The cost of mobile money transactions has pushed up the cost of doing business in Africa. GRAPHIC | NATION MEDIA GROUP
Kenya
is among the top five African countries in mobile penetration, even
though the cost of mobile transactions remain high for poor households
and businesses.
The cost of mobile money transactions has pushed up the cost of doing business on the continent.
A new report by
Egyptian Investment Bank EFG Hermes shows that although financial
inclusion has taken root on the continent, it has come at a huge cost to
the consumers of mobile money services.
The report,
Deepening Financial Inclusion, But at a High Cost, shows that Ghana has
the highest rate of adult mobile penetration on the continent followed
by Botswana, Kenya, Zambia and Nigeria.
Within East Africa, Kenya leads in terms of adult mobile penetration, followed by Tanzania, Rwanda and Uganda.
The report, which
was released last month, shows that whereas there is improvement in the
penetration of mobile banking across sub-Saharan Africa, transaction
costs still remain high.
Also Read
Shares galore as investors go on selling spree at Dar bourse
Foreign investors boost turnover at Dar stock exchange
Vodacom, Amana unveil new service
For instance, the
average cost of sending $1 through the mobile money platform to a user
on the same network is 9.5 per cent of the value of the transaction,
while the cost of sending $20 is 2.6 per cent.
In Kenya, the cost
of sending and withdrawing $5 through Safaricom's M-Pesa platform is
currently fixed at nine per cent of the value of the transaction.
"Except for EcoCash in Zimbabwe, the more you send and withdraw the less it costs. Why is this acceptable?" the report asks.
Borrowing through
Safaricom's overdraft facility Fuliza is more expensive for smaller
amounts. The report notes that the effective cost of borrowing $1 on
your mobile using M-Shwari and Fuliza accounts in Kenya is 7.5 per cent
per month and two per cent per day. However, the annual percentage rate
(APR) of borrowing $25 on Fuliza is only 17 per cent, implying that
Fuliza is disproportionately expensive for the poor.
THE CASE OF FULIZA
"If the costs of
mobile transfers are high, the cost of borrowing on the mobile is usury.
This is particularly true of Safaricom's latest overdraft facility --
Fuliza. The effective cost of borrowing $1 from Fuliza is two per cent
per day with an APR of 137,641 per cent. However, the cost of borrowing
$25 is 0.04 per cent per day with an APR of 17 per cent.
"While we are
encouraged by the depth of mobile banking across sub-Saharan African
countries, we believe that now is the time to focus on the costs and
would encourage both the central banks and ICT regulators to review the
cost of this financial inclusion because the current tariff rates are
disproportionately expensive for the poor." According to the report, the
cost of sending and withdrawing $5 is more than double the cost of
sending $20 on M-Pesa (in Kenya) and MTN MoMo (in Uganda).
The report notes
that only in Zimbabwe is it cheaper to send and withdraw $5 vis-a-vis
$20, but it will still cost a user seven per cent of the value of the
transaction.
Central banks and
ICT regulators should level the playing field for financial inclusion
and policy makers should remove all prescriptive rates and open up
markets to competition in order bring down mobile money transaction
costs.
"With regard to
Kenya in particular, we strongly believe that it is absolutely
inconsistent to regulate bank lending rates and not all borrowing rates.
Competition on a level playing field is all that is needed to bring
down tariffs and rates across sub-Saharan Africa," the report says.
No comments :
Post a Comment