Mobile Money in Sub-Saharan Africa and its Implications

Abstract

Africa is currently rising as a major area where mobile money is spreading. According to the 2015 global index report by the World Bank, the 13 countries whose penetration rate for mobile money accounts was over 10% were all located in sub-Saharan Africa. The example of Africa’s mobile money diffusion is assessed as meaningful creation of new services from local African demand.The mobile money of Africa was known as first serviced in South Africa in the year 2000, and its full-fledged expansion is recognized as subsequent to the great success of Kenyan mobile communication operator Safari.com due to M-Pesa in 2007. Mobile money is currently supplied centering in the East Africa region including Kenya, Tanzania, Somalia, and Sudan, and also displays a high penetration rate in Cote d'Ivoire and South Africa.The background to the fast spread of mobile money in Africa includes low financial access, quickly diffusing mobile communications infrastructure, and the quick response of corporations to local demand. The proportion of the adult population who can use orthodox financial institutions excluding mobile finance in sub-Saharan Africa is just 24%, but the diffusion of mobile communications is 70%. Multinational corporations like Vodafone paid attention to the informal financial dealings between individuals in Africa and released a new service that could replace them.The mobile money system, M-Pesa, which began in Kenya, is a typical example of success and pioneering, which has had a ripple effect on not only countries nearby but also other sub-Saharan countries, although there are examples of mobile money diffusion failure like Nigeria. In the case of Nigeria, a cash-oriented economic structure and the excessive regulations of the government are pointed out as the biggest causes for the failure of diffusion.The diffusion of mobile money in Africa display differing aspects according to region and country. Mobile money was a success in the East Africa region including Kenya because of the complex functioning of several factors including the efficient institutions of each government, the peculiarity of the financial environment, and consumer demand.Local market analysis must precede to revitalize FinTech domestically and enter overseas markets. As you may see from the case of Africa, the diffusion of mobile money, unlike a top-down transmission of technology, tends to begin with local demand, so a close analysis on the demand and institutions of the local market must be preceded.