From Cape Town to Cairo, Africa’s financial inclusion agenda is finally receiving the attention it deserves. Public authorities, private sector players and multilateral institutions are clubbing together to transform the prospects of the estimated 326 million adults across sub-Saharan Africa without access to formal financial services.
But shining the spotlight on a problem is one thing; solving it is another. Today, Africa’s financial inclusion project resembles a patchwork quilt of progress. Some markets are making swift progress, through embracing digital finance, for example, while others are responding more slowly.
To move this agenda forward, the continent’s financial regulators need to be bold. Offering financial institutions the space to innovate when it comes to products and services and allowing new market entrants into the formal financial sector are good places to start.
Beyond this, advances in mobile money will be vital to the success of the financial inclusion agenda – and east Africa’s experience is instructive. Regulators, notably in Kenya and Tanzania, have championed a telecommunications company-led approach to mobile money development.
This has seen the likes of M-Pesa emerge in Kenya, while Tanzania today boasts a fully interoperable mobile money market, meaning consumers can interact with one another even if they use different providers. These developments have been achieved through progressive regulatory philosophies that emphasise innovation, and the growth of a holistic financial infrastructure that supports consumers and institutions alike. Yet the continent’s largest market by population, Nigeria, has failed to keep up in the mobile money stakes despite high levels of mobile penetration.
The Central Bank of Nigeria’s insistence on a bank-led model, where commercial lenders are licensed to operate mobile money offerings instead of telcos, is the biggest stumbling block. In this relatively stifling regulatory environment, mobile money is failing to flourish.
Nigeria, and other markets with bank-led models, must be willing to take some risks and loosen the reins on the regulation of mobile money. Allowing the market to drive innovation will accelerate financial inclusion and promote economic growth. Such an approach is not without problems, but east Africa has shown that a telco-led model delivers results. The rest of the continent should follow its lead.
