The next time the Minister of Finance and Development Planning, Kenneth Matambo and the Governor of the Bank of Botswana, Linah Mohohlo, sit down to discuss financial inclusion, it is unlikely they will find common ground on one very important aspect of this issue.
When presenting his budget speech, Matambo described mobile financial services as “one of those initiatives that are being used to promote financial inclusion. It includes mobile money transfer and mobile banking such as e-wallet and others which are easily accessible and convenient medium for the delivery of financial services.”
Mohohlo is a member of the African Progress Panel which is made up of 10 distinguished individuals from the private and public sector who advocate for equitable and sustainable development for Africa. On its website, the panel says that it has extensive networks of policy analysts across Africa and that by bringing together experts with a focus on Africa, it contributes to generating evidence-based policies. The panel is chaired by Kofi Annan, the former Secretary-General of the United Nations and Nobel laureate.
In its 2014 report, the panel addresses the subject of financial inclusion and reaches the conclusion that making financial transaction through a cellphone points to something really bothersome ÔÇô financial exclusion. The report cites the example of M-PESA, a mobile payment system in Kenya that has enabled more than 15 million unbanked people to send and receive money electronically. A recent survey found that 86 per cent of households in Kenya report using mobile phones to make payments, or send and receive money ÔÇô one of the highest rates in the world. However, in its report the panel questions whether this can be considered to be any kind of real progress at all: “… the very success of M-PESA raises its own set of questions. Why is it that while three-quarters of Africans have access to a mobile phone, just one-quarter have a bank account? Does being able to send and receive money using mobile phones equate to access to a country’s financial system?”
With Sub-Saharan Africa emerging as the global growth centre for mobile telecommunications, there are 146 cellphones per 100 people in Botswana. The country comes second after Gabon where there are 149 cellphones per 100 people. On the whole, mobile phone subscriptions in the region have risen from 90 million to 650 million over the past seven years. In Botswana, only 30 percent of eligible people have an account at a formal ?nancial institution. In the case of Gabon, the figure is 19 percent. This level of financial exclusion worries the Africa Progress Panel.
“After a decade of growth, three-quarters of African adults do not even hold an account at a formal financial institution. Africa’s banks register some of the world’s highest profit margins: returns on equity of 20 to 30 per cent are not uncommon. Yet many African banks are disengaged from the real economy and real lives, preferring to build profits on a lucrative trade in treasury bills,” it says in its report.
Currently, no region has a lower level of access to financial services than Sub-Saharan Africa and according to Mohohlo’s panel, both African governments and commercial should shoulder the blame for a situation in which “mobile phone coverage is running ahead of financial inclusion.” All too often poor physical access and infrastructure deters rural branch bank expansion, restricting people’s access to savings and driving up the costs of delivering services and providing loans.
As regards banks themselves, the panel notes that those in Africa typically serve a minority of the population and that their weak role in development is also reflected in interest rate spreads ÔÇô the gap between the borrowing rates and lending rates of financial institutions ÔÇô which are among the largest in the world.