By June Kotut
2009
Mobile phones have had tremendous growth in Sub-Saharan Africa over the last decade and have started being used to enhance access to financial services. This is being achieved by reaching out to the populations that did not have access to financial services previously via transformational mobile phone financial service models. These are models that reach out to provide financial services to populations that were previously un-banked and do not necessarily require a bank account to operate. They usually involve the introduction of a third party in this case, the mobile phone service operator.

Macroeconomic and Financial Management Institute of Eastern and Southern Africa (MEFMI) countries (Angola, Botswana, Kenya, Lesotho, Malawi, Mozambique, Namibia, Swaziland, Rwanda, Tanzania, Uganda, Zimbabwe and Zambia) countries fall under the list of less developed countries in the world. They are generally characterized by high unemployment rates, illiteracy and poverty. With respect to access to financial services, MEFMI member countries can aptly be described as mainly un-banked with generally more than half their populations having no access to any financial services. Transformational mobile phone initiatives have the potential to overcome remoteness, processing cost barriers and bureaucratic account opening and cash withdrawal procedures.

This paper has two aims based on a central bank perspective. Firstly, to examine the usage of transformational mobile phone financial services in MEFMI member countries and any regulatory/oversight roadblocks in their establishment. Secondly, to make recommendations for their establishment, usage and oversight in MEFMI member countries.

The study established that only three of the MEFMI member countries have non-bank based transformational mobile phone services provided by mobile phone operators. The study also found that the countries which have these services either do not have regulatory frameworks in place or the oversight of mobile payment systems is lacking. The study recommends that that the services be established where they are absent and extended where they already exist by developing policies that encourage more innovation in financial services by the private sector. The study further recommends that regulatory frameworks and oversight should also be put in place and standardized to curb or minimize inherent financial services risks.