exploring african fintech african... · 2016-02-05 · mahindra comviva, tagiattitude, pyro mobile...

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EXPLORING AFRICANFINTECH

OKA-HRwww.okahr.co

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Africa is the second largest continent in the world with approximately 1.2-billion citizens divided between 54 countries. As expected for such a large continent it is a vast area and presents a variety of cultures, nationalities, and levels of economic developments. We must therefore be careful not to make too broad a general about the situation of the market. This report focuses on FinTech – financial technology – development on the continent, giving insight into what is happening on the continent in the sector.

There has been a lot of attention on FinTech in Africa, particularly for its mobile financial services and the huge success of reaching the unbanked. However, we felt that so far no publication has put together elements relating to legislation, possible effects of FinTech, and those up and coming innovative businesses within Africa’s FinTech space. Here we offer some way by which to rectify that position, collating all these elements in one document. The

sector is very dynamic and this document does not claim to cover everything happening in the field.

However, we are certain that you will learn something from the extensive research which is presented. For those of you new to FinTech in Africa this will provide an excellent introduction which gives information on some of the ‘basics’. Whilst for those more experienced in Africa’s FinTech efforts can have a document to refer to which puts together what you might already know with some added depth, particular on the legislative side which has, to our knowledge, not been as extensively collated as we have presented here.

This report is intended for anybody invested in FinTech and its development. Whether journalists, government officials – in and outside Africa, non-government organisations, or charities. We hope that you gain something from this report and that it contributes positively to your knowledge.

FORWARD

Yinka OpaneyeCEO OKA-HR

www.okahr.co

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CONTENTsEXECUTIVE SUMMARY .................................................................................................................. 4

DEFINITIONS .................................................................................................................................6

PART 1: COUNTRY HIGHLIGHTS ......................................................................................................9

ESTABLISHED PLAYERS (SANGK) ................................................................................................9

South Africa .....................................................................................................................10

Nigeria..............................................................................................................................12

Ghana .............................................................................................................................. 14

Kenya ...............................................................................................................................16

RISING STARS ...........................................................................................................................18

Ethiopia (Addis Ababa) ....................................................................................................18

Egypt (Cairo) ...................................................................................................................19

Angola (Luanda)..............................................................................................................19

PART 2: ACROSS THE CONTINENT ..............................................................................................23

FINTECH (MOBILE FINANCIAL SERVICES) REGULATIONS .......................................................23

Northern Africa ..............................................................................................................24

Eastern Africa ................................................................................................................25

Southern Africa ..............................................................................................................28

Western Africa ...............................................................................................................29

MOBILE FINANCIAL SERVICES COLLABORATIONS .................................................................32

Southern and Eastern Africa.........................................................................................32

Northern and Western Africa .......................................................................................33

PART 3: DERIVATIVES AND DRIVERS ..............................................................................................36

SECONDARY EFFECTS OF FINTECH ......................................................................................36

HIGHLIGHTED START-UP ENABLERS.........................................................................................43

Incubators ......................................................................................................................43

Accelerators .................................................................................................................. 44

Co-working spaces........................................................................................................ 44

Innovation Centres ........................................................................................................45

TABLES AND DIAGRAMS:

• MFS Potential – Formally banked and mobile penetration rates .........................21-22

• Enabling Environment – Mapping the legislative landscape .....................................31

• Percentage and geographical spread of MFS deals over time .............................. 35

• Financial Deepening through M-Pesa ....................................................................40-43

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Within this group of countries there exists a considerable range in terms of financial inclusion. From the more financially included countries such as Mauritius and South Africa with 82 and 75 percent of their respective populations holding bank accounts; to less financially inclusive economies like Niger and Guinea where only 7 percent hold bank accounts. Across the entire continent, the median percentage of bank account holders stands at 23 percent. The median number of bank branches to every 100,000 people across the continent is also low at 4.75.

However, this population does have a significantly higher percentage of people with access to mobile phones. Though subscription penetration rates again vary from 7 to 813 percent (Eritrea and Comoros respectively), the median penetration rate is 81 percent. It means individuals are more than three times as likely to possess mobile phones as they are to hold a bank account. It is this simple concept which presents an opportunity for financial inclusion through FinTech – Mobile Financial Services (MFS) specifically.

Part 1 – Country Highlights: Established Play-ers and Rising stars

We selected four countries with the most influence, potential, and economic stability from across Africa: South Africa, Nigeria, Ghana, and Kenya (SANGK). Each is given an in-depth analysis of their Information, Communication and Technology (ICT) and Finance sectors. All four countries have well-developed start-up ecosystems to nurture the next generation of FinTech firms. The reasons each gives for further ICT investment differs slightly. Nigeria has focussed more on its ICT and telecommunications industry in an attempt to diversify its economy away from oil revenue. Ghana has introduced strategic visions to greater incorporate ICT into education, and Kenya hopes to leverage the ICT sector to develop itself into a “middle income” country.

