Mobile Money: Ghana's Experience

Millions of Africans are busy at their mobile phones. They are using the phones to send and receive money, top-up phone credits, pay bills and even buying basic shopping items.

All the above activities they are performing on their mobile phone are what have come to be known as “mobile banking” or “mobile money”-- financial transactions on the mobile phone. The amounts involved are normally small, but with the sheer numbers of people patronising it, the aggregate figures are huge.

Africans have been behind the world in many development indices and technological innovations but not mobile banking.

A survey of Global financial habits by the Gates Foundation, World Bank and Gallup World Poll quoted by The Economist magazine revealed that there are 20 countries in which more than 10% of adults used mobile money at some point in the year 2011. Of these 20 countries, 15 are in Africa alone.

World Bank estimates also show that more than a billion people worldwide do not have a bank account but own mobile phones.

Africa has the fastest-growing mobile phone market in the world, and -- in a region where banks are many kilometers away from villages -- the mobile phone has thus come in handy to fill a huge gap.  

Mobile money represents one of the few areas where Africa leads the rest of the world.

KENYA’S SUCCESS STORY

Kenya in East Africa is the poster-child for the revolution in mobile banking across the world. Its most successful service is called M-PESA and was launched by telecom operator Safaricom in 2007. The ‘M’ stands for ‘mobile’ while ‘PESA’ is the Swahili word for ‘cash’.

There were about 15,00 cell-phones in circulation in the country in 1999; but today there are 29 million mobile phones in use, a penetration rate of 74%. In addition, 68% of all adults in Kenya use mobile money -- the highest rate in the world. In fact, a third of Kenya’s GDP passes through mobile money.

M-Pesa has really helped to bring the Kenyan economy closer to a cashless one, therefore reducing the security risk of carrying cash around. It has helped reduce the cost involved in printing and carrying around cash. It has also enabled ordinary people who otherwise would have been left out of the traditional banking system to access financial services via their phone.

The service is so popular that the name M-PESA has found its way into Kenya’s dictionary.  Just as you say “Google it”, now Kenyans say “mpesa it” or “mpesa me”.

Mobile money services are equally popular in east African countries of Tanzania, Sudan, Somalia and Uganda.

GHANA’S SITUATION

It was about 1pm and I needed to send money to someone in the Volta Region of Ghana.  For fear of encountering long queues at the bank (some banks offer money transfer services), I decided to try the mobile money service offered by one of Ghana’s telecommunications companies. After about   15 minutes I sent the money and notified the recipient to go for the money. I left and went back to work.

About an hour later I had a call from the recipient that he was unable to get the money. He has been to the 3 accredited mobile money agents in the town where I sent the money, but each had a different story to tell. One agent did not have enough cash to pay the amount I sent.

The agent had to travel to the regional capital the next day to load up enough cash before he could pay out the amount. The second agent no longer offered the service (he has switched to a rival provider).

The last agent had completely stopped offering the service but the telecom operator in Accra (where I sent the money from) was unaware of this.

As the money was needed the same day, I had to ask that the telecom operator pay me my money so I could get a different means to re-send it to my recipient.

I was informed I could get the money back, but minus a 1% service charge. In other words, I would be punished for going through the process. I refused to pay the service charge and contended that it was not my fault but that of their agents. After heated arguments, the manager agreed and gave me the full amount. I frustratingly went to the bank and sent the money instead.

Since then, I have used a different telecom operator’s money transfer service with few problems.
Both situations, I believe, reflect the mobile money transfer situation in Ghana. Unlike East Africa, it is still in its infant stages here.

Ghana has six telecom operators (MTN, Vodafone, Tigo, Airtel, Glo and Expresso). Of these 6, only 3 offer mobile money services.

Figures released by the country’s telecom regulator as at July 2012 show that the mobile phone penetration rate in the country is 93%. That is for every 100 people, 93 of them own a cell-phone (I think this figure is bloated as people own multiple SIM cards)

An IMF report released this year and quoted by Ghana’s Business and Financial Times newspaper said that only:

1% of Ghanaians use their mobile phones to send money;
1.5% use their phones to receive money; and
Only 0.9% use their phones to pay bills or perform allied services.

So what is my point?

Kenya has a mobile phone penetration rate of 74%; out of those 68% use mobile money transfer services. Ghana has a mobile phone penetration rate of 93%, but only 3.4% of them use cell phones for mobile money services. Ghana needs to vigorously adopt the use of the mobile phone for basic financial services.

In other words, the majority of Ghanaians still prefer to use the banking hall to make cash deposits and withdrawals.

Herein lies one of the reasons why most banking halls are choked, leading to delay in service times and poor customer service. This low patronage also means there is a huge gap for telecom operators to increase their revenues.

MTN Mobile Money leads the way in the usage of this service. MTN has signed up over 2 million money subscribers, although this is dwarfed by Kenya’s 29 million users.

At a roundtable discussion last month on building a ‘cashless economy in Ghana, The Sales and Distribution Executive of MTN Mr. Ebenezer Asante revealed that by the close of this year, the company expects to have handled about 13.5 million transactions since they launched the service in 2009. A growth of about 265% in the value transacted over that period.

Yet another money transfer opportunity available is in the area of remittances from Ghanaians living abroad. The Ghanaian regulator could put in specific regulation that can enable Ghanaians abroad to send remittances directly to people phones for them to be cash at these mobile money operators’ outlets.

‘Airtel Money’ and ‘Tigo Cash’ money transfer services are also experiencing growth in the use of their services. An increase in the use of mobile money will make positive contributions to the economy.

It will provide job opportunities for the many agents across the country that will be signed on to offer this service. They will offer cheaper alternatives to current competitors like the banks, Western Union, Moneygram and others. As explained above, it will help reduce the cost of printing money, transporting and the cost of security associated with cash.

DISADVANTAGES

Mobile money usage has its setbacks.

The first is the strong desire for cash-based transactions in the country. Many businesses and individuals prefer cash in transactions.

The Bank of Ghana should step-up regulation that discourages the love for cash transactions. The current ‘E-Zwich’ smart card is a god policy. 

The regulator, banks and other financial institutions should step-up education on discouraging cash-based business transactions.

Mobile money has cash-float problems. Many users who mainly do withdrawals are rural people, and this makes the agents to run out of cash quickly -- as my frustrating experience with sending showed in the example above.

This is especially so if the agent is not close to an urban centre (which is where most banks are based), the transportation cost to a bank to load-up cash can cause problems.
There are not many agents that have been recruited, too.

The last difficulty is that the whole mobile money service is tied to availability or reliability of network coverage (people call it “reception”) as it involves text-messaging, which the recipient receives on his phone instantly to confirm that the money has been sent to him.

Thus, if a telecom operator does not have network coverage in a particular part of the country, inhabitants of that area will then be denied the chance of using mobile money services.

In conclusion, Ghana is behind Kenya and other countries in mobile banking despite our high ownership of cell-phones. The market for growth is big, and if fully-exploited our economy will benefit greatly.

By Anthony SEDZRO