The registered accounts in the nation have grown six-fold between 2012 and 2017. The experience of Ghana with mobile money has helped to show that mobile technology can be used to bring about financial inclusion in Africa.

The Data

 Mobile money applications in Ghana

In Ghana, mobile cash services have become a favorite banking option for those underserved by the banking sector. A recent survey shows that access to financial services amongst adults rose from 41% to 58% from 2014 to 2017. This is mainly due to increased access to mobile accounts. About 20% of current digital wallet users were previously unbanked. Mobile accounts account for almost 40% of the formal account holders compared to just 13% in 2014.

Besides that, by reducing the time that it takes to conduct a transaction and associated costs and risks, mobile money solutions meet the needs of the vulnerable better. This is especially useful for small-scale farmers. While accessing financial services in rural areas is still low, the figure has almost doubled since 2011. It has grown from about 26% to about 51% today. Today, almost 40% of payments for small-scale agriculture produce are conducted through a formal channel, which is often a mobile money account.

The Rapid Rise of Money on Mobile Payments in Ghana

There are many reasons why money on mobile accounts has grown so much here. Firstly, mobile devices penetration is high at about 128%, which makes it easy to use these services. It is especially so in rural areas. Second, the perfect mix of consumer actions and a great regulatory environment has made penetration easy.

While Ghana can boast about a great mobile money network today, it actually struggle in the early years. Originally, regulation for branchless banking, which was established in 2008, was stifling. It imposed rules and requirement, which kept away most investors. The regulation was based on the perceived high risk of letting non-bank players like mobile network to operate e-money networks. There were also fears that it would have a negative impact on the stability of the banking industry.

When no signs of growth could be seen, the bank of Ghana with help from CGAP engaged stakeholders and they reexamined the legislation to secure the future of money on mobile. The new rules created a more flexible legal environment. This allowed new player to provide financial services while also leaving more room for experimentation.

Important Initiatives in Ghana’s Money on Mobile Market

Besides creating a better regulatory environment, Ghana made other reforms to support the development of mobile money. One of the most important developments was the growth of the distribution network from about 6000 agents in 2012 to over 150,000 in 2015. It made it possible for more cash-in cash-out operations to take place while also making it more convenient to use mobile money.

In May 2018, Ghana became one of the first countries to launch an interoperable system. This meant that different service providers could now be used for transactions. Payments made through the system reached 57 million US dollars by March 2019. With E-zwich card being introduced, it is going to ease recognition and using payment solutions for all the cardholders.

Adoption of money on mobile is growing but is still limited by the acceptance of merchants. Thus far, 2.7 million cards have already been distributed and 7.7 million transactions have gone through. These transactions represent 2% of the nation’s GDP. However, many people still only use it for immediate cash-out. About 53% of them have some residual value.

Most people in Ghana use their mobile wallets for P2P transactions. According to data from the bank of Ghana, all transactions were valued at 29 billion dollars in 2017, compared to 6.5 billion in 2015. Gradually, the goods accessible via mobile money have grown to include credits, payment of public bills, and even salaries.

Government to People is the Next Step

For mobile cash growth to be sustainable, the next step is to digitize government services. Majority of these services are still paid for in Cash. By digitizing these payments, it will broaden the government’s tax base while growing their formal economy. This will also go a long way in supporting efforts for financial inclusion.

A good example of this is the nation National Health insurance Authority. The authority has a role of ensuring access to basic health services for all Ghanaians. By the end of 2018, there were about 11 million people taking part in the system. Renewals have to be done in person or at the district office. The process sometimes took as long as 11 hours, which slowed down coverage. It then leveled off at about 30%. With the support of various international partners, a user-friendly platform was created that makes it possible for renewals to be done via mobile money. The aim is to reach as many people as possible via a simple message and interface, which was easy for ordinary people to understand. 

As with any program, the NHIA program faces various challenges. However, the use of technology has made it possible to address some logistical challenges. Today, about 54% of renewals take place with the aid of mobile money. This mobile money reduced queuing at the district offices.

Other Impacts of Mobile Technology

Another aspect of the digital push includes verifying the identity of the member at the healthcare facility and notifying users when a claim is made in their name. This has helped to flag incidents of potential fraud. By increasing the digital renewals as well as authentication, it has helped to increase revenue while cutting back costs. This could potentially lead to a 25% reduction in the annual deficit.

Its success and sustainability will depend on the ability to grow adoption amongst workers in the informal sector as well as coverage in rural areas. The authorities will need to make the process as simple and user-friendly for it to succeed.

Ghana is a good case of a government being committed to creating a framework that supports innovation. These solutions increase access to financial services like mobile-based pension schemes and health insurance. More people who were previously unbanked can now access micro-loan services. Users will also be able to earn interest when they use digital savings accounts, with interests paid to holders of mobile wallets amounting to 4.5 million US dollars in 2016. We are eager to present such examples on this site about money transfer apps.

However, Ghana faces the challenge of limited literacy in finance. Many who use digital credit products do not fully understand their rights and obligations they have as consumers. Sometimes they become victims of predatory lending habits. In the future, the consumer protection watchdog will need to deal with consumer protection issues. The African Developments bank has already created a few pointers that the Ghanaian government can use.