The African Development Bank estimates that African consumers will spend $2.2 trillion by 2030. Despite the global slowdown over the last few years, African countries have registered high economic growth rates in comparison to the rest of the world. There are positive indicators across the continent.
The conundrum has been how to reach this growing demand when not everyone has access to financial services. Despite high rural populations, the cost of taking banking infrastructure – ATMs and banking halls - closer to the people has proven a big disincentive.
Enter Mobile Commerce
Mobile commerce appears to be the final part of the puzzle to unlock the economic potential of the continent. A recent report
by TA Telecom indicates that mobile phone penetration in 2013 hit 80% and was growing at an annual rate of over 4%. This is the fastest growth rate in the world. This phenomenal growth has been fueled by import duty reductions on mobile phones, policies to encourage greater competition and economies of scale taking hold since basic network infrastructure has been built.
Telecommunication companies and banks have taken advantage of mobile apps to take banking to the un-banked. Using the Short Message Service (SMS) platform; M-payments, M-Banking and M-Retail products have been developed. These have proven to be massively popular with the average man and woman on the street.
The charge was led by Safaricom, a Vodafone subsidiary in Kenya. M-Pesa is a service that allows mobile phone users to transfer e-currency easily. All a mobile phone user needs to do is to load funds into their phone at any of the thousands of Safaricom agents countrywide. Once they receive an SMS notification that their virtual bank account has been loaded they can make payments to other mobile phone users or withdraw the funds at agents or participating ATM's.
The service was launched in March 2007 and proved to be an instant hit. Kenyans no longer needed to walk to the banking hall or ATM to make a transaction. Trade became much easier as M-Pesa facilitated smoother flow of goods and services.
The service was quickly replicated by other Telecommunication companies in Kenya and across the continent. Banks also quickly adopted the platform and the Central bank issued guidelines on the management of mobile money platforms. Many other related e-payment services have grown out of this innovation.
In a country with a population of 40 million, there are currently about 20 million M-Pesa subscribers. Estimates from the Central Bank of Kenya
indicate that in the first eight months of 2013, over $14 billion had been transacted using the service.
Other African countries look to be on track to replicate the Kenyan success. Some of the countries where mobile commerce is growing fast include; Tanzania, Uganda, Lesotho, Ghana, Rwanda, Nigeria and many other markets. Some are actually quite surprising such as Somalia with their vibrant Zaad
Service by Telesom, a local telecommunications provider.
African countries need to adopt the Kenyan model and tailor it to their unique environment. The Kenyan mobile commerce model is sufficient proof that the un-banked population of Africa holds the key to further economic growth.