Adoption of mobile money in Nigeria has been, to say the least, underwhelming, despite a large, rural population and ambitions for the country to lead Africa’s technological evolution.
While Nigeria might have the correct demographic environment for mobile money, it does not have a supportive regulatory environment, says Bob Collymore, CEO of Safaricom, the leading integrated communications company in Kenya.
“There used to be a time when we would have delegates from two or three countries at a time coming to visit our operations in Kenya each week to see what they could learn and adapt to their own countries, but they would all go back and not employ any of the changes we spoke about,” says Collymore.
“The Nigerian ambassador in Nairobi is often on my case about how we can get something like M-Pesa [Kenya’s mobile payment system] to take off there. I say to him, ambassador, please don’t waste my time, because your regulator doesn’t want this to happen. If your regulator doesn’t want this to happen then it won’t. It’s a similar story in Uganda.”
 |
| Bob Collymore, CEO of Safaricom |
In 2011, the Central Bank of Nigeria (CBN) committed to develop and pursue a strategy of financial inclusion to reduce the percentage of adult Nigerians excluded from financial services from 46.3% at the time to 20% by 2020. However, despite the declaration, a survey conducted in August 2013 by NOI, an opinion research company in Nigeria, showed that 59% of the population are still unaware of mobile money services and only 13% of those that are aware of mobile money have adopted it.
Moreover, it found that 93% of those with mobile-money accounts operate them in connection with their bank accounts, implying that the unbanked population in Nigeria – the target audience for mobile banking – were not using the services.
In reality, the CBN has been reluctant to hand over mobile-money licences to mobile network operators in Nigeria, despite the fact research by the GSM Association – the association of mobile operators – has found mobile phone operators are the most capable institutions to launch and scale mobile-money services and to lead the partnership with banks.
“Banking lobbies are strong in most African countries and they don’t want M-Pesa because they believe that they will lose out,” says Collymore.
“The regulatory environment in Kenya was such that the government wanted to deepen financial inclusion in the country, so M-Pesa was supported by the government because we had found a product that could help achieve this goal. Elsewhere this is often not the case, and the regulatory environment and banking lobbies have been hostile.”
And since Lamido Sanusi, Nigeria’s reformist central bank governor, was ousted on February 20, mobile money in Nigeria has been put firmly on the backburner. Indeed, it was under Sanusi’s leadership that mobile money in Nigeria became a priority of the central bank towards achieving its goal of finical inclusion in the country.
Aitec Africa, a company that focuses on ICT publishing and event management on the continent, even postponed its March conference on banking and mobile money in Lagos until July because of Sanusi’s dismissal.
“The central bank is an important partner for the conference and its current state of transition makes it impossible for it to provide its usual level of input for the event,” said Aitec Africa in a statement on February 28.
For Collymore, the banking sector in Kenya was caught off guard when M-Pesa started gaining ground. “By the time M-Pesa was up and running and we had a critical mass, the banking lobby in Kenya couldn’t do anything about us,” he says.
According to the World Bank, there are more mobile phones in Kenya than there are adults and nearly 80% of the 43 million people that make up the population with mobile phones in Kenya use them for mobile-money services. There are approximately 60 million mobile-money users in the world, meaning that around one-in-three is a Kenyan.
Half of all mobile-money transactions are taking place in Kenya, where annual transfers have reached around $10 billon.
Indeed, M-Pesa was the solution to a very Kenyan problem – something that other African countries may or may not have.
“We recognized that there was a real problem in Kenya: money was being made in the cities, but was often needed by families in the more rural areas,” says Collymore. “Money would regularly go missing. Sending money to villages safely could be done through a mobile phone. This was a problem and we created a solution.
“In fact, simply transplanting the Kenyan solution elsewhere isn’t likely to work either, especially if the country doesn’t have the same problems.”
As other problems have arisen, the M-Pesa model has been adapted to create solutions. For example, Lipa na M-Pesa came about to allow individuals to pay merchants directly through their mobile phone – a trend which might be adopted in the west.
“In six months we signed up 110,000 agents which are accepting payments this way who pay a 1% merchants fee – not bad at all as a 1% handling fee is usually cheaper than the alternative of using cash where money often goes missing,” says Collymore. “We want to make this as ubiquitous as we can.”
M-Shwari is a banking product launched by Safaricom in partnership with the Commercial Bank of Africa (CBA) in November 2012. M-Shwari allows M-Pesa customers to save and borrow money using a phone while earning them interest on money saved. M-Pesa customers can sign up to the product without having to step inside a bank branch.
Even though M-Pesa customers can disintermediate bank-owned payment channels, Safaricom has been quick to point out M-Pesa is not a direct competitor to banks, given some 98% of low-value transactions are in the form of physical cash.
“Importantly, the banking sector in Kenya now sees how we can work together,” says the CEO. “We aren’t their competitor: products such as M-Pesa improve the velocity of cash and M-Pesa competes with cash not with banks.
“Rather than competing with banks, we are working with them. Since we launched M-Shwari with CBA, there have been 3.2 million new bank accounts created over the phone. Before M-Shwari, CBA only had around 30,000 open bank accounts. This has been a tremendous development for the bank.”
Products such as M-Pesa and M-Shwari rolled out by Safaricom can, with the support and partnership from the financial services, make savings more productive, make moving money easier and quicker, and give governments and central banks visibility to the flow of money.
“From this perspective, policymakers are provided with a much more informed position to govern,” says Collymore.
He concludes: “It’s important for Kenya to build a culture of savings. Right now, Kenya has a culture of storage – people stash their money under the mattress or elsewhere, but as soon as you store money, it devalues.”