Wednesday, January 19, 2022

Botswana’s financial services market largely untapped

While all three of Botswana’s cellular network operators have launched their own mobile money service, a Gallup survey has found that the quite significant Sub-Saharan Africa market for financial services that use this platform remains “largely untapped.” This finding is based on a survey of 11 Sub-Saharan countries that include Botswana.

Results of this particular survey were published in June last year and subsequent to that a similar study was done in South Asia and Indonesia. The latter found that adults in sub-Saharan Africa are more likely to use electronic means to send, bring, or receive remittances, money, payments, or transactions than are adults in South Asia and Indonesia.

“Both markets have similar levels of informal transaction activity. In Sub-Saharan Africa, there is a total market of 134 million adult customers already making some form of money transfer or payment to another part of the country in cash. South Asia and Indonesia’s untapped market is estimated to be more than 1.5 times as large, at 208 million adults. Together, these regions’ potential consumers of formal money transfer services account for approximately 5 percent of the global population.

However, the remittance, transaction, and payment markets in sub-Saharan Africa may be slightly further along with the integration of electronic technologies (such as mobile phone banking) than their South Asian and Indonesian counterparts.”

Leaders in Africa are Kenya, Tanzania, and Uganda where mobile money is contributing significantly to the financial inclusion of the unbanked citizens who use a variety of its deployments to send and receive money. There are now more mobile money accounts than bank accounts in Kenya, Madagascar, Tanzania and Uganda. According to a 2012 Global Mobile Money Adoption Survey (GSMA), there are 81.8 million registered customers globally and, in June 2012, there were twice as many mobile money users than Facebook users in Sub-Saharan Africa. With over 520,000 registered agent outlets, there are now just as many mobile money outlets globally as Western Union points of sale. There were more than half a million mobile money agents in June 2012, and there are now more mobile money agent outlets than bank branches in at least 28 countries. The GSMA Mobile Money for the Unbanked (MMU) programme tracks the progress of the mobile money industry for its Mobile Money Deployment Tracker and annual Global Mobile Money Adoption Survey.

The MMU has defined five categories of products to help classify them: transfers, being remittances, both on-net and off-net, and domestic and international; payment transactions, being bill payments, merchant payments, micro-insurance premium payments, airtime top-ups, online payments, ticketing, loan repayments, and others; disbursement transactions, being bulk payments, including salary payments and government-to-person payments, as well as loan disbursements; and conversion transactions, being transactions that allow customers to deposit money into and withdraw money from their mobile money account, thus converting digital currency to hard currency. The latter include cash-ins and cash-outs through a mobile money agent or an ATM, as well as transfers between bank accounts and mobile money accounts. There are also administrative transactions which take the form of PIN resets and balance inquiries.

The global mobile money industry has grown significantly: compared with 2007, when there were just a handful of mobile money deployments, Gallup says that there are now more than 100 worldwide, and 11 have more than a million registered users – a large part of them in Africa.

“Despite this growth, the market is far from saturated. As the data show, the potential exists for hundreds of millions of additional consumers to become regular users of formal remittance and payments markets,” says its survey, further noting that while development policy has focused largely on international remittances in recent years, the rate of domestic remittances in most countries dwarfs that of international remittances, sometimes by a high multiple.

According to this survey, 20 percent of the total adult population in the region (approximately 50 million people) reported having sent or brought domestic remittances, and 32 percent (approximately 80 million people) stated having received at least one domestic remittance in the 30 days prior to the survey.

“This compares to the 4 percent of the total adult population (approximately 10 million people) in the 11 countries who said they received international remittances in the same timeframe, most of them from outside of Africa. Furthermore, 1 percent across the region (approximately 2.5 million people) sent international remittances, with the biggest part being transferred to another African country. The findings suggest policy makers, donors, and academics should elevate the importance of domestic remittances and work to improve the access to the market for quality domestic remittance services for all parts of society.”

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