Mobile Money is a financial lifeline for rural East Africans
Over the past few years, East Africa’s mobile money revolution has transformed the continent’s financial services industry, offering a cheap way for millions of rural population to send money wherever and whenever they want to. Mobile phone users in the region are subscribers of mobile money services offered by different local network operators. An estimated 70 million East African households which is more than half the population benefit from these services. Despite the latest developments, most East Africans households receiving remittances still live outside the mainstream financial system, particularly those from rural areas, with limited access to normal banking accounts. The mobile telephony offers the prospect of cheaply connecting more than a hundred million of unbanked rural and low-income East African to financial services. East Africa has the fastest-growing market in Africa for mobile financial services, which now reach almost every urban areas and villages, enabling people to send money, transfer funds between accounts and pay bills.
Before the mobile money revolution, rural recipients of remittances had to travel long distances to a bank or other payout locations to receive their money in cash. Luckily, the technological advances mean that these days “mobile wallets” can be used to receive and store money for future use. In the past workers sending money home to families in rural areas faced higher remittance charges, but that is also changing. Local mobile operators are even subsidizing mobile devices that allow customers to receive money from ATMs without bank card as well as to pay for goods and services at retail locations. The most notable one is Kenya’s largest network operator Safaricom. A study I was involved with last year, the cost of mobile transactions is also about 1-2% of branch banking, and that has led to leading remittance service providers now offer mobile transfers with market leader Western Union not being left behind. The promise of low-cost, instantaneous transfers of funds over large distances directly through mobile phones is one of the most exciting prospects in the mobile industry and the players in the sector will only ignore it at their own peril. Mobile banking success depends on the development of economically sustainable business models in East African and other parts of Africa.