Written by Kwami Ahiabenu II

As the number of mobile phone subscribers in Ghana increases, so does the market for mobile money services. The majority of Ghanaians lack any formal bank account. Kwami Ahiabenu II reports on how mobile money could change the shape of financial transactions in the country.

An estimated 80 percent of Ghanaians are “unbanked” – meaning they conduct their transactions outside the banking sector with no access to financial services. Products like “mobile money,” that enable safe and secure money transfers without the useof a bank account, could have a major impact on this unserved segment of the population. Mobile money gives anyone with a mobile phone the ability to transfer money, make cash payments and conduct other financial transactions over the phone.

Mobile money is a relatively new phenomenon in Ghana. It was first introduced by the telecom company MTN a year ago. MTN Mobile Money operates in partnership with nine banks. Currently, more than 2 million Ghanaians are registered as active users. MTN expects this number to grow as a result of the resources they have committed to educating subscribers about switching from the traditional mode of cash payments to electronic payments. Earlier this year, Zain became the second mobile operator to provide mobile money services through the introduction of ZAP, working with three banks.

How Will Mobile Money Help Ghana?

With more than 15,000,000 mobile phone subscribers in Ghana, the potential market for these new services is significant. Mobile money presents certain advantages for Ghanaians without access to banks. It reduces the transaction costs of financial services for the poor, especially those in rural areas where financial services seldom exist. Mobile money saves the cost of travel and time spent visiting the nearest town to access financial services. As noted in AudienceScapes research, mobile money provides people with a way to transfer money safely and keep (or even increase) their savings.

Mobile money has the potential to create jobs directly through hiring in the mobile phone companies, partner banks and the more than 4,000 merchants involved in Ghana’s mobile money system. Key partners in the provision of mobile money services include commercial banks, mobile phone operator’s shops, distributor shops and accredited agents.

Jobs may be created indirectly as mobile money contributes to growth in Ghana’s business and trade. If deployed successfully, mobile money could help individuals harness funds outside the banking system and channel them into the formal financial sector, thus making it easier to gather funds for investments.

Not surprisingly, the general manager of Mobile Money-MTN, Bruno Akpaka, sees many benefits for Ghana as it continues adopting this service. Akpaka believes mobile money will “help trade activities within the country and foster strong business partnerships.”

“The creation of wide merchant footprints in places where traditional banks cannot go also contributes to bringing people into this new model of financial transactions,” said Akpaka. “MTN Mobile Money is bridging this existing huge gap between the unbanked and the financial sector.”

The Rise of E-Money Services

The introduction of mobile money service is taking place in isolation but in parallel with the advent and expansion of other financial electronic payments services. One of these is E-Zwich, an electronic platform that enables the loading and spending of electronic cash and also allows the settlement of inter-bank claims in addition to online transactions. Others are being made available over the Internet and through SMS-text messages.

The government regards these services as banking. They are strictly regulated and licensed by the Central Bank- Bank of Ghana under its branchless banking policy.

Both MTN and ZAIN SIM cards are enabled to utilize the service but each new subscriber needs to register for the service at before it is activated. Upon activation, the user is provided with a secure electronic “wallet” where funds can be disbursed or uploaded. The users can either exchange electronic money for physical cash (cash out) at shops, partner banks and accredited agents or make use of it in making purchases or transfers.

Enabling a Cash Flow to Rural Areas

In general, the most popular mobile money service is money transfer. The trend is for users in urban areas to transfer funds to recipients in rural areas. Traditionally in Ghana, city dwellers often send money to members of their extended family living in rural areas.

Other typical services include the purchase of mobile phone airtime, goods and services through electronic transfer of money from user’s wallet to the merchant’s account.

Commenting on money transfer via mobile phones, Carl Niikoi Ashie, an m-commerce (mobile commerce) specialist at Zain who works on ZAP, said: “The customers can ‘cash in’ by loading money onto their ZAP wallet, then send the money to someone else on their phone in a simple process. The person receiving the money can ‘cash out’ by going to any of our outlets and exchanging the e-value for physical cash. We’re seeing tremendous growth in the service across the country, with more cash-in done in the major cities while cash-outs are seen predominantly in the smaller towns.”

Ashie sees a lot of evidence that his product is reaching Ghana’s unbanked. “Users do not need to have a bank account to use the service. Currently, there are a lot of monetary transactions that take place outside the confines of the banks and it will take a product like ZAP to fill the void while providing a secure, convenient and trustworthy channel of transaction,” said Ashie. “Some customers have also requested products that will allow them to use their ZAP wallets for savings and hence enjoy interest on their savings, just as pertains in the traditional bank setting.”