In the last decade, African countries have invested heavily in expanding financial services and achieved impressive figures, but many communities remain excluded. It’s a challenge that Africa needs to overcome in order to find the path to development.
Why does the expansion of financial services continue to leave out an important part of African society? And what should be done to capitalise on all the efforts made since 2011? A World Bank study, carried out over a decade (2011 to 2022), provides the answers.
The work entitled ‘Financial Inclusion in Sub-Saharan Africa – Overview’ was based on 36 of the 47 countries in the region and concluded that access to financial services (traditional or mobile) has more than doubled since 2011, covering 49 per cent of adults. But this result does not reflect a similar performance by all the countries assessed. For example, looking at the extreme cases, in South Sudan the increase was 6 per cent. In Mauritius it was 91 per cent. In 16 of the 36 economies assessed, more than 50 per cent of adults had an account in 2022. Other success stories are Kenya (79 per cent), Senegal (56 per cent) and South Africa (85 per cent).
Despite general progress in promoting financial inclusion across the continent, there are significant gaps in access to accounts for women, young people, poorer adults, those with less education and the rural population
Between 2017 and 2022, nine of the 36 economies recorded double-digit growth in the number of financial services accounts, mostly driven by the adoption of so-called mobile wallets. The most prominent cases were Senegal and South Africa, each with growth of around 15 percentage points. In contrast, some economies, such as Kenya, showed no growth and others even regressed. According to the World Bank, the causes of these variations are related to political stability, regulation of the financial sector, competition between financial service providers, the size of the financial ecosystem and the effects of the Covid-19 pandemic.
The role of mobile money
Mobile wallets or mobile money, ‘deposited’ and managed on a mobile phone, has gained significant attention in sub-Saharan Africa over the last decade because of the way it has helped expand access to and use of traditional financial services. Kenya is famous for its robust and pioneering market. In 2014, the first year that the World Bank’s Global Findex collected data on mobile money penetration rates, 58 per cent of adults in that country already had an account. In comparison, 55 per cent of adults had a traditional bank account.
South Africa also had a relatively high rate of traditional accounts in 2014, at around 70 per cent. Mobile money adoption was more modest at just 14 per cent, but these services were entirely additional, as almost 100 per cent of mobile money account owners also had a bank account. The country continued to increase the share of adults with bank accounts (84 per cent in 2021) and mobile money (37 per cent, also in 2021).
In contrast, Mali and Senegal (at the opposite extreme) show a pattern that is more common among economies that used to have very low rates of bank account ownership. But since the introduction of mobile money, both economies have seen steady increases in account ownership, such that 44 per cent and 56 per cent of the population respectively now have an account (of any kind). In both economies, mobile money account adoption rates grew faster between 2014 and 2017 than bank account growth rates. But between 2017 and 2022, the growth rates for the different types of accounts were more uniform.
The exclusion of the ‘vulnerable’
Despite general progress in promoting financial inclusion across the continent, there are significant gaps in access to accounts for women, young people, poorer adults, those with less education and the rural population. In terms of gender, the exclusion of women in the region is double that of the average developing economy.
In sub-Saharan Africa, 52 per cent of adults have savings, more than the 42 per cent who manage to save in developing economies
Economies that have made great strides to boost equitable access include Mali, which has drastically reduced the exclusion of women: from 20 per cent in 2017 to just 5 per cent in 2021. South Africa, meanwhile, is the country in the region where gender asymmetries are lowest. However, in none of these economies has mobile money alone been responsible for a reduction in gender asymmetries. Instead, in both Mali and South Africa, women and men have gained ownership of mobile money accounts and bank accounts.
In the case of Kenya, where the gender gap remained unchanged, mobile money brought a larger share of women into the formal financial system than banks.
In Senegal, the gender gap has risen, but account ownership in general has increased almost tenfold in the last decade – a success story, although growth is occurring more slowly for women than for men. Thus, in Senegal, more women have mobile money accounts (38 per cent) than have bank accounts (24 per cent).
The barriers to inclusion?
The Global Findex survey asked unbanked adults why they don’t even have a traditional account. The most common reason was lack of liquidity. Other frequently cited reasons included a lack of documentation, such as an identity card or proof of residence.
The distance from a physical branch and the cost of financial services were also recurring reasons, meaning that there seems to be a market for more affordable, digitally accessible products. But there are also specific barriers in the context of digital financial services, such as the lack of a mobile phone.
Text: Celso Chambisso – Photo: D.R.
