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Mobile Banking in Africa: Regulation Required

 8 min read / 

The ability to send and receive money over the phone, without the need for an internet connection, revolutionised the way banking is conducted in Africa, especially in Eastern countries such as Kenya. These mobile financial services (MFS) now span the full spectrum of financial services, offering customers the ability to transfer money securely, using current accounts as well as allowing users to access savings, loans, investments, and insurance.

According to GSMA, half of the 282 mobile money services operating worldwide are located in Sub-Saharan Africa. McKinsey reports that there are 100 million active mobile money accounts in Africa, far exceeding customer adoption in South Asia, with 40 million active mobile money accounts. In the past four years alone, mobile money users have grown by more than 30% annually.

The Impact of Accessible Banking

Firstly, mobile banking allows those individuals who do not have access to real banks, either due to poverty traps or due to a lack of local banks, to bank cheaply and effectively. This increased fluidity in currency transfer has facilitated business growth, which started out as P2P payments but increasingly sees use in paying vendors, merchants, utility companies and in the future, government authorities. Not only does this facilitate financial inclusion for individuals that would otherwise experience hardships in accessing a stable banking system, but this also ensures users have more control over their financial situation, understanding exactly where their money is and where it is going.

Secondly, with access to quick transfers of money through P2P systems, this also establishes a system for loans between individuals and companies. These mobile loans, with low limits such as $10, can provide early businesses and families alike with the chance to escape poverty traps. To add, with almost 80% of people in sub-Saharan Africa being excluded from formal finance, and the African Development Bank estimating a credit gap of between $70bn and $90bn for the continent’s medium and small enterprises, there is large potential for the loan market to take shape in mobile banking.

Carriers Beating Banks

Despite FinTechs, banks and other financial ventures entering the mobile banking market, mobile networks operators (MNO) continue to dominate in customer numbers, transaction volume and coverage, with M-Pesa and MTN Money having five to ten times as many clients as bank-centric approaches (for example Equitel). McKinsey opines that such success rests upon three pillars: near ubiquitous distribution networks, vast numbers of customers/strong market concentration, and a superior client experience.

Above all, the sheer scale that MNOs can operate at dwarfs the initiatives from banks, particularly in remote regions, presenting distribution as MNOs’ main advantage. It is reported that 37 African markets have ten times more registered agents than bank branches. To take Kenya as an example, leading banks in Kenya, where agency banking has been highly successful, have approximately 15,000 agents, yet Safaricom, a large MNO, has more than 130,000 agents where customers can cash in or cash out. The scale of the operations allows MNOs to outperform traditional brick and mortar banks, securing further clients and users simply as a result of the ecosystem that new users would become a part of, should they accept MNOs as their banking platform.

Building on from this, customer numbers are vast. For example, MTN, the largest telco in Africa, conducts business with 171 million customers, compared to Ecobank, Standard Bank and Barclays Africa, who are leading Pan-African banks, service 11 million and 15 million customers.

Why is this happening?

The client numbers can be attributed to the superior client service that such companies offer. M-Pesa’s client-facing expertise and offered experience presents a user-friendly and simple process, that does not require financial literacy. Combined with easy registration, the fact that merchant acceptance is widespread and that M-PESA does not levy transaction fees on bill payments, users can begin financial inclusion relatively easily. Furthermore, MNOs also have the advantage of mobile phone penetration, which is an average of 80%, double the penetration of banking for the same regions.

As Paul Makin argues in Regulatory Issues Around Mobile Banking, the role of a regulator is to stand between citizens and financial chaos; ensure financial institutions offer services in a responsible manner and, for emerging economies particularly, promote social objectives, extending the reach and depth of financial services.


As with any jurisdiction, regulating emerging technologies is difficult, as shown by the divide on cryptocurrencies. Not only is emerging technology a challenge, but companies and individuals are using such technology to both combat new issues as well as solve old issues in new ways. With this comes more sophistication in processes and fintech companies are making banking easier by removing limitations and outpacing banks, and laws in the process.

