Kigali. New research from Vodafone Group, Vodacom Group, Safaricom and the United Nations Development Program (UNDP) shows that the successful deployment and adoption of mobile financial services is associated with a positive impact on GDP growth in emerging markets by helping businesses reduce costs, access credit to invest and contact consumers who have not previously been provided with financial services.
An Econometric Modeling Study1 – a study of 49 countries in Africa, Asia and Latin America found that countries with successful mobile money services had an annual GDP per capita growth rate of 1 percentage point higher than countries where mobile money platforms were not successful or not implemented.
Based on previous World Bank research on the relationship between economic growth and poverty reduction2this increase in GDP per capita means that countries that successfully adopt mobile money could reduce poverty by around 2.6%.
The analysis was carried out as part of the companies’ Africa.Connected campaign, an initiative that aims to work together to promote sustainable development and help bridge the divides that hinder progress in key sectors of Africa’s economy. The findings are part of a new research paper, Digital financial platforms that will empower everyonethe fourth research paper developed and published under the umbrella of Africa.Connected.
Sitoyo Lopokoiyit, CEO of M-Pesa Africa and Head of Financial Services at Safaricom, said:
“Mobile financial services platforms like M-Pesa are vital drivers of financial inclusion in society, which can improve personal life chances and enable businesses to start up and expand, bringing wealth and jobs to developing economies.” However, barriers to both access to and development of platforms (including digital literacy and smartphone availability) remain, as non-traditional financial service providers are regulated differently in many countries.
As part of the Africa.Connected study, user surveys were conducted focusing on M-Pesa users in Kenya and Tanzania, with results extrapolated to Ghana and Mozambique. A business survey was also conducted in Kenya. The resulting research confirmed that the world’s first mobile money service remains relevant 15 years after its launch in 2007. The researchers estimated that:
- 17.6 million current users in four countries did not have access to any formal financial services before using M-Pesa;
- 98% of companies surveyed said that M-Pesa helps them do business, and the main benefits of M-Pesa are faster and safer payments and the ability to sell goods and services online; and
- 95% of companies surveyed indicated that they use M-Pesa for at least half of their business transactions.
Ulrika Modeer, UN Assistant Secretary-General and Director of the UNDP Office of External Relations and Advocacy, said:
“Financial inclusion is both a precondition and a key tool for achieving many of the UN’s Sustainable Development Goals, including reducing poverty, promoting economic growth, promoting market access and encouraging investment in key sectors such as education, agriculture and health.” But more importantly, it needs to put people at the center, give them more control over their money and increase their resilience. Closing the financial gap in Africa and around the world must be a priority if we are to ensure inclusive, sustainable prosperity for all on a healthy planet.
Click here to read the full Africa.connected financial inclusion document:
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Notes to editors
1. 2003-2019 were used for the econometric model. period data. Due to the effects of the pandemic, more recent data were not included in the simulations.
2. Adams, 2003 Economic growth, inequality and poverty: findings from a new dataset. World Bank. Available online: https://elibrary.worldbank.org/doi/abs/10.1596/1813-9450-2972