Influence of Mobile Money on Transactions in Africa, Focus on East

AfricaKelvin Kizito Kiyingi

Assistant Director, Communications Department Bank of Uganda

Cash Cycle Seminar Beirut LebanonNovember 2015

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The rapid growth of mobile money in East Africa is a phenomenon

which has few precedents in the region’s financial and banking

history and has far reaching implications on transactions.

Main Areas of Focus: The history and growth of Mobile Money

The financial sector

Business

Influence on transactions

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History & Growth of Mobile Money Kenya: 2007 (Safaricom); it is now used by at least 70% of

households Last year, the value of mobile money transactions was more

than $20 billion.

Tanzania: 2007 (E-Fulusi); (T) Ltd pioneered

Interoperability; across all platforms

September 2013, the Bank of Tanzania reported 30.3 million registered mobile money users

Uganda: 2009 (MTN);.

Value of mobile transactions about $6 billion

Number of mobile money accounts 18.59 million

Number of account holders in all commercial banks, 6 million

Mobile phone subscribers, banked or unbanked, deposit value into their mobile account/virtual account to enable transactions It is a form of branchless banking Mobile money is purchased for cash from a

mobile agent.

Once e-value is obtained one can: Withdraw cash from an agent Transfer funds, even to unregistered users Pay bills, for goods and services Purchase mobile airtime for self or others ATM withdrawal Pay salaries, welfare payments Loan repayments Foreign remittances

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Transactions via Mobile Money

Kenya is ranked the biggest economy in East Africa with a GDP of $61 billion followed by Tanzania ($49 billion), Uganda ($26 billion) and Rwanda ($8 billion)

Source:World Bank statistical July 2015.

Source: The East African

Financial Sector

There is a difference between mobile banking and mobile money

Mali, Pan-African Ecobank partnering with Orange Cameroon to transfer

cash between two services. Four other countries

Nigeria, GT Bank with Etisalat, create GTEasysavers, saving account via

mobile phones.

Kenya, competition between Equitel and Safaricom

In general, banks have entered the fray and offering new services

The financial sector has been revolutionarised

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Participation in the infrastructure bond in Kenya: 23 million people in Kenya with mobile money accounts. Ordinary Kenyans given chance to climb the investment ladder.

Mobile Money as collateral in Kenya and Tanzania

Transferring money from Rwanda (Francs) to Uganda (in Shillings) via MTN

Use of several mobile applications like the “Wave”.

Business

Kenya: M-Pesa agents are more prevalent per capita than ATMs in the United States

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Communication: Tools and Channels

Mobile Money Guidelines issued by Bank of Uganda

Public Education on the use of mobile money

Communications Strategy: Know Your Rights

Regional Sensitization Workshops

Media seminars & workshops

Social Media, Internal communication

Financial Consumer Protection Consultation Group

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Transactions in East Africa

“Millions of people send and save money with M-Pesa – and it’s a great idea that started here in Kenya”

In 2014, Consumers in Kenya, Uganda, Rwanda and Tanzania transacted $45.75 billion through their mobile phones

This is equivalent in value to 32 per cent of their combined gross domestic product — up from $4.86 billion or 3.4 per cent of GDP in 2009.

In East Africa, there are 24 mobile money service providers across the region; Safaricom’s M-Pesa is ranked the biggest.

Mobile money is a tool for strengthening social capital in East Africa, allowing families and friends to share financial burdens.

Mobile money has evolved beyond cash transfers

Source: GSMA AfricaPresident Barack Obama

Global Entrepreneurship Summit, Nairobi, 2015

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Yet to take off in some countries Poor technology and infrastructure (disruptive innovation):

Flexible regulatory framework, which aims to protect consumers while allowing innovation.

Central Bank of Kenya and Bank of Tanzania crucial

Microfinance organizations have lowered interest rates due to a reduction in collection costs via mobile money.

South Africa:

Better developed financial infrastructure

Regulatory regime

First of all, in the absence of a special dispensation for non-banks or e-money providers (which is the approach taken by the Tanzanian authorities, for example), payments providers in South Africa are treated as banks and subject to the full regulatory compliance requirements (and costs) associated with this.

Why mobile money has flopped in SA

Statistics to consider The following three slides show the influence of mobile

money in Uganda: Slide 11: Number of mobile money clients Vs. Number of transactions

Slide 12: Broad Money Vs. Value of mobile money transactions

Slide 13: Annual transactions in mobile money Vs. Uganda National Inter-bank Settlement System

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11

Uganda: mobile money users and transactions

Source: Bank of Uganda2009 2010 2011 2012 2013 2014

0

100

200

300

400

500

600

0

5

10

15

20

25

2.8428.82

57.3

241.73

399.46

496.25

0.551.68

2.61

8.87

14.24

18.59

Uganda: Number of mobile money clients and transactionsNumber of transactions (millions) Number of registered customers (millions)

Num

ber o

f tra

nsac

tions

(mill

ion)

Num

ber o

f reg

ister

ed c

usto

mer

s (m

illio

n)

Source: Bank of Uganda

12

Source: Bank of Uganda2009 2010 2011 2012 2013 2014

0

2,000

4,000

6,000

8,000

10,000

12,000

-

50

100

150

200

250

300

5,332.44

7,397.657,762.54

8,844.41

9,583.00

11,081.07

3.24 14.97

44.65

131.76

178.20

231.92

Broad Money-M2 Value of MM transactions

Broa

d M

oney

in b

illio

ns o

f Shi

lling

s

Valu

e of

MM

tran

sacti

ons i

n b

illio

ns o

f Shi

lling

s

Uganda: Broad Money and Value of MM transactions in billions of Shillings (2009 – 2014)Source: Bank of Uganda

Annual Transactions in Mobile Money and the Uganda Inter-bank Settlement System

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2011 2012 2013 20140

50

100

150

200

250

0%

2%

4%

6%

8%

10%

12%

153.2

195.7

235.0 227.3

4.5 13.2 19.5 23.2

2.94%

6.75%

8.30%

10.21%

Value of UNISS Transactions Value of MM Transactions Proportion

Year

Valu

e in

Shi

lling

s (T

rilli

ons)

Prop

ortio

n of

MM

of U

NIS

S

Source: Bank of Uganda

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In 2014, the value of settlements via the UNISS was UGX227 trillion,

including RTGS; mobile money transactions were UGX23 trillion.

The value of mobile money transactions was equivalent to 10% of UNISS

settlements in Uganda.

In 2014, Broad Money was UGX11 trillion, mobile was UGX231.92 billion,

which is about 2% of Broad Money.

It is impossible to measure transactions made in cash

Therefore, mobile money is much more important as a medium of

exchange than a store of value.

Conclusion

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But I think that we are probably still only at the beginning of the transformation which mobile banking will create in our economy and society.

-Prof. Emmanuel Tumusiime-Mutebile,Opening Remarks, February 2015

The rapid growth of mobile money in East Africa is a phenomenon which has few precedents in the region’s financial and banking history and has far reaching implications.

History & Growth: Impressive growth The financial sector: The writing is on the wall

General public: Paying for utilities in smaller quantities

Impact of Mobile Money: is an important medium of exchange.

However, not yet very important as a store of value; cash is still

king.

Recap