By Alexandra Wexler
Consumers struggling with Covid-19 shutdowns across sub-Saharan
Africa have found a new place to get cash to make ends meet: their
cellphones.
Tidahy Jacquot, 65 years old, a retired ministry of transport
worker who lives in Madagascar's capital city Antananarivo, hasn't
received any government grants or assistance and has been unable to
make his normal income doing odd jobs. But he did get a loan of
60,000 ariary, equivalent to about $16, via his account with French
telecom giant Orange SA.
By depositing more money into his mobile money wallet, he
qualified for a loan and got an answer to his request for cash in
about 10 seconds. He used the digital cash to stock up on rice.
"I am thankful...it was helpful in a critical moment," he
said.
African consumers have long been paying each other for goods and
services on cellphones, making them among the earliest adopters of
mobile money services in the world. The pandemic has turbocharged
the usage of digital cash. It has also hastened the use of
cellphones not just to transfer money, but also to take out loans
and deliver government assistance.
During the pandemic, African governments bolstered the use of
digital payments, known locally as mobile money. The goal was to
reduce the usage of hard currency -- which requires people to meet
face to face and handle physical paper or coins -- as well as to
keep citizens at home.
Mobile money differs from popular payment apps like PayPal in
the West, or Alipay in China, in that it isn't connected to an
underlying bank account. The telecom service processes the
transactions.
Customers dial a code and then follow simple prompts on their
phones, which often are pre-smartphone-era devices and don't
require internet access. They enter the number of the person they
want to send money to and the amount.
The Central Bank of Kenya eliminated transaction fees for
low-value transactions, among other measures, which it said spurred
"a significant increase in the use of mobile money channels by
individuals in both value and number of transactions." The bank
added that the move "helped cushion the most vulnerable households"
and saw 1.6 million more households start using mobile money.
Mozambique, Zambia and Rwanda cut mobile-money transaction fees
and increased balance and transaction limits. Ghana's government
relaxed regulations that require customers to show their IDs at a
mobile carrier's physical shop in order to purchase a SIM card, to
give more people contactless access to mobile money services.
Nearly half of 1.04 billion registered mobile money accounts
world-wide are in sub-Saharan Africa, according to GSM Association,
a telecommunications trade group.
"We continue to see significant growth in sub-Saharan Africa in
terms of number of mobile money accounts, in terms of active
accounts, value of transactions and volume of transactions [since
March]," said Akinwale Goodluck, head of sub-Saharan Africa at
GSMA.
Government shutdowns restricted workers -- especially those in
the informal sector so prevalent across Africa -- from moving
around and sending physical cash home. The International Monetary
Fund warned in June that it expects gross domestic product per
capita in sub-Saharan Africa to contract 5.4% in 2020, the sharpest
economic contraction since the 1970s, thrusting as many as 39
million people in the region into extreme poverty.
In Madagascar, the government distributed one-time social grants
of 100,000 Malagasy ariary (about $26) via mobile money to nearly
200,000 households at risk of food insecurity due to lost income
from the country's shutdowns.
Cellphone companies, which have dominated the mobile money space
for more than a decade, have used the pandemic to accelerate their
expansion beyond payments into more traditional banking services
such as lending.
Telecom executives say Africa is fertile territory because of
the lack of traditional bank branches, their distance from most
rural areas and the fact that most people earn so little. In 2019,
the average GDP per capita in sub-Saharan Africa was $1,585,
according to the World Bank.
The active customers in the Middle East and Africa of Orange
SA's Orange Money unit climbed by 5.4% to 19.6 million users from
March to June. Orange launched its own bank in Ivory Coast in July,
using mobile phones as a distributor for its services.
"The success of Orange Money in Africa has shed a light on how
we can proceed in Europe," said Patrick Roussel, executive vice
president of mobile financial services in the Middle East and
Africa at Orange. He cited specifically the importance of the
company's strong distribution network, the better response to
customer needs that technology can provide, as well as learning
about compliance and IT platform management.
The largest mobile money service on the continent is M-Pesa,
launched in 2007 by Kenya's Safaricom PLC. It has 40 million active
users in Africa and processed transactions worth about $173 billion
during the 12 months ended March 31, equivalent to almost double
the GDP of Kenya, sub-Saharan Africa's third-largest economy.
"The more time goes by, telecoms are becoming banks and banks
are becoming telecoms," said Diego Gutierrez, chief officer for
international business at Vodacom Group Ltd., which owns a 35%
stake in Safaricom.
Telecom firms in Africa have traditionally partnered with local
banks to manage the mobile money balances. The telecoms have a
trove of data about customer spending habits through their payment
platforms. This helps them make credit decisions for these
low-earning customers.
Before Covid-19 forced much of the globe into rolling shutdowns,
Sera Finina, a 35-year-old single mother who sold samosas on the
streets of Antananarivo, was able to expand her business from
making and selling 30 to 50 samosas a day to 200 of the savory
pastries using a digital credit and savings service distributed by
Orange, which is called M-kajy.
"This loan...was like sunshine to me. I started from a very
little amount of money to borrow, and ended up with 300,000
[Malagasy ariary] monthly," Ms. Finina said. Now the pandemic means
there are fewer customers walking the streets to buy her samosas,
but she is already planning to tap another loan post-Covid-19 to
rebuild her business.
"Hopefully [they] will consider increasing the amount they will
lend, as really everyone is in bad shape now," she said.
--Amir Antoy contributed to this article.
Write to Alexandra Wexler at alexandra.wexler@wsj.com
(END) Dow Jones Newswires
December 02, 2020 08:14 ET (13:14 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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