Mobile banking has great potential to promote financial inclusion in Africa. By reducing geographic and cost barriers, mobile banking allows commercial banks to expand into new areas at low cost. Kenya and South Africa have been leaders in mobile banking, with services like M-Pesa in Kenya growing exponentially and bringing millions of unbanked individuals into the formal financial system. Partnerships between mobile operators, banks, and microfinance institutions can further expand access to affordable financial services across Africa through mobile phones.

1. Mobile banking at the service of financial
inclusion
Presented by Soumaila Emmanuel BOUKARI

2. Financial inclusion
Financial inclusion is the provision of low-cost basic financial
and banking services for consumers in difficulty and excluded
from traditional services
Declared by the ONU as a priority issue by 2020, financial
inclusion is a major challenge for global economic development.
The aim is to make Households and businesses a wide range of
financial services, Mainly banking and insurance: account
keeping (transfer, etc.), means Payments, savings products,
loans, insurance, provident funds, etc.

3. Mobile banking and financial inclusion
Mobile telephony reduces geographic constraints and
transaction costs while offering commercial banks a low-cost
expansion strategy.
This contrast creates the ideal conditions for mobile banking to
develop on the African continent.
Over the past decade, mobile telephony has grown
exponentially in Africa; The rate of banking remains low.

4. Mobile banking continues to extend
reach
Africa is now regarded as the emerging continent where developments in the information
and communication technology Is the fastest.
At the same time, the average price of a 2G phone rose from $ 150 in 2003 to $ 75 in
2008.
Between 1998 and 2009, the rate of equipment increased from 0.53 aircraft per 100
inhabitants to 42.82 aircraft per 100 inhabitants (Hausman, J., 2010).
Mobile penetration in developing countries has grown rapidly with annual growth rates of
between 30% and 50%, or even higher in some countries (Hausman, J., 2010).

5. Impact of mobile banking
In some countries, the minimum deposit amount can be up to 50% of gross domestic product (GDP) per capita and
transaction costs are generally relatively high.
Limited access to financial services is explained by geographic isolation, but also by inadequate infrastructure and
financial illiteracy. These factors contribute to explain the usually very high costs of banking services in these areas.
In rural areas, which account for 60% of the total African population, the network of commercial banks is particularly
underdeveloped.
Sub-Saharan Africa thus has the lowest penetration rate of depositary institutions in the world, with an average of
16.6% - compared to 63.5% for all developing countries.
The majority of the African population, in fact, has no access to formal banking services. Only 20% of households have
a bank account.
This exponential growth creates a unique opportunity in sub-Saharan Africa to develop banking services.

6. Putting the bank within reach
Not surprisingly, this type of service is growing rapidly in sub-Saharan Africa.
It also modifies the economic model of the service, in particular by reducing the costs of financial transactions. That is
its strength.
Mobile banking is a powerful tool to offer savings services to the billions of people around the world who have a mobile
phone but do not have a bank account. Because it is free of geographical constraints, mobile banking has advantages
over traditional banking. It is also immediate, safe and effective.
For commercial banks, the main advantage of mobile telephony lies in its ability to penetrate all environments
and to be able to be reached from anywhere.
Financial institutions and mobile operators are putting in place ingenious systems to integrate unbanked
populations into the formal economy via mobile phones.

7. Mobile banking(1)
The mobile phone easily reproduces the functionality of a point-of-sale terminal: it can be
used to obtain a transaction authorization from a financial institution.
The SIM card present inside most GSM phones is actually a smart card similar to a bank
card. The PIN4 code and bank account number can be stored on this SIM card to
perform the same functions as a bank card.
The mobile phone can serve as a virtual bank card and safely store information about the
customer and the financial institution.
Mobile banking is a powerful tool for offering savings services.

8. Mobile banking(2)
The phone and the wireless connection make all Internet services available to unbanked
customers.
This provides two basic customer services: instant access to any account and the ability
to make payments and remote transfers.
Finally, the mobile phone can be used as an online banking terminal.
In fact, it can serve as a point of deposit and withdrawal of cash.
The mobile phone can also be used as an automated teller machine.

9. Kenya and South Africa rank first in
mobile banking
This revolutionary service allows the most rudimentary mobile phones to transfer money
to another device by simply sending SMS.
In 2007, national mobile operator Safaricom, a subsidiary of Vodafone, launched M-Pesa
("M" for "mobile" and "Pesa" for "money" in Swahili).
Mobile operators have devised an ingenious way to provide financial services to rural
populations living in remote areas.
Only 19% of Kenya's adult population has access to a conventional bank account and
banking services are largely limited to urban populations (Mas, I., Radcliffe, D., 2010).

