What’s next for mobile finance in Africa? Q&A with Greta Bull
Greta Bull on progress in financial inclusion in Africa to date, why Tanzania matters and the prospects for greater change
The story of mobile finance in Africa seems tailor-made for headlines in the age of the start-up: unencumbered by legacy infrastructure, the continent has been able to “leapfrog” the West in tackling economic challenges with technology. The reality, however, is more complicated than any leapfrog narrative, and much more interesting.
A better descriptor would be an evolving ecosystem, as it highlights the complex and ongoing interplay of forces like consumer demand and regulatory attitudes that in turn create the foundation for new mobile finance offerings. Understanding that dynamic is key to understanding the prospects for greater progress in financial inclusion explains Greta Bull, Manager, Financial Institutions Group Advisory services in Sub-Saharan Africa at IFC, the private-sector development arm of the World Bank Group.
Q: How significant has progress been in increasing financial inclusion in Africa?
A: According to the latest Findex data, released last month, only 34% of African adults hold an account at a formal financial institution today. This is an improvement compared with the latest survey in 2011, when 24% of African adults had an account at a formal financial institution, but still means the vast majority of Africans do not have a safe and reliable way of saving money, efficient ways of transferring funds, no access to credit and no insurance.
Q: What more can be done, and what role can digital financial services like mobile payments play?
A: Digital financial services have shown to be a fairly quick remedy to this problem, at least to some extent. In Kenya, where financial inclusion used to be as low as in other African countries, more than half the population has an account at a formal financial institution today, and that is to a large extent due to the success of M-PESA and other mobile financial services providers.
Q: Tanzania is the first country in the world in which mobile financial services providers have sat down to agree on standards and rules for interoperability. What factors enabled this to happen in Tanzania?
A: For a market to be ready for interoperability it needs to have reached a certain maturity. Tanzania had an evident market demand for interoperable mobile financial services—that is, it was clear that customers wanted to be able to interact across mobile accounts of different service providers. Some were already using vouchers to do so.
The Tanzanian mobile financial services market is also relatively well balanced, with a number of almost equally large operators. That meant there was relative parity between the negotiating partners in the industry process.
Last but not least, there was a supportive regulatory environment. The consensus of the stakeholders involved in the interoperability process is that the Bank of Tanzania is a progressive institution that regards itself as an enabling agency rather than an entity that dictates how markets should organize themselves. And this allowed the industry in Tanzania to sit down and agree on a model of interoperability that operators were happy to engage with. It allowed Tanzania to succeed.
How important is interoperability between mobile money providers to increasing financial inclusion in Africa?
A: It is potentially very important. Interoperability is likely to increase the number of access points and use cases for mobile financial services for customers and can reduce the cost of using services. It may also enable mobile financial services providers to expand their businesses and grow volumes. As the market matures, you find that financial services providers begin to offer a broader spectrum of financial services over the mobile financial services platform, such as loans, savings accounts and insurance. That’s what I would call mobile banking, and that’s what IFC, with our efforts to support the advancement of digital financial services in Africa and elsewhere, would like to see much more of in the future.