Cyber security risks are also an ever-growing problem. As more carriers collect data on customers to strengthen services offered, they need to take appropriate measures to ensure that the data is stored securely. Such data is not only delicate, as it connects individuals to finance, but users are not able to take control of their own data protection. As a result, regulation is needed to set standards of security, and leveraging the opportunity of mobile banking against security threats is a prime objective for legislators in order to protect what has become a critical infrastructure in Africa.

Further, crafting monetary policy to suit this niche market is required. As mobile banking continues to mature and develop more financial inclusion, policies need to be adopted that make individuals more sensitive to investment opportunities, and increase the taxation base. With this, laws regulating deposit schemes, trust arrangements and the control of carriers in this regard must be well researched and produced, this includes deposit insurance, particularly as such companies are effectively the larger party in the relationship.

Laws recognising such a duty of care and pushing mobile banking companies to take precautions in the name of customer security is the right step forward. For example, no company is too big to fail, and thus insurance and protection must be offered to customers against the default of the company, protecting customers’ money accounts in the event that such companies become insolvent.

The Other Side

Interestingly, regulators such also seek to ensure competition is healthy. For the market to work efficiently, an adequate amount of competitors must be present, to afford some protection to users against monopolies and to prevent abuse of market positions. What’s more, when conducting consultations to research regulations and aid with the law making process, regulators would do well to, as argued by Njuguna Ndung’u (May 2016), “ensure they are listening to all the voices in the market, not just the dominant provider.”

This also includes analysing the readiness of carriers and banks to facilitate greater adoption and promotion of these services, including microfinance loans, as passing regulations that limit such services from being offered by carriers, despite possessing a stronger ecosystem and better infrastructure, would cause more harm than good. Thus, when regulators feel the need to decidedly attribute certain actions to banks only, considering the power and ability of banks to carry out such services, should be a critical factor.

With that said, should regulators conclude that these carriers are performing an essential public service, such operations should be required to follow the stringent requirements that other private institutions performing public sector work are required to follow – including transparency on certain issues and keen consideration of stakeholders. This would also extend to protecting users from abuse in order to increase profits, declaring some schemes unpalatable as traps and moving to secure better representation for the consumer base.

Managing Risk

Moreover, the risk of a high profile failure, from a major carrier, either through financial difficulty, default and insolvency, caused by bad corporate decision-making, legal action or otherwise, or security failures including cyber attacks, weakened infrastructure, the use of outdated technology or other technical issues, could be enough to set mobile banking back.

The reputational damage to not only the company but additionally the branchless banking system could cause distrust by individuals, provide excuses for regulators to toughen up on such schemes as well as shrink the market through a lack of investment. Regulators need to provide options to protect against such eventualities, from insurance to other trust options. Cooperation with existing providers is key to gathering expertise and using existing experience to customise banking regulation that protects and creates an environment that is conducive to further growth.

Lastly, users need laws to ensure that this niche form of banking is not abused – carriers are in a strong position of power, effectively being in control of mobile banking. As carriers and mobile banking providers continue to expand their services into more sectors, regulators must resist the temptation to “classify all services as banking services and hold up the entire industry but instead regulate each service in proportion to its level of risk,” as is argued in Consolidating Africa’s Mobile Banking Revolution (May 2016).


Whilst these mobile services are going some way to facilitate banking, they do not perfectly meet the definition of a banking institution. The revolution is welcomed, but as the reach of these private operators grows, regulation must be levied against them to protect consumers, particularly in delicate economies.

The companies are performing a quasi-banking role in a narrow sense but are not held to the standard that banks are. Regulators must close the gap to ensure that continued financial inclusion remains unhindered.

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Investing in Zimbabwe – Gamble or Jackpot?

