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Richer countries urged to help poorer make the most of mobile banking revolution

Anne Gulland
Banking via mobile phone has exploded in Africa - EPA

Finance ministers from the world's richest nations are being urged to do more to help people in the poorest countries gain access to bank accounts. 

The ministers from the G7 richest nations, who are meeting in Paris on Thursday, will be presented with a report by the Bill and Melinda Gates Foundation that sets out how to help the 400 million people in Africa who do not have a bank account gain a foothold in the financial system.

Doing so will enable Africa's booming population to thrive and lift millions out of poverty, experts believe.

Bruno Le Maire, France’s minister for the economy and finance, will urge his counterparts to provide $255 million to implement the measures outlined in the report, including improving infrastructure, regulation and helping people gain digital identification. 

The UK has already pledged $18m, France $25m and the Gates Foundation $73m to improve financial access. 

Mr Le Maire said: “Having a bank account is the first crucial step towards independence. That is why we are committing $25m to this initiative and we encourage other G7 countries to do the same.”

The report shows that of the 400 million people in Africa who are currently “unbanked”, some 240 million are women. It highlights how giving women access to finance and the opportunity to save, send and receive money can lift whole families out of poverty.   

Mobile banking, in particular, presents a huge opportunity. According to GSMA, which represents mobile phone operators, around half of the population of sub Saharan Africa will have a mobile by 2025 - and it is the fastest growing region in the world. 

In 2007 the M-Pesa money network was launched in Kenya, and it has since spread across the continent. Roughly 100 million people now use their phones to access money. 

The mobile money platforms, provided by telecoms companies such as Kenya’s Safaricom, enable customers to send, receive and store money, bypassing traditional bricks and mortar banks. Money is sent via text message and users can do it on even the most basic mobile phones.

These mobile money networks have completely revolutionised banking in Africa - they are estimated to have taken 180,000 people out of the bottom tier of the financial scale.

But with African's booming population urgent measures are needed to ensure that all groups can make the most of the opportunities on offer, the report warns.  

“The current financial system leaves out women, the poor and rural communities,” said Melinda Gates. “Digital technology opens up opportunities to bring them in. If we act on the recommendations in this report, we will help some of the most marginalised people in the world, most of them women, build a more prosperous future.” 

The report identifies key methods mobile financial systems can employ to encourage broader access.  

It says systems need to be interoperable so people can send and receive money between different networks - which would also prevent fraud as companies could join together to monitor dodgy transactions.

The report also calls for digital ID systems to be introduced across the continent to make it easier for people to set up bank accounts. 

Kosta Peric, deputy director for financial services for the poor at the Gates Foundation, highlighted India’s “aadhaar” digital ID system which has been rolled out to more than a billion people, as a way of enabling people to access government and financial services.

“Today in many countries there are social support programmes where governments help households in various ways. If the money goes direct to the household it will end up in the hands of men,” he said. 

“With digital ID the woman becomes part of the economy. She can receive the money on her own so government help can be directed to her.”

The report also calls for better financial regulation to enable more financial products and services while also keeping the system secure.

Daniel Mhina, head of digital finance at Financial Sector Deepening Trust, an organisation in Tanzania which promotes financial inclusion, said that the country already had a mature mobile money market.

But he said there needed to be more specific products for women.

“Many women are farmers and the majority take care of their family. Savings are key for them, as is insurance in case the family has any medical expenses. It’s important that they can cope with big financial shocks,” he said.

But Mr Mhina said that in a country where 50 per cent of people were unable to multiply or divide it was important that communication was clear.

“If you lend someone $10 and tell them the interest is two per cent they will not understand. The way companies communicate about their financial products is really important,” he said.

Mr Peric said the report was not calling for new players in the market.

“M-Pesa showed it can be profitable for a company to serve the poor.  It has a large volume of transactions but only a very tiny fee. Today in sub-Saharan Africa there are more than 200 mobile money systems.

“Our goal at the Gates Foundation  is not to do more of this because it’s now proven that there is a business model.  The problem is the current rate of growth, particularly to marginalised communities,” he said. 

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