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The fast growth of mobile phone banking across Africa has driven an increase in access to financial services and has the potential, with time, to boost economic growth and create opportunities for banks to expand across the continent, Moody's Investors Service said in a report today.
"Mobile phone banking technology is helping to include more and more people in Sub Saharan Africa into the formal financial sector and the economy more broadly. This has the potential to support sovereign credit quality in the region, whether the result of a more financially resilient population who are able to maintain a steady contribution to domestic demand and economic growth, or a healthier, more profitable banking system," said Rita Babihuga, a Moody's AVP -- Analyst and co-author of the report. "Low levels of economic development are a key constraint on credit ratings in Sub-Saharan Africa."
Sub-Saharan Africa is experiencing the world's fastest rise in new bank accounts, fuelled by the growth in mobile banking. Some 12% of adults in the region had a mobile money account at the end of 2014, compared to just 2% globally, according to World Bank figures. Kenya has led Africa's mobile banking revolution, with 58% of the adult population having a mobile account.
Over time, increased access to formal financial services, including mobile bank accounts, has the potential to boost economic growth and diversification -- by increasing productivity and facilitating investment in small and medium sized enterprises -- and reduce poverty, according to several academic studies. Together with a more profitable banking system these are all important factors that support a sovereign's creditworthiness.
For banks, a stronger macroeconomic environment offers greater opportunities for growth. "Mobile phone technology also allows banks to target new customers directly with minimal transaction and overhead costs and without an extensive network of branches" said Constantinos Kypreos, a Moody's Vice President -- Senior Credit Officer and co-author of the report. Banks are also able to boost their revenues by offering users access to a wider array of banking products on the mobile platform.
