Q&A: Corine Mbiaketcha, Managing Sales Director Kenya, West Transition & East Africa, Oracle
A mobile money revolution is sweeping across Africa, as FinTechs play a major role in changing the way people transact and manage their money, says Oracle
How have telecommunications bridged the gap in African financial inclusion?
From the submarine cable connection linking Zanzibar, Mombasa and Dar Es Salaam laid by the Eastern and South African Telegraph Company in 1888 to modern day 4G connectivity in Kenya, Africa’s telecommunications landscape has evolved significantly.
This advancement has certainly been a critical factor in driving financial inclusion across Africa. GSMA estimates that almost half of Africa’s population subscribed to mobile services in 2015 with nearly 725 million unique subscribers expected by 2020 across the continent.
This rapid penetration of mobile services has led to the unmistakable rise of FinTech in Africa. The success of M-Pesa in Kenya is a great example of how FinTechs are changing the way people are now transacting and managing their money in Africa.
Mobile technology has now brought hundreds and thousands of unbanked Africans under the ambit of formal financial services. People now find it easier to save, transfer and receive money using these money transfer services via their mobile phones.
You’ve commented that additional development is required to ensure the financial system remains current and offsets the risk of financial exclusion of underprivileged citizens and small enterprises. Could you give more details on this?
The level of financial development in Tanzania has improved in recent years. There have been noticeable improvements in the development of institutions such as the improvement of financial access where the expansion of mobile money and mobile banking is a key driver. Nearly two-thirds of Tanzanian citizens have access to formal financial services. This would not have been made possible without the implementation of the latest IT advancements in the financial sector.
Mobile money transactions which have rapidly grown in the country amounted to nearly 47% of GDP in 2015 from just 0.2% in 2010. The monetary expansion, therefore, is likely to occur with greater mobile money usage which would reflect higher potential growth, thus not leading to inflation.
The nominal value of mobile money transactions and their importance as per the monetary and economic aggregates has greatly risen over the past recent years. In 2011, monthly transactions stood at Tsh 452 billion while as of 2015, they were at Tsh 4.7 trillion.
Mobile money has also acted as a gateway to other financial products and services such as savings and loans products. Vodacom introduced M-Pawa, a mobile savings and lending product, in 2014. This linked banking services with mobile money, thus generating positive feedback from both platforms.
Other than Vodacom, other providers such as Airtel, Tigo, Zantel and Halotel compete to provide mobile money services in Tanzania. IT has greatly enabled more users to access and utilise banking services. The World Bank’s Global FinDex database suggests that while only about 19% have a bank account at a formal institution, the proportion doubles to 39.8% when mobile accounts are included. This increase is driven by the rapid expansion in mobile money and banking services today.
Can you talk about how certain institutions have flourished and how these and other strategies can help African banks increase operational effectiveness and expand their customer bases? In particular, the migration of National Microfinance Bank (NMB) to a modern banking platform and how it enabled NMB to directly address financial exclusion)
NMB is one of the largest banks in Tanzania, with a customer base of more than two million. In order to effectively cater to the diverse requirements of its customers, NMB gradually migrated to a modern banking platform.
It adopted the mobile banking service where users only need to dial *155*66# to access features such as balance inquiry; mini-statement; money transfers to any NMB account; prepaid electricity purchase and even top up of pre-paid mobile service.
What does the future hold in regard to IT and the Tanzanian financial sector (trends, challenges, opportunities)?
Government, corporate and individual customers demand faster and more convenient services than ever before. With its 53 million plus population, Tanzania is a rapidly growing market that competes with its’ largest neighbour Kenya for business attention.
Even though the financial sector doesn’t play a primarily role in the Tanzanian economy, its’ strengthening is extremely strategical as it directly impacts ease of doing business by providing access to loans and microloans to SMEs.
The market is very vibrant and there is still a lot of room for opportunities, building on digitalisation (mobile money, potentially new financial products) and Big Data analytics. I personally believe that the latter one may unleash the potential of Tanzania by uncovering the right strategy for the Tanzanian market. At the end of the day, what worked in other East African countries doesn’t necessarily have to work here.
Even though new revenue streams are the priority, building them on a secure foundation is equally important. The FSI industry should put emphasis on securing its operations at the core – banking systems, internal process and access management to software – which currently seems to be a challenge.
You note that Tanzania’s financial development has been accelerating in recent years, particularly with notable improvements to the regulatory framework for electronic payments and an increase in mobile transactions. Could you give some examples?
According to the Tanzania Communications Regulatory Authority, the number of fixed phone subscriptions dropped by 20% from roughly 161 thousands in 2011 to 130 in 2016. During the same period mobile subscriptions skyrocketed by 56% from 25.6 million to 40 million standing for almost 80% of penetration of the market. In 2016, 18 million people had wireless mobile access to the Internet.
These figures are supported by the reality. If one will face challenges accessing Wi-Fi in the downtown of a stunning city of Dar es Salaam, he or she can seamlessly switch to a 3G/4G connection and start streaming YouTube videos or developing applications harnessing computing capacity of server farms running somewhere in Europe or Australia.
These are reasons for the Tanzanian mobile payment revolution that has been taking place for a few years now, and has been picked up by a few operators like Millicom, Vodacom or Airtel. Both well established companies and startups – which Tanzania is full of – started looking into digital opportunities and cloud computing to keep up with the pace of the economy’s growth and fuel their own.