M-Pesa is the undisputed leader of mobile money in Africa. In 2012, its rapid growth inspired Sampoa, an Innovations Manager at a Kenyan bank, to get his financial institution involved: he suggested creating a type of credit that could be used with electronic wallets.¹ The digital credit product M-Shwari was born 10 months later, thanks to a partnership between Safaricom M-PESA and the Commercial Bank of Africa.

There was immediate interest in M-Shwari. Three weeks after launch, 645,000 people had signed up for it.² Over the course of four years (by 2016), 14 million customers had signed up for M-Shwari, which also offers a savings account. Customers borrow an average of US$30, at a rate of 7.5 percent over 30 days, and save an average of US$5, with an interest rate of 7 percent.

Six years later, digital credit is widespread in East Africa. Products such as M-Pawa in the United Republic of Tanzania and EcoCash in Zimbabwe are incredibly popular and involve a partnership between a bank and a mobile network operator, combining credit and savings services. Other actors are investing in this niche, particularly fintech companies and microfinance institutions, in partnership with operators. Examples include Branch and Tala in Kenya as well as HalaYako and Tigo Nivushe in Tanzania.

East Africa is paving the way for mobile money, so it is natural that it is also taking the lead when it comes to innovation in the sector. Digital credit is quickly finding success among low-income populations. These groups, lacking access to banking services, have the possibility to access small amounts to solve temporary problems, to invest and to improve their daily lives. In this way, digital credit offers a great opportunity to boost financial inclusion.

© Martin Jjumba UNCDF/2018

Experiences in countries such as Kenya and Tanzania provide great lessons for West Africa. Potential is there for countries such as Côte d’Ivoire, Ghana and Senegal, where the mobile penetration rate is relatively high but where most of the population is low income and lacks access to financial services.

The UNCDF programme MM4P has seized the opportunity to organize training workshops on digital credit for all stakeholders in the digital finance ecosystem in Benin and Senegal. Sabine Mensah, Regional Technical Specialist for the programme, explains: “We need to find services that encourage the adoption of mobile financial services, which ensure the financial inclusion of vulnerable groups. For those with low incomes, near-instant access to microcredit when it is most needed can only be beneficial. This training provides an introduction to the potential of digital credit and will equip actors to examine a range of services that meet certain demands—namely, responsible digital credit that clearly communicates all terms and remedies to customers, protects them against the risk of excess debt and remains within everyone’s reach.”

The workshops, facilitated by the consultant firm PHB Development, address the basics of digital credit, partnership models for launching these products, as well as costs and benefits of the products and their regulatory challenges. In regard to the latter, digital credit has not yet been specifically defined in regulations by the West African Economic and Monetary Union. The Central Bank of Western African States remains open to discussion to support all actors.

Research carried out in Kenya has revealed that access to and usage of mobile money allowed 194,000 households to escape extreme poverty and improved the economic lives of poor women and households headed by women³—as set out in the fifth UN Sustainable Development Goal. Innovative products such as digital credit allow more people to be included in financial systems and give autonomy to those with low incomes, provided that the products are adapted to them. Understanding the market, its characteristics and the needs of customers is thus the first step for those interested in offering mobile money and digital credit, prior to investing in this type of product.

To that point, MM4P supported the 2016 launch of the first digital savings and credit product in Uganda through a partnership between Commercial Bank of Africa and Mobile Telephone Networks. Using a human-centric approach, MM4P helped ensure the product, MoKash, was designed to meet the needs of Ugandans. MoKash currently has more than 2.5 million customers, the majority of them women.

Closer to home, Airtel Money Bosea in Ghana and MoMo Kash in Côte d'Ivoire recently launched. Let’s hope that the next product to be launched will come from Senegal.

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^{1. Anecdote was shared by the consultant firm PHB Development.↩}

^{2. Unless otherwise noted, all figures in this blog were provided by PHB Development.↩}

^{3. Tavneet Suri and William Jack, ‘The long-run poverty and gender impacts of mobile money,’ Science, vol. 354, No. 6317 (9 December 2016), pp. 1288–1292. ↩}