Why Most People Don't Have Bank Accounts in Africa: The Surprising Technology Filling the Void
For many around the world, accessing a bank account is a given a tool for receiving salaries, paying bills, and saving for the future. However, in many parts of Africa, this is not the reality. Traditional banking, with its need for physical branches and formal paperwork, has often failed to reach vast rural populations and those with lower or irregular incomes. This is not because people lack money or financial needs; they pay school fees, settle bills, and support families. The question then arises: how do they manage their economic lives?
The answer lies in a surprising technological leap that has bypassed traditional banking entirely: the widespread adoption of mobile money.
The Scale of the Shift
The move to mobile money is not a niche trend. By 2023, there were over 640 million mobile money accounts globally, with more than half located in Sub-Saharan Africa. The region is home to a staggering 835 million registered accounts, which process billions of dollars daily .
This growth has fundamentally changed financial inclusion. In Sub-Saharan Africa, the percentage of adults with any form of bank account grew from one-third in 2014 to more than half by 2021. Crucially, data shows that the share of people with only a traditional bank account remained flat. Almost all the growth was driven by people getting a mobile money account, either on its own or alongside a bank account . This indicates that mobile money isn't just an add-on; for many, it is the primary and preferred gateway to financial services.
How Mobile Money Works: A Bank in Your Pocket
Mobile money is a simple yet powerful technology designed for environments with limited internet access and low smartphone penetration.
· Accessibility: It operates on basic feature phones via unstructured supplementary service data (USSD) codes, requiring only a mobile network signal .
· The Process: To send money, a user dials a short code, enters the recipient's phone number (which acts as the account number), the amount, and a secure PIN. The transaction is confirmed via SMS for both parties within seconds .
· Cash-in/Cash-out: A key to the system is the network of agents often local shop owners who act as human ATMs. Users deposit cash with an agent in exchange for electronic money in their mobile wallet, and vice-versa for withdrawals . This agent network brings financial services to the most remote villages, eliminating the need to travel long distances to a bank branch.
Mobile Money vs. Mobile Banking
It is important to distinguish mobile money from the mobile banking apps used in the developed world.
· Mobile Money: This is a service typically offered by mobile network operators (like Safaricom's M-PESA). It does not require a traditional bank account at all. Its infrastructure is built on telecom networks and agent kiosks, making it perfect for the unbanked .
· Mobile Banking: This is a digital extension of a pre-existing bank account. It requires internet access and is designed for those already within the formal banking system .
This distinction is crucial. Mobile money was built from the ground up for populations excluded from the traditional financial system.
More Than Transfers: A Suite of Financial Services
While person-to-person transfers were the starting point, mobile money platforms have evolved into comprehensive financial tools .
· Bill Payments and Commerce: Users can pay for utilities, school fees, and taxes directly from their phones . Businesses, from large corporations to small kiosks, can also receive payments via till numbers or QR codes, integrating the informal economy into the digital realm .
· Savings and Credit: Platforms like M-PESA now offer integrated savings products and micro-loans. For instance, in Kenya, services like M-Shwari allow users to earn interest on savings and access small, instant loans, building a credit history based on their mobile money transactions . This is a revolutionary step for those who previously had no safe place to save or access to affordable credit.
· Safety Nets and Remittances: Mobile money provides a critical buffer against unexpected financial shocks. Studies have shown that families with access to mobile money do not have to cut their consumption during a crisis because they can quickly receive support from relatives far away . It has also become a dominant channel for receiving international remittances, providing a cheaper and faster alternative .
Barriers and the Road Ahead
Despite its success, challenges remain. The primary barriers to adoption are the lack of funds and not owning a mobile phone, particularly for women . Additionally, a lack of official identification can prevent some from opening an account .
The future, however, is bright. The advent of affordable smartphones and the expansion of 4G and 5G networks will further accelerate adoption, enabling more advanced financial services . We are also seeing increased collaboration between mobile money providers and traditional banks, creating a more interconnected financial ecosystem that offers the best of both worlds .
Conclusion
The story of banking in Africa is being rewritten not in marble-clad bank halls, but on the small screens of mobile phones. Mobile money has succeeded by understanding the local context: it is low-cost, widely accessible, and built on trusted agent networks. It has done more than just provide a transactional tool; it has offered millions a financial identity, a safety net, and a path toward economic resilience. For the average person in rural Africa, the question is no longer why they don't have a bank account, but why they would need one when they have a powerful and portable bank securely embedded in their SIM cards
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