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Is Mobile Money Services Deepening Ghana’s Financial Inclusion?

Mobile money has improved livelihoods in poor and remote settings in Africa. It has also allowed businesses in various industries to innovate and digitalize their processes. Mobile money has brought many benefits to small and medium enterprises, more prominent organizations, and government to achieve their goals and benefit the end-users in Ghana.

In Africa, it is easier to find someone with a mobile phone than it is to find someone with a traditional bank account. Access to traditional banking does not come easy for many Africans, but a mobile phone can be purchased in minutes. This is why the mobile money has become the norm. The media are even reporting that mobile phones are replacing bank accounts in Africa, with sub-Saharan Africa boasts the highest number of mobile money accounts in the world.

Africa has been experiencing exponential growth, which has led to rising middle class incomes amid a technological boom. Mobile smartphones, which have dropped substantially in price over the last decade, mean more Africans are accessing the internet more often. Even in the most mature markets, mobile money accounts for a much smaller proportion of transaction values than transaction volumes, highlighting the ‘high-volume, low-value’ nature of the product. In Ghana financial transactions are gradually shifting from traditional banking methods such as cheques, and bank payments and deposits digital payment platforms such as those offered by telecommunication.

Ghana’s 2021 Mid-Year Fiscal Policy Review Of The Budget Statement And Economic Policy noted that, the country’s economy has outperformed its peers, recovering faster. After recording negative growth in the second and third quarters of 2020, the economy rebounded strongly in the last quarter of the year, continuing well into the first quarter of 2021. The Ghana Statistical Service reports that overall GDP growth for first quarter 2021 was 3.1 percent. The growth was even better excluding oil at 4.6 percent.

The Bank of Ghana Composite Index of Economic Activity (CIEA) attests to the strong growth recovery, with the index growing at 33.1 percent at the end of May 2021 compared to a contraction of 10.23 percent at the end of May 2020. There are also other positive trends from this pandemic, as digital technology is assuming a more significant role in the operations of businesses. Almost 9 out of 10 firms are now leveraging digital platforms to market their products. Similarly, mobile money, door-to-door delivery via courier services and internet usage for business operations also increased by 77 per cent. Government work better for the people; and rolling out digital technologies (eg. National ID, Digital Address System, Payment System Interoperability, Land Title Registration, Ghana.gov etc) to improve service delivery.

As financial inclusion implies increasing the coverage of the formal financial system, it may be expected to contribute to the development of a financial system. This is achieved by ensuring the ease of access, availability, and usage of formal financial systems for all members of an economy. Mobile money services in Ghana are positively increasing the amount, currency in circulation. The value of government-to-person payments quadrupled during the pandemic, with the mobile money industry working hand-in-hand with administrations and NGOs to distribute social protection and humanitarian payments quickly, securely, and efficiently to those in need. Facilitating this type of direct income support payments is one example of how mobile money provides a financial lifeline to underserved communities. Mobile money providers have also provided in-kind support, including the distribution of personal protective equipment (PPE) and hand sanitising gel at agent counters.

In fact, under these unprecedented circumstances, central banks and governments enacted a wide range of policy interventions. While some measures have aimed to reduce the sharp tightening of financial conditions in the short term, others sought to support the flow of credit to firms, either by direct intervention of credit markets (e.g., government sponsored credit lines and liability guarantees), or by relaxing banks’ constraints on the use of capital buffers. While credit institutions were being called to play an important countercyclical role to support the real sector, these actions also have a series of implications for the future resilience of the banking sector. For instance, as lenders exhaust their existing buffers, they might also experience deterioration of asset quality which may threaten the systems’ stability. As the crisis is expected to continue, even after the lockdowns were lifted and economies start to reopen, the net effect of these policy measures on the banking sector is largely unknown. Commercials Banks in Ghana recently published their 3rd quarter 2020 management financials and a quick review is being done to understand how they have managed to sustain the shocks during this pandemic.

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Ghana is one of the major African mobile money markets. The factors like increasing trend of convenience in service delivery, expansion in mobile money agent network and implementation of mobile money interoperability, are driving the mobile money market in the region. Various regulations and guidelines have also been implemented to strengthen and protect the mobile money system in the country. People in the country are preferring mobile payment mode in order to eliminate the threat of theft. Moreover, recent developments in mobile money interoperability have boosted the efficiency and accessibility to transfer the money easily for various applications. The EMI (electronic money issuers) guidelines introduced by the bank of Ghana has contributed a lot to the growth of mobile money system in the region. In addition to this, various other factors are also accelerating the growth of the market such as government support, rising internet penetration, implementation of interoperability and increasing financial literacy. Financial transactions in Ghana are shifting at a fast pace from traditional banks to the platforms offered by telecoms companies such as MTN Ghana, Airtigo Money, and Vodafone Cash. Progressively, the range of mobile accessible goods and services has successfully extended to the purchase of mobile communication credits, financial services, payment of public service bills or salaries, among others.