 6 min read / 

Investing Zimbabwe

After nearly four decades of rule, Robert Mugabe finally stepped down as president of Zimbabwe late last year. A nation that has been crippled by corruption, plagued by poverty and ostracised from the international community now has an unprecedented opportunity to reform its economy and re-establish itself as a major African power. President Emmerson Mnangagwa has already announced his intention to revive the country’s flagging finances, open up to foreign investors and crack down on corruption.

The first signs are encouraging. On January 15th, South African tycoon Robert Gumede pledged to invest $1.2 billion in the country to develop IT and infrastructure projects. But Mnangagwa and his new government must learn from past mistakes if Zimbabwe is to realise its potential. Otherwise, the country will almost certainly lapse back into the stagnation, inequality and squalor that came to define the Mugabe era.

Is Zimbabwe a bull market?

If history is any guide, foreign investors would be wise to play it safe. This is not the first time a hopeful figure ousts an ageing African dictator after decades of misrule, promising reform only to prove themselves equally unfit for the task. The most notable example is perhaps the Democratic Republic of Congo (DRC), which spent three decades under the thumb of its own Mugabe-like figure: Mobutu Sese Soko. Mobutu, a textbook totalitarian, embezzled substantial amounts of state aid, played minority groups against each other and ruled with an iron fist.

After his ouster in 1997, hopes were high that the DRC’s new leader – Laurent Kabila – would steer the country in a more judicial direction. Instead, Kabila maintained the same power structure as his predecessor and ramped up the violence. His forces slaughtered thousands of Rwandan refugees within months of taking the presidency. Assassinated by one of his own bodyguards just four years into his regime, Kabila was replaced by his son, Joseph, who is still clinging to power today.

Though Joseph Kabila has proven to be slightly less bloodthirsty than the father, he appears to be every bit as addicted to his position. Despite agreeing to step down in December 2016, Kabila has repeatedly delayed elections, citing logistical obstacles and financial deficiencies. Protests at his continued reign have become increasingly violent – seven were killed at the turn of the year – while his most popular political opponent, Moïse Katumbi, has been hounded out of the country on entirely politically motivated fraud charges.

Recent polls suggest Katumbi would replace Kabila with ease, though the former provincial governor and current opposition leader is reluctant to return to his homeland as he fears for his life. Katumbi is asking for international protection and is leveraging his time abroad to maintain global pressure on Kabila’s regime.

Unsurprisingly, foreign investment in the DRC has cratered. Most outside commercial interests in the country are concentrated in the mining sector – itself embroiled in international scandals involving Dan Gertler, an Israeli tycoon added to the U.S. sanctions list for his ties to the murderous leadership in Kinshasa. Economic development has stagnated and the country’s GDP per capita stands at around half of its 1970s levels.

There are eerie parallels – not to mention unsavoury connections – between the Congolese and Zimbabwean political ordeals. When Robert Mugabe came to power as the first prime minister of the newly liberated Zimbabwe in 1980, his appointment was greeted with rapturous optimism by the world. Mugabe was even nominated for the Nobel Peace Prize the following year. Unfortunately, the ‘freedom fighter’ rapidly showed his true colours, using intimidation, bribery and, at times, outright slaughter to maintain his grip on power. The Matabeleland Massacres alone which claimed between 10,000 and 20,000 civilian victims between 1983 and 1987.

Mugabe prioritised military endeavours and total control over society, famously proclaiming in 1998 that “countries don’t go bankrupt!” when sending troops to the Congo in support of the elder Kabila. At the same time, he oversaw the decimation of his own country’s economy. Mugabe’s continued threats to nationalize the nation’s best performing industries has discouraged foreign direct investment (FDI). In 1992, the Land Acquisition Act decreed that the government could lawfully strip white landowners of their property and redistribute it among the indigenous population.

This bill was forcibly enacted in 2000 when 4,000 white farmers were forced into giving up their land. Mugabe then gifted the assets to friends, relatives and assorted cronies instead of promoting the interests of impoverished Zimbabweans. Agricultural output plummeted immediately. The resulting food shortages prompted the need for increased imports, financed by an unsustainably zealous attitude towards money-printing.

