Insight: Mobile Money

A market-based approach to financial inclusion.

In sub-Saharan Africa, just less than 30% of people have access to formal banking. For many, issues such as low income, distance and a lack of documentation preclude them from traditional banking services.

In poor and 'under-banked' markets, sending money domestically or paying bills often has to be done in person, requiring time, effort and money be spent on travelling and queuing - often during the most productive hours of the day - or sending cash via friends or bus drivers, which is insecure and slow. International remittances made via money transfer companies such as Western Union, are expensive and inconvenient. Any savings are usually hidden as cash at home, and in emergencies, people are reliant on whoever is nearby with spare cash to help.

The advent of mobile money began in the early 2000s, when individuals – particularly in Kenya – began to transfer ‘value’ domestically, by sending airtime credit phone-to-phone, establishing a quasi-financial ecosystem.

In response, Safaricom, Kenya’s leading telecom provider, and Vodafone launched M-Pesa in Kenya in 2007, with funding from the UK’s Department for International Development (DFID). Since then, Africa became the global leader in mobile money, with the development of M-Pesa in Kenya as the pioneering and most successful model.

The model works through agents (local shops, kiosks, and businesses) that act as cash-in/cash-out points, making it accessible even in rural areas where banking infrastructure is lacking. Mobile money allows users to store, send, and receive money digitally using a mobile phone, where ‘value’ is stored virtually in an e-wallet tied to their phone number, rather than a bank account. It does not require users to download an app, have a smart phone, internet access or even a bank account.

Before M-Pesa, only 27% of Kenyans had access to formal financial services. Today, over 80% of adults use mobile money. Following M-Pesa’s success in Kenya, Vodafone and other telecom operators expanded the model into markets across the continent, while other telecom operators launched their own mobile money platforms, such as Airtel Money, MTN Mobile Money and EcoCash.

A technological leapfrog

Mobile money is transforming the market, expanding financial inclusion at a very high rate of growth, and providing the previously ‘unbanked’ a means to buy goods and services, save and send money. Thanks to mobile money, 55% of people in sub-Saharan Africa have access to some form of banking today.

By 2022, Africa accounted for over 70% of global mobile money transactions, with over 600 million registered accounts and transactions surpassing US$700 billion annually. Globally, there are 1.6 billion registered mobile money accounts with US$1,260 billion in transactions carried out in 2022.

Mobile money is now considered a mainstream financial service in many countries and has revolutionised financial inclusion in Africa. What began as a simple mobile payment system has evolved into a sophisticated digital economy, driving entrepreneurship, trade, and financial stability. As mobile penetration continues to grow, Africa will remain at the forefront of mobile finance innovation, transforming millions of lives across the continent.

Egmont Partners & mobile money

In many of the communities that Egmont Partners work in, poor network coverage and lower mobile ownership, mean that mobile money remains in its infancy. A recent Egmont-hosted roundtable discussion with Partners on Financial Controls discussed ways that they can reduce cash handling – both as a means of reducing risk and enhancing cash flow. We expect mobile money and other forms of digital banking to become more commonplace in Egmont Partner operations, and we recently convened a digital roundtable for all Egmont Partners entitled 'Going Digital' where they discussed strategies and technologies that are available to adopt.