Mobile money and digital payment are central to Ghana’s plan to expand financial inclusion and move towards what it calls a “cash-lite” economy. As part of the National Financial Inclusion and Development Strategy 2017-23, officials hope to increase financial inclusion to 85% of the population by 2023, which is in turn expected to help reduce poverty and improve levels of social and economic development across the country. When mobile money was first introduced in Ghana in 2009, it took a while to gain as much traction as in other African countries due to the Bank of Ghana’s restrictive 2008 Branchless Banking Guidelines. Five years later, however, the Bank of Ghana revised regulations and eventually released new agent and e-money guidelines. These new regulations permitted mobile network operators (MNOs) to own and operate mobile money services under the supervision of the Central Bank. Shortly after that, new players like the telecommunications giant MTN began heavily investing in creating awareness, educating customers and recruiting agents and merchants. The country’s DFS industry now includes not only mobile money providers but banks, FinTechs and others that are leveraging mobile money account ownership to offer customers a range of new use cases.

Access to formal financial services in Ghana increased by 41 percent between 2010 and 2015, largely thanks to the uptake of Mobile Money, the Financial Inclusion Insights (FII) survey noted. According to study, mobile money has enabled Ghanaians to transfer funds, pay bills, and sometimes school fees, anytime and anywhere, regardless of the subscriber‘s level of education. Arguably, mobile money has become one of the surest, if not the surest, payment system in Ghana. With almost 27 million Ghanaians (90% of the country‘s population) being served according to Bank of Ghana in 2016, on mobile telecommunication technology in Ghana, and only about 58 percent of Ghanaians being banked, it is vital to examine the extent to which mobile money service influences financial inclusion. Surprisingly, by the year 2017, the country had over 11 million active mobile money accounts. The launch of Ghana’s first Mobile Money Interoperability Payment System in May 2018 is an important milestone towards an integrated and interoperable electronic payments environment and will have a major impact in efforts to ensure greater financial inclusion. Following publication of the guidelines, there has been increased activity in electronic payments, especially mobile money, with tremendous positive impact on financial inclusion.

Value of mobile money transactions in Ghana, grew by over 30% in March 2020. It increased from GH₵23. 4 billion recorded in March 2019 to GH₵33. 8 within the same period in 2020, indicating a percentage increase of more than 30 percent. According to the the Summary of the Economic and Financial Data for May 2020, published by the Bank of Ghana, the balance on float for all mobile money transactions, which stood at GH₵2.7 billion in March 2019, stands at GH₵3.9 billion in 2020, representing an increase of GH₵1.2 billion. The balance on float is the amount of mobile money cash that sits with the banks. The float boosts liquidity for banks. Data from Statista reveals that, 38.9 percent of the population aged 15 years and older had a mobile money account in Ghana as of January 2021. The share of mobile money users increased over the previous three years, but decreased slightly in 2021 from 39 percent in 2020.

Moreover, the number of mobile connections in this West African country increased steadily. But in recent times, incidents of mobile money fraud have increased. Statistics from the cybercrime unit of the Ghana Police Service showed over 300 reported cases in 2019. In an effort to curb MoMo fraud in Ghana, market leader, MTN MoMo on March 2021 announced that all MoMo customers should present valid ID cards before any MoMo cash-out (withdrawal) transaction can be processed. Without a valid ID card, MoMo transactions cannot be processed. Customers are expected to present any of the following ID cards -Ghana Card, Driving License, Passport, Voter’s ID, and NHIS.

A Senior Lecturer in Information Systems at University of Southampton, PK Senyo, stated in a report that, “I’ve done research on what influences behaviour related to financial technologies. One of my findings is that people are more open to using mobile money when they expect the effort of doing so to be small. On this basis, I believe they will not use mobile money if there are hindrances like constantly providing ID. Faced with this effort, they may revert to the use of cash thereby derailing Ghana’s financial inclusion progress. This new rule about presenting an ID has good intentions but might produce unwanted effects.”

Precious Baidoo a member of Digital Finance Practitioners Ghana and a student of Digital Frontiers Institute noted that, “Financial inclusion without regulation is as equal as driving without caution to speed limit.Moreover, regulation can equally ban and restrict mobile money, which again will not augur well for financial inclusion. A larger number of the financially included via Mobile Money do not have a proper Identity such as the NHIS, Drivers License, Passport.With this said, MTN should adopt a tiered risk management approach: thus an approach to assess what value of cash out transaction requires an ID. For example, transactions less than GHS 1000 should not require an ID. This can be made better with a continuous due diligence approach with withdrawal and prevent the “Cash becoming KING.”

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