Moody’s says mobiles giving Kenya the edge in banking
A man uses his mobile phone next to an M-Shwari poster. M-Shwari is a leading mobile banking service rolled out by Safaricom and the Commercial Bank of Africa. PHOTO | DIANA NGILA
What you need to know:
Moody’s says mobile money accounts make up a sizeable share of the formal bank accounts held in the region.
Adoption of mobile banking has helped lift Kenya’s financial inclusion levels to over twice the average for Sub-Saharan Africa (SSA), a new report by global ratings agency Moody’s shows.
The report says 75 per cent of the adults have a bank account—including mobile banking accounts—against an average of 34 per cent in the SSA region.
Kenya is ranked above Nigeria, which has about 44 per cent of adults holding bank accounts, Ghana (40 per cent), Ivory Coast (34 per cent) and Angola with 29 per cent.
Moody’s expects regional banking systems to continue expanding strongly over the next 12 to 18 months on the back of economic growth and increasing financial inclusion.
“Extensive use of mobile technology is a distinctive characteristic of the region, which has fuelled a surge in financial inclusion…the pace has the potential to increase exponentially, helped by the growing accessibility of mobile banking, with Kenyan banks leading their peers in this area,” vice-president and senior credit officer Constantinos Kypreos says in the report.
Moody’s says mobile money accounts make up a sizeable share of the formal bank accounts held in the region. The latest CBK data shows 25.45 million Kenyans had mobile money accounts by the end of February, transacting an average of Sh209 billion a month.
In 2014, Kenyans transacted a total of Sh2.37 trillion through mobile money, equivalent to half of the size of Kenya’s gross domestic product.
The popularity of mobile money has seen the M-Shwari product rolled out by Safaricom and Commercial Bank of Africa (CBA) attract over 10 million customers, catapulting the lender to the top in terms of the number of retail bank accounts in Kenya.
In contrast to the Kenyan success story with mobile money, just two per cent of adults world-wide have such accounts. In Sub-Saharan Africa the number is also relatively low at 12 per cent.
Moody’s notes that financial inclusion is critical in reducing poverty and achieving economic growth, in addition to offering banks extensive growth opportunities.
“The immediate benefits relate to increased fee-based revenue derived from so-called ‘first-generation’ products, which include money transfers, bill payments and mobile phone airtime top-ups. As the market develops, banks can progress to deposits, loans and insurance,” said Mr Kypreos.
“Mobile bank accounts, moreover, incur lower transaction costs because basic banking and transactional services can be offered without requiring a costly branch network.”
Innovate
Moody’s further says based on the experience of Kenya, successful mobile banking operations require flexible regulators who allow companies to innovate and test their services outside the confines of strict regulation, a good network of agents, high volumes of mobile payments and reasonably high literacy.
Analysts at Old Mutual Securities say Kenyan banks are also boosting their bottom lines by cutting costs through adoption of mobile banking.
“Offering banking services on mobile platforms increases convenience to the customer and helps banks reduce their operating expenses—it costs approximately Sh14 to deliver a banking service to a customer via mobile compared to Sh97 via the counter,” said Old Mutual analysts Eric Munywoki and Halima Saadia in a banking sector report released on Monday.
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