Predictably, inflation spiralled out of control. At its peak in 2008, monthly inflation reached 7,900,000,000% and prices doubled overnight. Gross national income (GNI) per capita fell from $890 USD in 1990 to just $300 in 2008; only in recent years has it returned to the previous levels. Even now, inflation remains at 348%. The industrial sector is operating at below 30% capacity and unemployment remains above 90%. Clearly, reform is needed – and fast.

Can Mnangagwa do it?

Fortunately for him, Zimbabwe’s economic opportunities are still there for the taking. The country was formerly known as the “breadbasket” of Africa, but a glance at its natural resources makes such a description seem positively miserly. With the world’s third-largest reserves of platinum, the fifth-biggest lithium production output and plentiful mines of coal, copper, diamonds, gold and iron ore, the country is a veritable cornucopia of resources. Mnangagwa hopes to harness that potential with a raft of measures designed to boost the economy by 4.5% in 2018.

Among other incentives, Mnangagwa has pledged to repeal the indigenisation law (so crucial to Mugabe’s regime and so damaging to the economy) from all industries except platinum and diamonds. He has also indicated that local businesses will be granted a tax amnesty on interest and fees, allowing them to clear debts and concentrate on the future. Additionally, he will also need to introduce a stable domestic currency in order to combat cash shortages that currently result in Zimbabweans queuing outside banks for days on end. Only then will the target of 4.5% become feasible.

Democracy just as important as the dollar

Even if Mnangagwa is successful in enacting his proposed measures (in itself a tall order), all that will mean nothing if he can’t get his own house in order. Corrupt political institutions will not encourage FDI or catapult the country out of its current pariah state, and if Zimbabwe is to flourish, it will need the help of the international community.

The signs thus far do not seem encouraging. New Justice Minister Ziyambi Ziyambi has dismissed calls for electoral reform, claiming they are not needed. Mnangagwa’s opponents say that the new president – and longtime Mugabe lieutenant – will turn out to be a carbon copy of his predecessor. Unless Mnangagwa can banish such anxieties and demonstrate a real desire to reform, Zimbabweans could come to face the same Sisyphean fate as their Congolese counterparts.

Keep reading |  6 min read


Zimbabwe’s President Announces the Country’s First Free Elections

 1 min read / 

Zimbabwe’s President, Emmerson Mnangagwa, has declared a clean break with the past by announcing the country’s first post-Mugabe elections.

The elections, which are expected to take place in the next four to five months, will be completely free and fair, according to the new president, Under his predecessor, Robert Mugabe, elections were rigged, opponents were intimidated and calls for electoral reform were either ignored or silenced.

The move is expected to form part of a charm offensive for Mnangagwa to attract much-needed investment into the country. Under Mugabe, the once-prosperous Zimbabwean economy went into freefall with land forcefully reallocated to party cronies and the imposition of a harmful indigenisation law which curtailed potential investment from abroad.

Some remain cynical over the President’s bon homie. Up until the coup in November, Mnangagwa was Mugabe’s longstanding ally and henchmen. The opposition has said Mnangagwa’s Zanu PF has already made moves to win the rural vote by gifting all-terrain vehicles to tribal chiefs. Something the President has refuted.

Mnangagwa, nicknamed ‘the crocodile’ for his political cunning, has said he plans to attend the Davos Economic Forum later this month. He has also expressed interest in reforging close ties with Britain, its former colonial power.

Keep reading |  1 min read


Standing Defiant: African Countries Respond to Trump’s Comments

 5 min read / 

Africa Trump

Trump’s recent bout of racism has given African states the opportunity to exert considerable agency on the world stage and also take the moral high ground of dignity and respect. Though Trump’s comments are of a vulgar and vile nature, they represent nothing new: African countries are severely misunderstood and misrepresented in mindsets and media, in particular by those of some western publics.

