The Mobile Telephone a Means of Improving Access to Financial Services in Africa
A great number of Africans are still excluded from their financial systems. In spite of their growth, banks in Africa cover only 23 percent of the population. The rate is 11 per cent in the Central African Republic and 2 per cent in Niger, panelists who discussed the issue said at the 48th Annual Meetings of the African Development Bank in Marrakech, Morocco, said.
What is the reason behind this low level of bank coverage? “First and foremost, the populations are poor. They have no savings and therefore no money to make bank deposits. Opening an account in Africa is also very expensive,” explained Fabrizio Fraboni, an expert at the International Finance Corporation. Another reason is that small and medium enterprises that play a key role in the continent’s economic development usually do not have access to financial services .
Further, Bank branches are usually out of the reach of rural populations, Angela Hansen of the World Food Security Bureau said.
She added: “Rural populations are generally illiterate and do not have the slightest idea about the banking system, especially interest rates.”
In the 1990’s, “African economies placed a high level of importance on micro-credit, but this has not improved access to the financial systems,” Tanzania’s Minister of Finance , William Mgimwa, said.
Given this backdrop, how can financial services on the continent be improved?
The mobile telephone is one of the answers to this question, delegates on the panel said. This is all the more so as the number of subscribers has virtually exploded in Africa over the last few years, totaling some 600 million. Because they do not hold bank accounts, many Africans make payments through their mobile phones. “This means that if we develop this type of service, we can improve access to banking services,” Fraboni said.
However, the panelists cautioned, if mobile telephone banking is to be developed, it must be regulated, in large measure because financial services on the continent are not generally of a high standard due to the lack of competition .
The experts said Africa also suffers from a high level of financial illiteracy.
A large number of households use bank loans for immediate consumption rather production, making it difficult for them to repay these loans. “It is important to teach the populations the subtleties of the financial system,” the panelists said.
Mgimwa noted a close connection between a boom in the financial sector and economic development. He said, as an example, improved access to the financial sector will help develop Africa’s agricultural sector.
If rural populations find easy access to credit, they can in turn invest the monies they borrow in better agricultural tools and implements and so obtain higher production and yields, he said.