Africa: The Largest Unserved Market Dropped out of Sight of the Financial System

Although Africa’s startup ecosystem aiming to foster financial inclusion on the continent has been actively growing, the vast majority of the population in the developing region remains excluded from the international financial system.

According to some estimations, ~330 million adult Africans, approximately 80% of the continent’s population, lack access to formal financial services, which signifies tremendous opportunities for financial technology companies that are ready to embrace them. And there even are industries that are particularly advanced in terms of adoption scale and of particular attractiveness to entrants. Remittance via mobile has picked up a rapid pace in Africa, with Kenyans using mobile money services for over eight years already. M-Pesa being Kenya’s dominant mobile-money provider, the segment allows people to make P2P payments by simply texting.

Moreover, mobile-money accounts now outnumber bank accounts in 9 African countries – Cameroon, the Democratic Republic of Congo, Gabon, Kenya, Madagascar, Tanzania, Uganda, Zambia and Zimbabwe. Moreover, one of the African countries may become the hottest mobile money market in the world by 2020. In Kenya, for example, ~85% of all mobile money transfers are already P2P.

In addition, 2014 estimations suggest that there were 242 mobile money service providers operating in 89 countries holding a total of 203 million mobile money accounts. Aside from Kenya, there are other leaders in mobile money adoption.

The report by CGAP published at the end of 2015 suggested that 17% of Ghana’s 27.3 million citizens had a mobile money account, which has doubled from 2014. Ghana demonstrated a rapid growth of mobile money and a potential to become the world’s most successful mobile money market moving previous leaders.

Moreover, 92% of adults in Ghana have the required ID necessary to open an account and 91% of Ghanaians own a mobile phone. As stated by The World Bank, Ghana has an even greater potential for mobile money than Kenya and Tanzania, which are considered two of the most successful markets in the world.

Africa has all the prerequisites promising to serve as a firm foundation for growth and development. Among the key data points characterizing Africa’s state of financial system, SWIFT Institute has recently mentioned the following ones:

  • In 47 out of the 89 markets where mobile money is available, both banks and nonbanks are allowed to provide mobile money services.
  • Half of almost 300 million registered mobile money accounts globally are located in sub-Saharan Africa.
  • In addition, there are 2.26 million mobile money agents in developing countries around the world, many more than the number of alternative financial access points comprising ATMs (1.38 million), commercial bank branches (524,000), post offices (501,000) and Western Union locations (500,000).

As analysts at Nairobi-based Standard Investment Bank (SIB) suggest, With the mobile space continuing to attract attention both for payment processing and money transfers, we expect continued growth as more products and services are loaded onto the mobile platforms.

Recognizing the potential of the market, financial institutions and startups have been supporting initiatives to foster financial inclusion in the region. Barclays Africa, for example, has expressed commitment to drive Africa’s economic growth agenda through a shared growth strategy by pledging to spend $93 million to improve education access and skills development of the youth. The bank also promised to raise $89 million to help small and medium-sized African businesses grow, and to ensure that more people gain access to digital and non-digital financial services throughout the continent.

Enhancing Financial Innovation and Access (EFInA) has released an Innovation Grant of $1.5 million to Diamond Bank in a bid to deliver financial inclusion to unbanked individuals in Nigeria.

MyBucks, a German FinTech company that holds three brands GetBucks, GetSure and GetBanked, recently shared that its partnership with NGO Opportunity International continues to take strides forward in their vision of bringing financial inclusion to the unbanked and underbanked in emerging markets – most specifically in Africa. The partnership will allow both organizations to actively pursue virtual financial inclusion across the continent, where digital and mobile banking are the only realistic path to banking the unbanked and underbanked in these markets.

There are certainly more initiatives, some of which we have been covering before, and over time, Africa’s population will be actively involved in the global financial system as an increasing number of players recognize the opportunity to improve lives of millions of Africans through the application of innovative technology.