Mobile money could add one percentage point per year to GDP per capita growth in Africa (report)
(Agence Ecofin) – Econometric modeling shows that Kenya’s GDP of $84 billion in 2019 would have been $76 billion if only mobile money had not been used.
According to a report published on October 27 by Vodafone, Vodacom and Safaricom, the successful implementation of mobile money in developing countries, especially in Africa, could add one percentage point to the growth rate of GDP per capita each year. Mobile phone companies partnering with the United Nations Development Program (UNDP).
This report, Digital Financial Platforms to Empower All: Accelerating the SDG Impact of Digital Financial Inclusion in Sub-Saharan Africa, estimates the positive impact of mobile money adoption on per capita GDP growth. It is one of the main results of econometric modeling conducted in 49 developing countries in Africa, Asia and Latin America.
The most obvious example in this context is the M-Pesa mobile money service launched in Kenya in 2007 by Vodafone, Safaricom and Vodacom.
According to models run by the report’s authors, Kenya’s GDP per capita today is estimated at $1,600 (constant 2015 US dollars). Without the deployment of the M-Pesa service, this figure would have been around $1,450. Thus, Kenya’s GDP, which reached $84 billion in 2019, would have been $76 billion that year alone if mobile money had not been implemented.
A report published in February 2021 by Vodacom, Vodafone and Safaricom as part of the “Africa Connected” campaign launched by Vodacom, Vodafone and Safaricom to harness the power of technology to accelerate inclusive economic growth on the continent mentions earlier World Bank research on connectivity in this context. Between economic growth and poverty reduction, it was found that each percentage point increase in GDP growth in a country results in a 2.59% decrease in the proportion of poor people.
Access to credit and insurance services
For example, if we apply this modeling to the Kenyan case, we can see that M-Pesa lifted approximately 430,000 people out of poverty between 2007 and 2019.
In the four African countries examined in the report (Kenya, Mozambique, Tanzania and Ghana), the same mobile money service would lift 1.7 million people out of poverty.
The report further highlights that mobile financial services have significantly improved financial inclusion in Africa and are the first step towards access to the formal financial system. For example, M-Pesa has 52 million active users, many of whom would otherwise have no access to financial services.
In 2022, the service also provided first access to credit to 12.3 million users in Kenya, Tanzania, Mozambique and Ghana.
A survey conducted in early 2022 among a representative sample of M-Pesa users in Kenya and Tanzania also found that 39% of respondents said they did not have access to financial services such as a bank account or mobile wallet before using M. -Pesa. The proportion of people completely excluded from both traditional and digital financial systems was typically higher in underserved social categories (49% of people living in rural areas and 47% of low-income people).
34% of users in both rural and urban areas said they would still be excluded from the financial system without mobile money.
Almost all businesses surveyed (98%) agreed that the M-PESA service enables them to carry out their commercial activities by facilitating access to faster and safer payments and by enabling the sale of goods and services online.
95% of these companies report that they rely on M-Pesa for at least half of their financial transactions.
In South Africa, 48% of Vodacom credit solutions users and 70% of insurance solutions users believe that access to traditional alternatives to these mobile financial services very hard “.
