The low level of financial inclusion in Africa is a reflection of both demand- and supplyside constraints. These include the underdevelopment of existing financial systems, lack of credit reporting institutions, poor levels of financial literacy and limited capacity of enterprises. The ability of Africans to access financial services is also hindered by poor quality of infrastructure and the small scale of many African economies. These constraints depict a large share of African population as commercially non-viable clients for formal financial institutions.
Interestingly, over the last years, innovative use of information and communications technologies are making it inexpensive to process a large volume of small transactions and to deliver a wide range of financial services in areas where physical infrastructure is lacking. With over 640 million mobile phone subscribers in 2012, Africa has become the second most connected region in the world in terms of mobile subscriptions count, right after the Asia-Pacific region. Given this large mobile customer base and the absence of an extensive brick and mortar banks’ network, technology could be seen as a game changer in the sense that it could enable the continent’s financial system to outperform the traditional banking model and establish itself as the world leader in mobile financial services.
This chapter discusses how technology, especially mobile phones, can push the financial inclusion agenda forward in Africa. The chapter describes existing mobile financial service deployments available on the continent and their various uses. It also discusses the challenges for financial inclusion through technology-based solutions and provides some policy recommendations on how to overcome these challenges.