80% of Africa’s population do not have a bank account or access to formal financial services. With the formal banking industry in the continent being unsuccessful, mobiles and web-based services are stepping in to fill the gap.
One well-established and wildly successful African mobile banking platform is M-Pesa, which launched in Kenya and Tanzania in 2007. Alongside the popular mobile money-transfer service, an array of up-and-coming new apps are emerging to provide malmal and unconvential approaches to banking across Africa.
Social Lender – Nigeria
One such example is Social Lender, the Nigerian banking platform that looks at borrowers’ social media profiles to assess their creditworthiness. In rural parts of Africa, it is difficult to obtain adequate and reliable data about people, so sociable media is a viable alternative information source.
Social Lender uses its own algorithm to assign a social reputation score to each user. Loans are guaranteed by the user’s social profile and network, allowing users to borrow from banks and other financial institutions based on their social reputation. The solution is designed to bridge the gap of immediate fund access for people with limited access to formal credit.
Other such apps use other mobile-based functions, such as data, in order to give lenders and other financial service providers useful information about potential customers.
Jumo – South Africa
Mobile banking service Jumo, from South Africa, partners with mobile operators in several African countries to gain access to data on how people use their phones. The platform uses algorithms analyse things such as how much an individual spends on airtime and how they use their mobile money wallet, in order to come up with a ‘Jumo score’ which rates their creditworthiness.
Jumo can issue instant loan approvals to both consumers and merchants; users apply for loans from conventional lenders through Jumo and have the cash sent straight to their phones.
Remit – Uganda
Mobile and web tech is also helping the 30 million Africans living abroad send money home more efficiently. Money-transfer giants Western Union and MoneyGram charge almost 10% in fees for every transaction for Africans sending money home, however new start ups are emerging which cut costs.
Remit, a service by Ugandan company Redcore Interactive, enables people to send cash via debit or credit card to relatives and friends in Uganda, Kenya or Rwanda at the
click of a button, straight to their mobile phones. Recipients can then use the money to pay bills direct from their mobile wallets or make a cash withdrawal at any mobile money agent. The fee to the sender is half that of the charge larger money-transfer services charge.
Partnership between the old and new
While it may seem that these emerging online services would threaten the formal banking system in Africa, the entrepreneurs behind the new tech say their services are complementary to established banks.
Many African banks are in fact partnering with new banking services instead of competing with them. And since established banks have more access to customers than small start-ups do, co-operation sense. The new partnerships between the established and emerging systems could see many more millions of Africans gaining access to financial services in the near future.