Enhancing financial inclusion through mobile money

The introduction of mobile telephony in Nigeria, its rapid growth and adoption and the identification of person-to-person payments as a practical strategy for financial inclusion, has made it imperative to adopt the mobile channel as a means of driving financial inclusion of the unbanked.

The Central Bank of Nigeria (CBN) identifies two types of mobile payment services for operation in the country. These include Bank-led model- where a bank either alone or a consortium of banks, whether or not partnering with other approved organisations seek to deliver banking services, leveraging the mobile money system and a non Bank-led model that allows a corporate organisation that has been duly licensed by the CBN to deliver mobile payment services to subscribers.

Consequently, mobile phones now reach the most remote communities across the world- in places where banks cannot penetrate. Mobile Money, a simple electronic account linked to a mobile phone number, is now available in 93 countries, enabling unbanked customers to make basic transfers and payments at very low cost.

“…E-money payment services through mobile phones seem to be especially well suited for rural and isolated areas, where providing physical points of access to payment services can be expensive,” Alix Murphy, Senior Mobile Analyst at WorldRemit said.

A payment account is one thing, but full financial inclusion also depends on access to crucial services such as credit, savings and insurance, which helps to protect households against income shocks and disaster. Mobile Money providers are among the payment services most innovatively driving financial inclusion by providing access to micro-insurance, micro-loans and even interest-bearing savings accounts.

Channelling remittances directly into Mobile Money provides a missing link to financial inclusion by enabling the recipients of remittances to make payments like utility bills and other essential transactions directly from their account, according to WorldRemit.

Murphy noted that up until now, the potential of remittances have remained “largely untapped”. This is because many remittance payments are made and received in cash and so are disconnected from the broader domestic payments infrastructure.

While it’s been the talk of the payments industry for years, the World Bank has officially recognised that you don’t need a bank account to access financial services, but simply a “transaction account” through which payments can be made and received, and where money can be stored safely.

Previous financial inclusion efforts focused too narrowly on getting everybody “banked”, but these failed to reach hundreds of millions of people because of the high costs of extending banking infrastructure into rural areas, especially in developing countries.

The World Bank now says that simple transaction accounts offered by non-bank entities such as e-money issuers and Mobile Money, are “an essential financial service,” reflecting a visionary about-turn in the international development sector and fight against global poverty.

HOPE MOSES-ASHIKE