How Money Moves To The Most Remote Places In Africa


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How Money Moves To The Most Remote Places In Africa

digital , 08-07-2020

Many have wondered why one can get a bottle of Coca Cola in rural Africa, yet struggle to obtain essential medicine in those corners. Until a decade or so ago, the same was said about remitting money. How carting crates and cartons of fast-moving consumer goods seemed more efficiently delivered than sending money to a sick grandma or a business supplier was simply baffling.

For financial institutions, it was an issue of completing the last mile. You could move money to a bank in a town, but not the next village. These were times when sending money to remote Africa was literally “war”. Those who ventured had to fight off fraudulent money couriers; pray those they trusted delivered their money parcels, and hope that the travelling relative or friend to those corners would arrive in one piece. The continent’s public transportation served as non-descript money vans and motorcycles like the “kabu-kabu” of Niger, Kenya’s “matatus” and Ghana’s “trotros” among others. At the horn of Africa, the money brokers of the “Hawala” remittance system and the widely used postal money orders have been vital channels for fund transfer.

It is amazing how times are changing. What we once aspired to is increasingly being taken for granted. It is as if the banks and money couriers were doing triage in the trenches only for FinTech firms and telecommunication companies to win the “battle” over money transfer using technology. Some casualties have never recovered. Take the intermediaries and money couriers at bus terminals who are going out of business. Increasingly, sending money to rural Africa is just a click away or a walk to a mobile money agent. It is a huge market. 40 per cent of the 200 million African migrant family members receiving remittances lived in rural communities (IFAD/World Bank, 2015).

The simple things work in Africa

In all this, the weapon of choice is USSD – Unstructured Supplementary Service Data. The name belies its simplicity and pan-African acceptance. Casually typing *___# on any basic (GSM) phone is the only entry point. It has caught on in a continent with less than 30 per cent internet penetration (ITU, 2019) – most of which are in urban centres.
Moving forward, we ask whether digital money transfer should continue to rely heavily on the USSD channel, in a youthful continent with growing tech-savvy users. With lesser barriers to accessing the internet, users are finding creative ways of opening up the payments corridor to and within Africa. Although in-country money transfers are much easier, cross-border payments are getting better by the day, even for payments originating outside the continent.

No single player can win alone!

Cross-border payment is the next frontier and Africa needs all it can marshal to win this battle. GSM Association (2017) reports that mobile money can be used for international transfers in 51 of the 92 countries where the service is available. That is possible because the providers connect directly with other remittance service providers such as competing mobile money providers, money transfer operators or even through an international remittance hub like MFS Africa.

The World Bank estimates migrants’ remittance flow to and within Africa to be US$80 billion in 2020. Despite the expected shortfall stemming from the Coronavirus pandemic, the restrictions in movement are projected to drive the acceptance and uptake of digital payment channels over cash transfers.

At this rate, the continent is on track towards true financial inclusion, beyond just peer-to-peer remittances. It promises to open up opportunities to access the broad range of digital financial services like micro-lending and insurance; while limiting the potential for money laundering and terrorist financing. This is the shared goal and it is one Africa’s finest digital financial providers are working at.