This is to everyone’s detriment, as African countries are strategic partners in trade and security and will only grow more vital to the state of global, economic and political affairs – it is estimated that the majority of the world’s population growth will take place on the African continent.

The African Union’s Response

Trump’s comments are an opportunity for the African Union, or AU, and for individual African states to exert agency and also strengthen their moral standing. Trump’s outright racism and the ensuing African diplomatic response and the strong voices on social media represent a key moment in recognising Africa’s all too often under-appreciated importance to global affairs. The African Union condemned Trump’s comments in the strongest of terms, and issued a statement declaring that:

“The African Union Mission wishes to express its infuriation, disappointment and outrage over the unfortunate comment made by Mr. Donald Trump, President of the United States of America, which remarks dishonor the celebrated American creed and respect for diversity and human dignity.” The comments were further characterized by African envoys as “outrageous, racist, and xenophobic.”

Botswana has been a major voice in this response, describing the comments as “irresponsible, reprehensible, and racist.” Among the larger African states, Nigeria has not issued an official response, though South Africa is issuing a diplomatic protest over the comments, stressing that “relations between South Africa and the United States, and between the rest of Africa and the United States, must be based on mutual respect and understanding.” US diplomats were summoned in Ghana, Botswana, and Senegal – more African countries are expected to follow suit.

American Views on Africa

The racism and ethnocentrism inherent in labelling “distant” countries (such as Haiti and nations in Africa) pejoratively is nothing new. Though most Americans would not express their worldviews in such crass and vulgar terms, there is widespread ignorance about African countries, with little recognition that African countries represent strategic trade and security partners, not to mention their vast cultural wealth. This problem lies in all facets of American society, from predominantly negative and homogenising news coverage about the African continent to the Eurocentric focus of the education system.

These comments were made in a larger context of domestic demographic change within the US, in which white people will enter minority status by 2044, in addition to the global power shifts of the wider world. Not only are Trump’s comments steeped in racism and ignorance, but they represent the uncertainty and deep discomfort many white Americans feel in the midst of the changing domestic demographics and a world order in which the US is no longer the lone superpower.

Africa is the Future

The African continent is the future, as African population growth will account for the majority of the world’s global population with half of the world being African by 2100. African countries are already strategic partners in trade and security, and will only become stronger players in global political and economic affairs.

Though it is certainly a desired goal for public opinion – the worldviews of western publics in particular – to recognise and appreciate the importance of African countries in their right and their integral significance to international relations, in some respects it doesn’t matter what Americans might think about a massive continent of 54 countries. As John and Jean Comaroff have written in ‘Theory from the South‘, “Lagos is not catching up to us. Rather, we are the ones catching up to Lagos.” African countries are not waiting on Western publics’ enlightenment.

Due to the rise of emerging powers changing the global landscape of power relations, African countries have more opportunity than ever to exert agency in selecting their partners and leveraging relations for national gain. Though the US is a key economic partner for much of the continent, African countries have many other options and it is well known that the approach of China and other emerging powers are, in many respects, regarded more positively than traditional western approaches. Relations between the US and African countries have been marked by longstanding goodwill, but Trump’s comments may complicate relations, ranging from security cooperation to trade ties.

Most important is African ownership of African development, in which the harmonisation of external partners aligns with domestically articulated goals and aims in respect to the continent’s nations. African countries, and all of the diversity within them, must be appreciated in their own right and understood on their own terms.


African countries have their own visions and national development plans and are charting a course marked by innovation and holistic strategies aimed at meeting both human and environmental needs. It is time African countries are recognised and respected for the leaders they are on the world stage and that western publics realise that society’s global future is very much an African one.

Trump’s comments are of course vulgar and crude, but should make people think very seriously about society’s own failings in how people portray – and learn about – Africa, an incredibly diverse continent of 54 countries, from our media to our classrooms. Africa is the future, and – following Trump’s comments – African countries have taken the opportunity to exert agency on the world stage and take the moral high ground.

Keep reading |  5 min read


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