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Escalation in digital transactions – Fintech investments on the Rise in East Africa

The report, The Mobile Economy Sub-Saharan Africa 2018, released last month suggests that in Kenya, Uganda, Tanzania and Rwanda, mobile money is playing a significant role in extending financial services to people with limited access to traditional financial institutions, particularly women and rural populations.

East African countries are at the forefront of driving mobile money transactions between their citizens and public as well as private institutions. A new report by GSMA, a lobby group for mobile operators worldwide, shows that the unrelenting integration of this payment system with different sectors of the economy and its ease of use has seen citizens increasingly preferring it as a medium of choice when making payments for the government or private sector goods and services.

The report, The Mobile Economy Sub-Saharan Africa 2018, released last month suggests that in Kenya, Uganda, Tanzania and Rwanda, mobile money is playing a significant role in extending financial services to people with limited access to traditional financial institutions, particularly women and rural populations.

Mobile network operators such as Safaricom, Vodacom and MTN among others, are mobile money leaders in their respective countries of operation in East Africa. These providers have in recent years, increasingly collaborated with governments to digitise person-to-business and person-to-government (P2G) payment streams in a bid to improve fund collection, transparency, traceability and accountability.

“Countries including Côte d’Ivoire, Guinea, Kenya, Mauritius, Rwanda, Tanzania and Uganda have done well in driving digital P2G payments, with the most popular use cases including tax collection, school fee payment and health services payment,” the report says.

Kenya, where Safaricom first pioneered the M-Pesa mobile money system in 2007, has taken a particularly unique position by integrating its payment systems with public service delivery platforms. The eCitizen platform through which citizens can access more than 250 government services online, reported more than 90 percent of digital payments were made via mobile money in 2017. The Nairobi City County government, which is one of Kenya’s 47 decentralized units of governance, reported that it received 85% of payments from citizens for various services such as parking and permits issuance through mobile payments system, eJijiPay.

The country’s National Transportation Safety Authority (NTSA) also reported that revenue collection doubled from a monthly average of US$1.1 million in July 2015 to US$2 million in October 2017. Aside from the increased revenue collections, turning to the cashless mobile payment system generated cost savings of about US$18.2 million between 2014 and May 2016 by sealing revenue leakages and cutting the person-hours that could ordinarily be expended collecting money in absence of the mobile-money enabled transaction mechanisms.

“The shift from cash to digital delivers widespread benefits up and down the value chain. For customers, mobile money provides a safer, more efficient and more convenient payment option than cash, saving travel time and costs and reducing the risk of theft,” the report states.

A recent study in Uganda showed that within a three-month period, each of the 5 million regular users of mobile financial services saved at least 12 productive hours. Such time would otherwise have been lost travelling to a financial institution and dealing with traditional transaction and payment methods.

Nevertheless, beyond digitising person-2-government transactions, mobile money is equally enabling innovative business models that offer affordable and sustainable access to life-enhancing services for underserved consumers. Sectors such as health and agriculture are some of the major beneficiaries of this development. In Tanzania, for instance, Healthy Pregnancy, Healthy Baby (HPHB) enables citizens to access critical health and nutrition information via mobile phone SMS system for free. A donor-funded initiative of the Ministry of Health, Community Development, Gender and Children, it has been used by over 1.8 million people who have collectively received at least 115 million messages since its inauguration in 2012.

Leveraging on the life-changing and leap-frogging power of mobile technologies, the Rwandan government rolled out the Digital Ambassador Programme, which aims to increase the number of digitally literate citizens. The digital ambassadors are required to aid other citizens acquire digital skills and boost adoption of e-services. This is ultimately a win-win for the government and citizens in the pursuit of deepening digital inclusion.

 

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