Economic Update

26 Jul, 2019

Innovative technology, administrative developments and the expansion of financial access points have helped transform Ghana into Africa’s fastest-growing mobile money market, according to a new report from the World Bank.

The “Enhancing Financial Inclusion” report, released in June, highlighted mobile money’s role in improving broader financial access in the country.

Using figures from the bank’s Global Findex Database, the report stated that the share of Ghanaian adults with a registered financial account increased from 41% to 58% between 2014 and 2017.

This was largely attributed to increased uptake of mobile money, with the percentage of adults who hold such accounts jumping from 13% to 39% over the period.

Bank of Ghana (BoG) data shows that registered mobile money accounts rose six-fold between 2012 and 2017, from 3.8m to 23.9m, while the value of transactions increased by a factor of 261, from GHS594m ($109.8m) to GHS155bn ($28.7bn). Transactions rose again by another 43% last year to total GHS233bn ($43.1bn).

See also: The Report – Ghana 2019

Improved mobile phone access drives growth

One of the most prominent contributors to the expansion of mobile money is greater access to mobile phones.

A growing agent distribution network has also fuelled mobile money growth, with the number of active mobile money agents increasing from 5900 in 2012 to 152,000 in 2017.

The launch of Ghana’s interoperability platform in May last year, one of the first such systems in Africa, has similarly played an important role in facilitating expansion.

Set up by Ghana Interbank Payment and Settlement Systems, a subsidiary of the BoG, the platform allows customers to transfer money between mobile money accounts in different countries, as well as between banks and other financial institutions.

New laws to boost digital payments

A series of new reforms are expected to stimulate further activity in the digital payments space.

The Electronic Payment and Financial Services Law, effective from July, will allow banks to directly operate their own mobile money vending points, a move that should lead to greater competition in a market currently dominated by telecoms companies.

This has been supported by the Payments Systems and Services Act, approved by the president in May.

The new legislation, which updates a series of previous laws governing payments systems and electronic money operations, will see the BoG receive increased power to regulate the mobile money market, thereby providing greater certainty to potential investors.

Financial inclusion and a “cash-lite” economy

Mobile money and digital payment are central to Ghana’s plan to expand financial inclusion and move towards what it calls a “cash-lite” economy.

As part of the National Financial Inclusion and Development Strategy 2017-23, officials hope to increase financial inclusion to 85% of the population by 2023, which is in turn expected to help reduce poverty and improve levels of social and economic development across the country.

Given that mobile money makes up some 97% of all non-cash transactions, it is a key tool for reaching this goal, Kojo Choi, CEO of local digital payments company PaySwitch, told OBG in a recent interview.

“Considering that an estimated 65% of the population does not yet have bank accounts, cash-free mobile has become the means of financial inclusion for much of the population,” he said.

However, despite the proliferation of digital payments, cash remains the dominant form of payment in Ghana.

The government is keen to reduce its use in many basic financial transactions – for example, by enabling the digital payment of utility bills such as electricity and water, as well as supporting the development of a series of digital payment methods. This should help decrease the cost of business and improve revenue-collection measures.