Mobile Phones: Banking  80% Unbanked AFRICA

…. Innovations For Microfinance Development in Africa……………..

By Kelly Nii Mensah @AppsGH

This article originally appeared on Appreporttv.blogspot.com where the writer frequently contributes

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Will it be fair enough to readers if I begin this article with a recall of the past decades when we normally spend hours queued in banking halls just to deposit or withdraw money? Worse to my memory is the difficulties young students went through just to purchase banker’s draft to pay their various school fees. The least I talk about the frustrations and the ill treatments from bank staff the better.

Besides these, the intention for this piece is to elaborate on the non-banking and micro financial Institutions for their innovations in bringing safer, easier and convenient banking to the ordinary market woman, farmer, teacher and the mechanic who hitherto, shied away from any banking service for the obvious reason.

Lets critically look at the three finance segments in Ghana. That is the Banking and Finance, Insurance and then the Financial Market.  These sectors saw a significant development in 2003 when the BoG officially put to force the Universal Banking Business License (Act 673) with a mandatory reserved for operation set at 70billion Cedis. This brought more competition into the industry. The pace was set from then on and we have gradually seen the emergence of several banks and financial service providers. This, importantly caused interest margins to becoming smaller with time because of the competition.  More banks were willing to give out loans.

Price Water House Coopers-Ghana in a report of the Ghana Banking Survey 2011 stated that, total of 26 banks are currently operating in Ghana. The survey further observed that, the new oil found in Ghana brings enormous opportunities, however, tapping into these remains a challenge. Basically due to the banks’ lack of capacity. The survey specifically said…the unbanked sector of the population remained over 80% and this is a large untapped area for banks to continue to raise cheaper funds from, through deposits mobilization. The influx of non-banking financial institutions is a welcome service as they reach the unbanked and mainly informal sectors to provide a healthy competition for the banking sector. My take on this portion of the PwC report is that, the future for non-banking financial institutions in Africa is prodigious.

Mobile Banking

The non-banking institutions moreover needs to find the most convenient way of reaching the 80% informal unbanked sector rather than waiting for them to come to the banks. In short, financial services must be mobile thus taking their services to their potential clients and customers. ‘If the mountain will not come to Muhammad, then Muhammad must go to the mountain’ as the old adage goes.

Over recent times, we’ve witnessed several non-banking institutions doing just that. The new agenda had turned on technology and innovation such as the use of mobile devices to do banking services that minimizes the frustrations of conducting a particular service directly in a bank.

One in company that has invested significantly into mobile banking innovations in Ghana is First Capital Plus, a wholly owned Ghanaian Savings and Loans Institution. The company’s mobile banking product called SpeedBanking® basically enables customers to directly deposit money into their account using a scratch card on their mobile phones.  This presents an excellent way for rural folks especially to engage in active banking from the comfort of their remote locations. They can save, transfer and withdraw money anytime and anywhere. 

Mobile banking in Ghana has become so attractive. This is largely due to the enormous segment of Ghana’s unbanked populace. Mobile telecommunication companies such as Airtel and MTN have joined the business offering services in mobile saving, money transfers, mobile insurance and others to device users.

Another innovative measure being deployed here in Ghana is the use of point of sale devices and mobile banks (mobile bank vehicles) with ATM features that provides total banking services to rural communities. Opportunity International (a micro financial service providers) has taken a significant lead in this advancement towards improving upon banking in Africa.  

Global Support for Non-Banking Innovations

I came across a piece on Bill and Melinda Gates Foundation website on the use of innovations in microfinancing to fight poverty. These guys are keen on supporting any financial policy that focuses on bringing domestic banking to the poor. I noticed from testimonies on the site that, The Foundation has partnered a lot of organizations in many developing countries including Ghana.

They provides fund for non-banking surveys and sponsor operations of domestic banking targeted at the informal sector, usually people living in places far away from banks.

Not too long ago, a Forum on Financing for Development: Mobilizing Resources for Economic Transformation was held this year at the United Nations Conference Centre, Addis Ababa, Ethiopia. The forum registered following observations on Mobile Banking

…The use of mobile phone technology for distribution of financial services to the people of Africa provides huge opportunity for growth and reaching scale. It enables pre-paid insurance, pre-paid airtime, money transfers, payment of goods and accounts, balance enquiries etc. Loan applications could be processed, loan balances provided to borrowers by Loan Officers and collections improved through access to loan portfolio data’’

So the future is bright for the financial sectors in Africa especially the non-banking sectors. Mobile phones have taken center stage in the innovation to make banking completely accessible to the informal folk to save money, transfer money, withdraw money and access other like insurance others conveniently, safely and fast.

We need to do more. The digital media such as mobile devices are here to stay. Devices are advancing and more features are being added to make life easier. We can do more with our mobile phones like buy and sell as well as do other businesses on mobile devices. These innovations are here to help us develop in all sectors including finance.