10. Kenya and South Africa rank first in
mobile banking(2)
In addition, transaction costs are minimal, in the order of $ 0.46. This is less than
the costs of banking services in Kenya, ranging from one to three dollars.
In 2009, this figure had risen to 10 million; Between 2009 and 2010, the number of
M-Pesa customers was still up 61%, of which one third were non-banked. M-
Pesa's financial services have low value but volumes are significant and they
generate significant gains.
The predominance of Safaricom in the Kenyan market and the strong penetration
of mobile telephony in the country, especially in remote rural areas, have created
the conditions for M-Pesa's success. By the end of 2008, five million people were
using payments and money transfers by mobile phone.

11. Kenya and South Africa rank first in
mobile banking(3)
The service will be extended to the 20 countries where MTN is present, including Uganda, Nigeria,
Cameroon and Côte d'Ivoire, which together represent more than 90 million mobile phone users.
In 2010, MTN South Africa announced full mobile banking projects with an optional credit card.
The MTN5 operator, with his Mobile Money account, illustrates this. The Mobile Money account allows
you to access a customer account from anywhere on the planet at any time via an MTN mobile phone
and a secure connection.
With a high penetration rate of mobile telephony, it is by far the country in Africa where mobile banking
is the most developed and where the potential is greatest.
South Africa is also providing other interesting examples of success in mobile banking.

12. Strategic advisory and technical
assistance
Through strategic advice and technical assistance, it promotes
investment in the continent to foster sustainable economic
development and social progress.
With a capital of about 100 billion dollars, it is the main financial
institution of development in Africa.
The African Development Bank (AfDB) has 78 member
countries - including 54 African countries and 24 non-African
countries.

13. Strategic advisory and technical
assistance(2)
They can also carry out transactions in the 17,000 M-Pesa outlets.
Savings are also remunerated. M-Kesho's clients can open accounts either with Equity
Bank branches or with 5,000 M-Pesa agents.
M-Kesho, like M-Pesa, does not charge an opening fee or monthly fee and no minimum
balance is required.
This is a bank account linked to the M-Pesa account, which allows money to be
transferred from one account to another and saved.
Another interesting initiative, the M-Kesho account, was developed in Kenya through the
partnership between Equity Bank and Safaricom.

14. Strategic advisory and technical
assistance (3)
M-Kesho could bring more than 18 million Kenyans into formal banking. This example demonstrates that mobile
banking must be carried by the banking sector itself and must adapt to the needs and expectations of local customers.
M-Pesa could facilitate and strengthen access to formal financial services, but did not directly encourage deposits.
It is especially a tremendous lever to advance bank penetration, well beyond what M-Pesa allowed.
Without incurring any costs of developing a network of branches and without degrading its cost / income ratio. This
new initiative is a perfect example of the convergence between mobile telephony and banking.
By joining forces with information and communication technology operators and launching mobile banking, between
2007 and 2012, Equity Bank was able to increase its deposit base by 40% on an annual average basis.

15. Synergies between mobile telephony and banking
In October 2010, Safaricom and Barclays Bank of Kenya signed an agreement
allowing Barclays Bank account holders to make both deposits and withdrawals
from their M-Pesa accounts.
It has also led an increasing number of banks to forge partnerships with local
mobile operators.
This new regulation opened the way to the use of the M-Pesa platform by the
banks, which thus had a new distribution channel - the M-Pesa network of outlets.
In 2010, the Central Bank of Kenya issued new rules for bank retailers.

16. Synergies between mobile telephony
and banking(2)
In September 2011, Kenya had 70,000 bank retailers accredited by only ten banks.
It provides a powerful lever to increase their presence, visibility and network without increasing their operating costs.
The agency banking model becomes a key focus of the expansion strategy of commercial banks based in Kenya.
This shows the growing opportunities offered by the synergies between mobile telephony and banking.
Barclays Bank is the eighth bank, following in particular Family Bank and Kenya Commercial Bank, to become a partner
of M-Pesa.
The M-Pesa agents acting on behalf of Barclays Bank could also facilitate the financing of their daily activities through
this partnership.

17. Expanding the borders of mobile
banking
In addition, partnerships between banks, financial institutions, microfinance institutions and players in
the mobile phone industry should also be encouraged.
For the poor and unbanked populations of Africa, the mobile phone thus becomes more than just a
telephone. It becomes a real bank at your fingertips
It will also reduce transaction costs, which will benefit the development of the private sector in general.
The development of mobile banking will help to stimulate domestic savings and to increase the
financial transfers of the Diaspora at low cost.
The examples of Kenya and South Africa clearly show that there is no shortage of ways to ensure the
financial inclusion of African populations - excluded for decades from formal financial services.