Can Covid accelerate the adoption of mobile money in Africa?
04 Aug 2020
One area where Africa appears to be leading the pack globally is in the use of mobile money to make deposits or transactions. And it’s a trend that stands the continent in good stead as it looks for ways to contain the spread of Covid-19.
Consumers too have been switching to online purchases or contactless payments in retailers, rather than using cash. Restrictions on movement also make mobile money transfers more attractive.
Andrew Schultz, from Investec’s African equities desk, explains that mobile money systems are popular in Kenya, Uganda and Tanzania, where it is used widely for all sorts of activities from daily shopping to paying bills. West Africa is a bit behind East Africa, but is catching up, says Schultz.
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Is Covid a catalyst for mobile growth?
Many operators have also made it cheaper and in some cases easier to sign up, says the report. For example, Ghana's central bank now allows mobile phone subscribers to open a mobile wallet and transfer money daily without needing additional documentation.
There is therefore an opportunity set for investors, with a number of listed companies active in the mobile money space, says Schultz.
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Cash shortages in Zimbabwe have helped the adoption of mobile money there, even before Covid-19, while the Nigerian and Ethiopian governments are seeing the value of mobile money in promoting financial inclusion and improved revenue collection.
M-Pesa, which is one of the leading mobile money platforms on the continent, was established by Safaricom in 2007 in conjunction with Vodafone, and has driven much of the growth in East Africa while showing that it is possible to make a profit by increasing financial inclusion. M-Pesa has supported Safaricom’s average annual revenue growth of about 25% over the last 10 years.
Another firm is Cassava, which is active in Zimbabwe. “Almost all transactions in Zimbabwe done by mobile money, with very little physical currency. There’s a natural inflation hedge in place for the company, with the firm earning a fee on each transaction,” says Schultz.Read more: Impact investing - is it possible to do well by doing good?
Many of the continent’s leading banks are involved in mobile money, while some have made the move into other services beyond payments. For example, Kenya’s major banks, including Co-operative Bank, Equity Bank, and Kenya Commercial Bank use mobile money on their lending platforms, an area that was growing going into the pandemic.
“Mobile money is an example of a technology or platform that is likely to enjoy accelerated adoption because of Covid-19,” says Schultz.“As we have seen, governments are making it easier for people to open accounts, while we could also see the acceleration of the roll-out of other platforms, such as social payments going digital. This would be beneficial for the adoption of mobile payments as well.
“Longer term, governments are likely to see mobile money as a way to broaden their revenue bases, formalise parts of the economy and improve access to financial services,” says Schultz.
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About the author
Patrick writes and edits content for Investec Wealth & Investment, and Corporate and Institutional Banking, including editing the Daily View, Monthly View and One Magazine - an online publication for Investec's Wealth clients. Patrick was a financial journalist for many years for publications such as Financial Mail, Finweek and Business Report. He holds a BA and a PDM (Bus.Admin.) both from Wits University.