In Africa, mobile money can add one percentage point per year to GDP per capita growth (report)

(Agence Ecofin) – Econometric modeling shows that Kenya’s GDP, which reached $84 billion in 2019, would have been $76 billion only if mobile money had not been deployed.

A successful adoption of mobile money in developing countries, and more particularly in Africa, is able to add a percentage point to the growth rate of GDP per capita each year, according to a report published on October 27 by operators. mobile phone companies Vodafone, Vodacom and Safaricom in collaboration with the United Nations Development Program (UNDP).

Entitled “Digital Finance Platforms to empower all: accelerating the SDG impact of digital financial inclusion in Sub-Saharan Africa”, this report specifies that the estimation of this positive impact of the adoption of mobile money on the rate of GDP growth by per capita was one of the main conclusions of an econometric modeling carried out in 49 developing countries in Africa, Asia and Latin America.

The most revealing example in this context is that of the M-Pesa mobile money service, which was launched in 2007 in Kenya by Vodafone, Safaricom and Vodacom before being deployed in several other countries on the continent.

According to the models carried out by the authors of the report, the GDP per capita of Kenya is today estimated at 1600 dollars (constant 2015 US dollars). Without the deployment of the M-Pesa service, this figure would be around 1450 dollars. Thus, Kenya’s GDP, which reached $84 billion in 2019, would have been $76 billion only in the same year if mobile money had not been deployed.

Published as part of the “Africa Connected” campaign launched in February 2021 by Vodacom, Vodafone and Safaricom to harness the power of technology to accelerate inclusive economic growth on the continent, the report says in this context that an earlier World Bank study on the relationship between economic growth and poverty reduction found that every one percentage point increase in GDP growth in a country results in a decrease of 2.59 % of the proportion of poor people.

Access to credit and insurance services

If we apply this modeling to the Kenyan case, for example, we see that M-Pesa lifted some 430,000 people out of poverty between 2007 and 2019.

In the four African countries studied in the report (Kenya, Mozambique, Tanzania and Ghana), this same mobile money service would have enabled some 1.7 million people to get out of poverty.

The report further underlines that mobile financial services have greatly improved financial inclusion in Africa and constituted a first step on the way to entering the formal financial system. M-Pesa, for example, has 52 million active users, many of whom would not have been able to access financial services otherwise.

In 2022, this service also provided 12.3 million users in Kenya, Tanzania, Mozambique and Ghana with first access to credit.

A study conducted in early 2022 in Kenya and Tanzania among a representative sample of M-Pesa users also revealed that 39% of respondents said they had not had access to financial services, such as a bank account or a mobile money wallet, before using M-Pesa. This proportion of people totally excluded, both from the traditional and digital financial system, was higher in the typically underserved social categories (49% of people living in rural areas and 47% of people with low incomes).

34% of users in both rural and urban areas also said they would still be locked out of the financial system if mobile money was not available.

Nearly all of the companies surveyed (98%) also agreed that the M-PESA service enables them to carry out their commercial activities by facilitating access to faster and more secure payments and by enabling the sale of goods. and online services.

95% of these companies say they trust M-Pesa for at least half of their financial transactions.

In South Africa, 48% of users of Vodacom’s loan solutions and 70% of users of insurance solutions believe that access to traditional alternatives to these mobile financial services is very difficult “.

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In Africa, mobile money can add one percentage point per year to GDP per capita growth (report)

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