December 2013.
At the end of September 2015, 22 million people, or nearly a quarter of the population of the Union, subscribed to financial services via mobile phone and approximately 30% of those subscribers are active. In the first nine months of 2015, there were 500 million transactions completed transactions with a cumulative value of 5 trillion CFA francs (approximately USD 8.5 billion) as at the end of September 2015 which is an increase of 142% in one year. There was a 107% increase in the value of transactions between September 2013 and September 2014 as the value of transactions grew from 1 to 2.068 trillion CFA francs.
Mobile Banking in Ivory Coast
Mobile banking in Ivory Coast started with of the launch mobile money services by Orange in December 2008. This was followed by MTN (October 2009) and Moov (January 2013). The country has the 5th highest mobile money penetration rate in the world and the highest in West Africa. Though only 34 % of the adult population in the country are financially included, 24 % own a mobile money account compared to 15 % owning accounts in Banks. The country has 8 million mobile money accounts 2017.
According to the GSMA’s 2014 State of the Industry Mobile Financial Services for the Unbanked report, the government of the country is working with the private sector to encourage mobile banking in the sector. The government has successfully partnered with MNOs to digitize school fees payment for secondary schools in the country, Transaction record shows that 99% of 1.5 million students paid their annual school fees via mobile money from 2014 to 2015, and 99.3 % of 1.7 million paid from 2015 to 2016.
Interoperability and International Remittance
Network collaboration and interoperability is boosting International Remittance in West Africa. Customers are allowed to transact across different mobile networks as well as across country borders. According to the same GSMA 2014 report, In April 2014 MTN Ivory Coast and Airtel Burkina Faso entered into an agreement for interoperation in mobile money services. Thereafter Orange Ivory Coast and Airtel Burkina Faso contracted in March 2015 to engage in a similar collaboration.
This enables rural farmers in the main cocoa and other export crop growing areas who are mostly economic migrants from Burkina Faso and Mali to transfer money from MTN mobile accounts in Ivory Coast to Airtel Money subscribers in Burkina Faso. This has had particularly strong traction in rural Burkina Faso, where 60 % of recipients live. (GSMA, 2016). Orange also operates an international money transfer service linking Ivory Coast, Mali and Senegal. This services resulted in Orange money remittances to the value of nearly one-fifth of World Bank reported remittances between the countries (GSMA 2015’ State of the Industry Report – Mobile Money).
Mobile banking transaction value growth in the region will be driven by increase in IR transaction which is most likely as the numbers of mobile money users increase in the region. This is because the very low remittance cost and strong cross-border collaborations among MNOs in the region which is spreading across the region will certainly attract more IR transactions.
West Africa’s dominance of global mobile money based IR transactions far above East Africa, a region with far higher levels of financial inclusion and mobile money usage suggest one-size-fits-all is not the best approach in mobile banking as countries and regions respond differently.
Ivory Coast, Burkina Faso, Mali and Senegal are all members of WAEMU and use a common currency, the African financial community franc (CFA franc) which is pegged to the euro at a fixed rate (1 Euro = 655.975 CFA francs). This financial harmonisation and the economic integration provided by the union may be a major part of the reason for the successful interoperability and strong collaboration between the MNOs in these countries.