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FinTech

Connecting Africa Podcast S2 Ep. 10 – Financial inclusion reality check

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In this podcast, hosts Tobi Lafinhan, Matshepo Sehloho and Paula Gilbert talk about financial inclusion in Africa and whether services like mobile money are really making the impact people hoped they would.

This episode delves into the growth of mobile financial services in Africa but is also a reality check on the rose-colored glasses that everyone has been viewing the fintech industry with over the past few years.

We start off with talking about the early days of mobile money and M-Pesa in Africa and the huge impact it had on the lives of the unbanked, but also how the ecosystem has evolved over the past 15 years.

The GSMA's State of the Industry Report on Mobile Money 2023 showed that despite the impact of mobile money in Sub-Saharan Africa, only 55% of adults in the region have any kind of financial account and 33% of adults in the region have a mobile money account.

Meanwhile, Africa has over 160 live mobile money services and about 220 million active accounts and the industry transacted $836.5 billion dollars in 2022 on the continent.

Fintech services often come with a pledge to boost financial and digital inclusion, but the hosts share their views on whether the initial impact has slowed and just how financially included they believe Africa is at the moment.

The team talked about the flurry of fintechs launching with remittance solutions, peer-to-peer payments and investment technology, including some of the startups featured this season on the Connecting Africa Podcast like Jawudi, SendSprint, BezoMoney and Bamboo.

As the industry grows, more services become available to fintech users, but questions surface around who is really being included and how the market is growing beyond just the payments space.

"I think the issue is, when it comes to financial inclusion or just getting people on board, it's more than just providing the platform for people to transact – there is identity, there is education, there is the fact that people are in areas that are tough to reach. There is also something around USSD vs. smartphones," Lafinhan said.

Gilbert pointed out that when new fintechs launch they almost always launch with statements promising to revolutionize African payments and bring financial inclusion to the masses, but many are only catering for those that are already banked or have access to smart devices.

"How many startups launch today and target people that only have feature phones? At the end of the day, you are targeting the same middle-class audience that is going to create a new account – they already have one account with a bank and they will create another account [with the new startup] – and it's really the same customer base, the same dollars everyone is chasing," Lafinhan added.

The hosts talk about Africa's smartphone growth but point out that there are still huge numbers of African mobile users on feature phones and basic phones, with many only accessing 2G services.

"The price of smartphones is still very high, and most of these mobile money platforms are moving away from USSD. So, if I don't have a smartphone that means I can't access some of these services," Sehloho added.

Data from Statista shows that out of the 40 to 50 million mobile phones shipped in Africa per quarter, more than half are feature phones. In the fourth quarter of 2022, there were around 17.6 million smartphones shipped to Africa, while 22.7 million feature phones were shipped.

Fintech services often come with a pledge to boost financial inclusion but many only offer services to smartphone users or those who already have bank accounts.   (Source: Freepik)
Fintech services often come with a pledge to boost financial inclusion but many only offer services to smartphone users or those who already have bank accounts.
(Source: Freepik)

"Are fintechs catering for those [feature phone users]? It's also probably quite a similar pool of people that have feature phones and people that are unbanked. I also think we don't realize how many people don't have a physical address, can't get an identity document from government, can't prove that they have a credit score, so how do they get access to lending? I think we still have a big section of the population that is being left out of the financial system," Gilbert said.

There was also a discussion around economic inclusion and wealth creation and how the fintech market needs to find more creative ways to help Africans make more money.

"You can't financially include someone that doesn't have economic capacity. You need to get people earning first before you think about financially including them, if not you are dealing with the same pool of users. The problems are not necessarily just for startups to solve, it’s a problem of identity, it's a problem of creating economic opportunity," Lafinhan said.

"We can't be too negative, obviously mobile phones have brought a lot of positives, but I don't think it's the silver bullet that everyone thought it would be," Gilbert added.

Challenges facing financial inclusion

The conversation moved to the challenges that the industry is finding when it comes to including low-income users and the unbanked and the impact of heavy taxes, digital levies and import duties making smartphone ownership and fintech usage unaffordable for millions of Africans.

"I think governments are always reactive. They see mobile money transactions going high and they think let's tax these people because telcos are making a lot of money, so they introduce high taxes but at the end of the day it's the actual customers that are suffering," Sehloho added.

The continent has seen a rising tide when it comes to financial inclusion through mobile-based financial services like loans, insurance and savings products. The team discusses what could be done to bring these services to more people and how the misalignment of incentives can often end up hurting consumers and passing all the costs on to them.

Gender inclusion and funding shortfalls

The discussion shifted to the mobile gender gap and the impact on financial inclusion for women.

GSMA stats show that women in sub-Saharan Africa are 30% less likely to own a smartphone than men in the region. And 95 million women in sub-Saharan Africa don't own a mobile phone at all, even a basic phone.

Female mobile phone owners in sub-Saharan Africa spend 32% less on mobile services than male mobile owners.

The hosts discussed the top barrier to mobile Internet adoption for women including issues with affordability; literacy and digital skills; safety and security; and relevance of services.

The final topic of discussion was around funding for startups and the heavy preference toward fintech over other sectors.

"I think that incentives across the board are not super aligned in the ecosystem. I don't think that some important problems get enough attention because there is only one kind of funding that is accessible to the ecosystem, which is venture capital funding and venture funding isn't for every kind of business," Lafinhan said.

"The challenge then is if we are only solving problems that are venture-backable what does that mean? Because some problems are just not designed that way, there is a reason why there is not a venture-funded telco for example," he continued.


Want to find more Connecting Africa Podcasts check out our Podcast Archive here.


This is the final episode for season two, but keep a lookout for new podcasts when season three launches soon.

If you want to catch up on all the previous episodes, you can find the podcast on Apple Podcasts; Spotify; Google Podcasts or find other podcast platform options on our main page on Spotify for Podcasters.

You can also find the podcast hosts online here:

Paula Gilbert (@paulajgilbert)

Tobi Lafinhan (@TobiLafinhan)

Matshepo Sehloho (@tsokamatshepo)

Related posts:

— The Staff, Connecting Africa

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