In Africa, access to regulated financial services by banks, building societies, credit unions and micro-finance institutions is generally a major challenge. As of January 2007, an estimated 38% of Kenyans were completely un-banked. Only 19% are believed to have access to formal financial services. Of those accessible, a good number have difficulty in accessing available channels. There are about 17 million Kenyans who qualify to get bank accounts, yet only about 3.5 million have bank accounts. The realities in Kenya are representations of many African countries.
The growth of other banking channels in Africa has been very slow. Of the four main channels; bank branches, Automated Teller Machines (ATMs), internet and telephone banking, none is considered to be an extreme success. This is due to cost, regulatory policies, and infrastructure among others. Tele-banking has not been very successful either. From an adoption point of view, a report by the Communication Commission Kenya (CCK) shows that in June 1999, there were 296,400 fixed line subscribers. This number dropped to 286,729 in February 2006. In the same report, there were over 5.5M mobile phone service subscribers in February 2006 up from 15,000 in June 1999. Besides, the same study indicates a teledensity of 0.88 for fixed lines services and 14.4 for cellular mobile services. This adoption rate suggests that a service based on the mobile phone stands a better of succeeding in Kenya.
Of the many technologies that could be used on the mobile phone to provide this access to financial services, a low-cost, secure and easily accessible solution would be more promising. In the survey by FinAccess, 51% of people in Nairobi and 25% nationally have heard of banking via the cell-phones. The same research established that 61% of those in Nairobi and 29% nationally do send text/SMS messages. This certainly indicates a lot of potential in mobile phone based solutions.
Various mobile network providers (MNPs) and private companies, such as Safaricom in Kenya, MTN in South Africa, CelPay, and Wizzit have deployed e-currency proprietary products, which have the potential to propel mobile transactions and hence financial integration in Africa. These solutions initially focused on money transfer, but have the potential to evolve into an integrated regional form of mobile banking (m-banking) services, except that the units of transaction are simply electronic.
Mobile phone adoption and usage in the same region in the last decade has been incredibly exponential. Assuming all Kenyans with bank accounts have mobile phones, with almost 10 million mobile phone subscribers, then about 6.5 million Kenyans could access financial services through low-cost mobile banking. Mobile phone technologies can provide secure, reliable and convenient solutions to banking, both as fifth channel to bank accounts and as a transformational technology for the un-banked.
Technology, just like language or a common currency is a unifying factor. Mobile technologies are borderless, a factor that increases the chance of being a tool for financial integration. Different countries in Africa have different currencies; varied banking systems but have common financial needs. Internet has been a great unifying factor, with credit and debit cards being the channels for transactions online. People are able to trade all over the world without ever meeting, making the world flat. For Africa, the key could lie in mobile technologies as the platform for financial integration.
Africa leads the world in mobile phone adoption and diffusion and the numbers are growing fast every day. The growth of mobile phone usage in Africa has been incredible. Besides the numbers, the rate has been amazing. According to Blycroft research estimates, Africa had 215 million mobile services subscribers at the end of the first quarter of 2007. Findings indicate a 46% growth over the year, from 128 million at the end of the first quarter of 2006. This then puts African mobile teledensity at 23 subscriptions per 100 people at the end of the first quarter of 2007.
Applications running on top of the mobile networks stand a great chance of jumpstarting many activities, including regional m-banking, m-currency and m-trading. Electronic currency can significantly accelerate the process of financial integration if well organized and developed.
There is need to take advantage of the high mobile density to diffuse banking services in Africa. Various factors will determine the success of the rapid diffusion of such technology including, appropriate regulation, appropriate costing, business models, effectiveness, security, speed, reliability, mobile provider independence, bank independence and mobile phone independence. Adoption of such technology forms an excellent basis for mobile commerce, which could diffuse much faster than Internet commerce. Given the successful impacts on specific country cases, prospects of adoption of regional solutions are high.
By Tony Kerage Omwansa
Omwasa is a Lecturer at Strathmore University as well as University of Nairobi
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