Many Africans will come into formal economy through Mobile money

By Emmanuel Elebeke

A UK based Nigerian telecommunications consultant,   Mr. Nnamdi   Oranye   says mobile money transaction will bring millions of Africans into the formal economy if fully adopted by the continent.

He however, criticised the charging of transaction fees for mobile money transfers, saying it was one of the reasons the service had not made the expected penetration in many rural African settlements.

For him, the charge is self-defeating and discourages low income account holders from adopting the novel transaction platform.

Oranye, who works with Indian Atlantic in the United Kingdom, also argued that the transaction fees remained the main reason some telecom operators in some African countries are still struggling to succeed in mobile money services.

He stated that mobile money transfers have the potential to make a huge impact in Africa’s unbanked population, giving it as a reason mobile money transfers should have no fees.

Oranye said mobile money transfer has become critical for the development of African continent considering the enormous potentials in the system.

He maintained that the system remains inevitable for South Africa, even with its technological prowess, since it has 13 million unbanked people who also need to come into the formal economy.

“This is the primary reason why M-Pesa type mobile money is struggling to gain traction in most markets outside of Kenya.

The amounts being transferred are often relatively small, so that the transaction charge can be quite large in comparison.

Despite the many benefits that mobile money transfers offer their users, persuading a low-income portion of the population to use a service that costs them money is a near-impossible task for operators,” he said.

Oranye further noted that total adoption of the novel system of banking is possible, since Africans have overwhelmingly adopted the mobile phone as their primary interface for connection and commerce, with phone subscriptions equalling 80 per cent of the continent’s population in early 2013.

“Technology that enables users to digitally transfer cash, pay bills, buy goods or make deposits without needing banks or accessing the internet is uniquely suited to Africa and other regions with minimal infrastructure,” said Oranye.

Recall that the pioneer of mobile money transfers was M-Pesa in Kenya, launched by telecoms operator Safaricom in 2007.

And from a slow start, it exploded to 17 million subscribers generating financial activity worth more than 20 per cent of Kenya’s annual GDP.

According Oranye, other operators followed Safaricom’s step by swiftly moving to get in on the act in other countries, but the take-up was unexpectedly reluctant.

“For instance, Kenya’s populous neighbour, Tanzania, has struggled to get up to five million subscribers.   MTN, Africa’s biggest telecoms operator, and rival Vodacom, launched mobile money offerings in South Africa that were unmitigated commercial failures, not even approaching the one million subscriber mark,”   he pointed out.
Photo file: Mobile Money 6/01/14