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Banking Theory and Practice

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Caselet Mobile Money can Boost Financial Inclusion

new research funded by the SWIFT Institute has revealed that mobile money can
help to promote financial inclusion and boost savings rates amongst remote
Acommunities.
The research, carried out by US-based Tufts University in rural communities in northern
Ghana with little access to financial services, demonstrated that take-up of mobile money
can be easily promoted and that use of mobile money services can help to encourage a
savings culture.
A month into the research project, 10% of participants had used the service solely for
money transfer; two and half months later, usage increased to 26% of households, with
86% of users receiving money transfers and 70% of users saving on their mobile phone.
In a release SWIFT, the financial messaging provider for more than 10,000 financial
institutions and corporations in 212 countries and territories, said the results could provide
a possible model for policy makers around the world to extend the reach of financial
services.
”If mobile money services can help to improve financial inclusion in this way, they could
offer a crucial mechanism through which to address a stubborn problem that continues to
hinder economic development,” the statement said.
In the remote areas of sub-Saharan Africa, less than 20% of the population has access to any
type of formal financial institution, defined as a bank, microfinance institution or
cooperative. Yet access to financial services is a key aspect of development, as credit and
savings allow households to invest, save and respond to shocks. In Ghana, this figure rises
to about 29% of the population, according to the World Bank.
Millison Narh, Second Deputy Governor of the Bank of Ghana, said: “Access to financial
services is crucial to economic development. The findings of this research suggest that
mobile money – something that is readily available – offer a possible model for extending
the benefits of financial services to a much wider section of the community.”
Typically, households in rural areas save ‘informally’ at home or with local collectors
(called “susu”, in Ghana), and often rely on remittances from migrants to urban areas.
While these strategies are important risk-sharing mechanisms for such households, they
are also vulnerable to risks, including theft, restricted access to funds, high fees, or high
transaction costs.
The research demonstrated that mobile money offers a new potential mechanism for
increasing the financial inclusion of the world’s poor. First and foremost, since it can
reduce the cost and increase the security of money transfers, mobile money can improve
households’ ability to share risk.
Beyond money transfers, mobile money can also be used to create a secure “pseudo-
savings” account, where individuals can deposit smaller savings amounts for more
immediate needs. As the “account” is password-protected, the mobile money savings
channel could offer greater security than savings under the mattress and better access than
offered by the annual “share out” of savings clubs.
Increased network coverage and mobile phone ownership, as well as a growing number
of mobile money services in many developing countries, including Ghana, would be
crucial to the success of any mobile money-based financial inclusion strategy.
Therefore, a key element of the research was a set of positive steps to reduce barriers to the
adoption and usage of mobile money in Ghana. These included the provision of some
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