The Digital Frontier: Africa’s Mobile Money Revolution

By:  Courtney Marshall, Lynx Global Intelligence


South Africa has set new investment records, with private equity funds growing to 3.2% of its GDP, compared to a global average of 2.7%. The burgeoning digital financial services market in Africa has been most prominent in Kenya where M-Pesa, a mobile-based banking product, has pushed the technological threshold of innovation and financial inclusion without losing its financial foothold.

While similar products exist in Zambia and Tanzania, it is Kenya’s flexible policy and regulatory environment that has allowed its digital potential to flourish.[1] In efforts to reach low-income populations, the Central Bank of Kenya worked with M-Pesa to promote financial inclusion through minimal sign-up requirements and a reduction in other barriers to entry. The country now has the world’s highest mobile money penetration rate. As World Bank economist Wolfgang Fengler described it, “They allowed regulation to follow innovation, whilst reassuring the market of its oversight.”[2]

As most development trends tend to flow from “the West to the rest,” Africa instead has leapfrogged ahead of many wealthier nations. Mobile money is being used throughout Africa to facilitate other services such as insurance, analytics, consumer credit, and e-commerce, making access to these services more convenient and less expensive. Rather than carry hard currency at the risk of it being lost or stolen, or decide how to best divide up the dinner check, mobile money provides an alternate solution to such antiquated payment ordeals. The practicality of electronic cash stored on a SIM card and loaded into a bank account created an innovative transactions platform, where national payments and reliable transactions did not exist in Africa before.[3]

So, how did a continent faced with widespread poverty, political corruption, and food insecurity manage to come to this groundbreaking mobile solution before Silicon Valley? In short, necessity drives creativity![4] The financial infrastructure gaps that existed prior to the 21st century are what have allowed Africa to make such major strides in the world of digital finance. As such, the Kenyan case proves that entrepreneurs and innovations can succeed given the right policy and regulatory environment. Africa has become the digital financing trailblazer and we can expect to see more financial innovation throughout the continent.