Africa’s Unbanked Find Another Solution to Tap into the Formal Economy

Mobile money is the fastest-growing source of income for wireless-network operators like MTN and Vodafone’s Safaricom unit, outpacing data since many Africans do not have the latest smartphones. The service has become an indispensable part of how Africa’s 1.2 billion people live, from buying funeral cover to borrowing money. The International Monetary Fund data shows that the number of registered users in Ghana soared 11 times between 2013 and 2017, in Kenya, where it was pioneered, the value of such transactions amounts to almost half of GDP, according to the World Bank. The GSM Association estimates that Sub-Saharan Africa has more mobile-money accounts than anywhere else in the world with about 396 million registered users at the end of 2018, a 14% increase from a year earlier. The trend is catching on around the world – South Asia saw 29% growth in 2018, and the increase was 38% for East Asia and the Pacific region.

In another development, Kiva, a San Francisco-based tech nonprofit organisation, is using blockchain to create an online ID database in Sierra Leone allowing people who struggle to get loans to prove their credit history. President Julius Maada Bio officially launched the system in the capital Freetown this month. Kiva facilitates small loans in 80 countries, but Sierra Leone is the first country to implement an online credit system designed by the organisation. The platform will enable lenders to look up citizens’ credit histories using fingerprints and other biometric data that was collected a few years ago by Sierra Leone’s government to print voter ID cards. More than three quarters of Sierra Leone’s population lies outside the formal banking sector, according to data from the central bank. Informal institutions like community banks and microfinance lenders are more common, but they rarely share credit information and often charge extortionate interest rates.