Previously unbanked Africa is leading digital financial advancement in emerging markets
Africa’s status as an “unbanked” region has undergone a profound transformation in recent years and it is now a leading light in the digital financial revolution, helping the continent to overcome one of its key obstacles to economic development.
“In sub-Saharan Africa in 2021, 55 percent of adults had a [bank] account, including 33 percent of adults who had a mobile money account – the largest share of any region in the world and more than three times larger than the 10 percent global average of mobile money account ownership,” the World Bank said in its Global Findex Database, an annual survey of financial inclusion.
This is a game-changer and highlights how Africa has embraced mobile banking, which is providing individuals, households and small businesses with newfound access to financial services. Revealingly, as the World Bank report notes, the region has the highest percentage of mobile banking penetration, which is providing inclusion and filling a gap that traditional banking has not been able to fill.
A step forward for financial inclusion
“Mobile money has become an important enabler of financial inclusion in sub-Saharan Africa – especially for women – both as a driver of account ownership and of account usage through mobile payments, saving, and borrowing,” the World Bank report said. “From 2017 to 2021, the average rate of account ownership in developing economies increased by eight percentage points, from 63 percent to 71 percent. In sub-Saharan Africa, this was largely due to the adoption of mobile money.”
According to the World Bank, “Mobile money accounts have also become an important method to save in sub-Saharan Africa, where 15 percent of adults – and 39 percent of mobile money account holders – used one to save – the same share that used a formal account at a bank or other financial institution.”
According to the International Monetary Fund (IMF), sub-Saharan Africa’s savings rate is just over 17 percent, much lower than other regions. That 39 percent of mobile money account users now saving is testimony to the role that such initiatives can play in enhancing savings and investment in Africa.
And this is an area where Shyft, which is now available in Botswana, has been leading the way. The Standard Bank-powered app is planning to further expand its presence in Africa, and it is also available for non-Standard Bank clients. Easy to download and activate, it is set to provide further digital inroads into the fast-growing African mobile money market.
Undoing the difficulties around cross-border payments
Among its many features, Shyft allows for fast, secure transfers of money to beneficiaries around the globe. Cross-border payments are charged at a flat rate regardless of the size of the transaction.
In Africa, this is vital, as the difficulties and expenses in making payments between countries is seen as an obstacle to the trade of goods and services within the region.
Trade among Africa’s over 50 countries amounts to only about 15 percent of their total imports and exports, according to a recent report in the IMF’s Finance and Development magazine. This is much lower than other regions and is in large part a consequence of the difficulties in making cross-border payments. Sixty percent of Asian trade, for example, takes place within the continent, while within the European Union, it is 70 percent.
Mobile money solutions like Shyft could provide a means to see that figure increase in the future.
Shyft’s cross-border payment abilities could allow a farmer in Botswana to sell produce to a market in Kenya and receive a cross-border payment in pula directly into their Shyft account both quickly and affordably. It gets even easier if both parties have the Shyft app. The Shyft-to-Shyft payment function is an industry first which allows users to send currency to one another instantly and for free.
The bigger picture
Mobile banking and digital services also hold the promise of providing more accurate economic data for Africa. Calculations for important metrics such as a country’s gross domestic product (GDP) have been hampered in Africa by the large numbers of people excluded from traditional banking services and the relative size of informal economies – a state of affairs that makes it difficult to measure the monetary value of transactions for goods and services.
Providing a more detailed assessment of such transactions provides a more realistic yardstick for GDP and other metrics such as GDP per capita. This shows how an economy is performing relative to its peers, underlining the challenges that need to be addressed while also providing foreign investors with insight on where to deploy their capital in the region.
In short, it’s a win-win, bringing badly needed transparency to the region’s political economies while allowing the previously unbanked to gain access to the financial services they require to raise their standards of living.
Africa is turning the tide on its legacy of being “unbanked” with mobile banking – and mobile apps such as Shyft – at the forefront of this revolution. Shyft is proud to be playing a role in this area. DM/BM
This post was sponsored by Shyft, the global money app, powered by Standard Bank. With Shyft you can buy forex instantly anytime, anywhere, and at the cheapest rates, and invest in top US stocks and ETFs. Visit Shyft to download it now, no matter where you bank. Shyft operates under the license of The Standard Bank of South Africa Limited, an authorised Financial Services Provider (FSP number 11287)