A new type of banking has taken root across many parts of Africa. While the number of mobile phone users across the continent has reached an estimated 500 million people most do not have access to a personal bank account or credit cards. This has helped to advance the use of mobile phone banking, a fairly simple process by which mobile user can transfer prepaid credits to another mobile user who can then redeem the credit for cash. Although this method of transferring money is virtually unheard of in the United States, “millions of Africans are using mobile phones to pay bills, move cash and buy basic everyday items.”
People have found a variety of conveniences through this new service. Some use mobile banking to send money to far away relatives, others use it as a secure way to store funds, or making business transactions. One charitable clinic in Tanzania uses the technology to send roundtrip bus fares to low income patients in rural areas allowing them to afford the cost of travel necessary to receive care.[1] However, the major cause for the service’s success is its penetration of a market which had previously existed without any formal banking institutions at all. Those who cannot afford or do not have easy access to traditional bank accounts can send and receive small amounts money relatively cheaply, quickly and safely. The typical transaction of “m-pesa,” a leading Kenyan mobile banking service is “less than $40.” While this is a relatively small transaction the company’s seven million customers are transferring “in excess of $8.5m per day."
While the mobile banking trend is widespread, access is not universal across Africa. There are still large populations which still have no access to traditional or mobile banks due to “low incomes, illiteracy and large signal black spots.” Taxes also apply to these transactions influencing many potential users to stick with cash when they can. While mobile phone use is extensive across Africa, many do not have the means or opportunity access to this technology, putting mobile phone banking out of reach. This has attracted “charitable backing [from] the Bill and Melinda Gates Foundation” which has pledged $12.5 million to “extend services to the poor.”
Despite lack of universal access, mobile phone technology has been highly profitable and is spreading quickly. Major mobile phone service providers have moved into the mobile banking sector, have the means, and see the potential in expanding the service. The South African mobile phone provider, MTN, will be extending service “to the 20 countries where MTN operates, including Uganda, Nigeria, Cameroon and Ivory Coast, which combined have over 90 million mobile phone users.” African born mobile phone banking is clearly thriving across the continent.
ADDITIONAL INFORMATION
An article and video from CNN on mobile banking and healthcare in Tanzania: http://www.cnn.com/2010/WORLD/africa/12/29/mobile.banking.tanzania/index.html
An article from the New York Times on the future of mobile banking in Africa: http://www.nytimes.com/2008/10/03/world/africa/03iht-03oxan-Mobbank.16671846.html?_r=1
An article from TIME magazine on mobile banking in Africa: http://www.time.com/time/magazine/article/0,9171,2043329,00.html
World Bank video Mobile Banking in South Africa: http://www.youtube.com/watch?v=2SKhCYoF0Lg
DISCUSSION QUESTIONS
1. Do you think mobile banking will ever catch on in the United States? Why or why not?
2. Do you think this type of banking will help elevate poverty in Africa? How?
3. How do you think more traditional banking methods and institutions will fare in Africa? Will mobile phone banking change the way they operate?