The common element in all four established players is their acute skills shortage particularly in the field of ICT. Though all four governments

understand this fact and have put strategies in place to remedy the shortage, most have attained moderate to poor success in tackling this issue. For most companies, particularly multinational firms, it has resulted in very well-developed internal learning programmes. It has also forced start-ups to compete more vigorously for ICT skilled employees.

Our three rising stars were chosen for various reasons:

a) Ethiopia (Addis Ababa): Following years of stability, the country has been achieving steady rates of growth. It also has a large population of over 90-million and growing; many of whom remain unbanked and potential MFS users.

b) Egypt (Cairo): The city is a developed and well-respected ecosystem particularly for crowdfunding. However, there is a lot of potential for MFS as there still remains a large unbanked population. Moreover, its geographical position gives it access to the Middle East, North Africa, and Europe.

c) Angola (Luanda): The country has the capabilities of becoming a telecommunications hub on the continent and is set to have over a fifth of its population using 4G by 2020. Additionally its financial sector, like the rest of the economy, is growing rapidly.

Part 2 – Across the Continent: Legislative Frameworks and Collaborations

There are three structures (business models) which have been used to deploy MFS: bank-based, non-bank based, and (independent) payment provider based. Most countries have permitted one or two business models; Nigeria is the only country studied which permits three models for MFS deployment. The regulation of these MFSs has been split between Central Banks and Telecommunication ministry departments. Some countries such as Tanzania have created specific committees to coordinate the communication between the two regulators. The

EXECUTIVE sUMMARY

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level of success in coordination (with or without a designated committee) varies considerably. Some countries (e.g. Tanzania) are rumoured to have exceptional inter-regulatory relations, whilst others (e.g. Zimbabwe) are rumoured to have more strained relationships.

Rather than amend Central Banking law, all countries analysed have put in place regulations and guidelines concerning e-money and MFSs. Some governments adopted a “test and learn” approach before developing these regulations. Examples of countries taking this approach include: Kenya and Uganda. They have developed guidelines which mandated the business environment following its maturity. Whilst other nations developed guidelines and regulations whilst their local MFS sectors were still nascent. Countries falling into this category include Ghana, Nigeria, and South Africa.

Irrespective of the guidelines and regulations adopted, all have required, to varying degrees, collaborations between mobile network operators (MNOs) and financial institutions. Within the Eastern and Southern parts of Africa: Vodafone (through a large stake in Safaricom – owner of M-Pesa) and Airtel prove dominant. However, Safaricom (M-Pesa) is facing strong challenge from Equity Bank’s offering through Equitel (its telecommunications subsidiary). In the Northern and Western parts Orange is dominant, particularly in the French speaking nations like Tunisia, Cameroon and Ivory Coast.

There are four technology firms which dominate Northern and Western African collaborations: Mahindra Comviva, Tagiattitude, Pyro Mobile Money, and Verifone. These four technology companies are responsible for supporting 40 percent of all the MFSs operating in these regions. This has mainly been as a result of the long-standing relationships these firms have built with MNOs. When entering new markets MNOs have tended to replicate their operations and bring their existing technology partners along with them.

Part 3 – Derivatives and Drivers: secondary Effects and start-up Enablers

This chapter concentrates on the secondary effects of FinTech and its supporting mechanisms (incubators, accelerators and co-working spaces) across the continent. The range of possible effects tested varies from the highly theoretical and economic, to the behavioural changes arising due to the growth of MFS and FinTech as a whole. Preliminary studies (as the service is under 10-years old) demonstrate that MFS operations do not have an effect on inflation. This is contrary to the common economic maxim that increased money volatility, which MFS causes, results in higher inflation.

Though MFS has been marketed as leading to financial inclusion, some have questioned its ability to contribute to this dimension. They have suggested that these products only appear to attract those already banked populations. Evidence indicates that though early adopters are generally urban, more educated, and wealthier; as time progresses more rural, uneducated and less financially solvent populations adopt the products too. There is also strong potential for MFS to be used more frequently in micro-finance institutions, conditional and non-conditional cash transfers, government payments and more sophisticated financial products.

We also provide a list of some the many accelerator and incubator programmes which exist in Africa. Some of the well-known programmes are internationally run such as Barclays Tech Lab (South Africa) or Startupbootcamp (South Africa and Kenya). However, there are many programmes which have been locally developed and are proving hugely successful. This is particularly the case in Northern Africa with Tahir2, Flat6Labs, and Plug and Play (all based in Egypt). Some other influential incubators and accelerators are MEST, iSpace and Impact Hub Accra (Ghana); iHub (Kenya), xHub Innovation Society and iceaddis (Ethiopia).

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Accelerator (programme)These are fixed-term, cyclical programmes which include mentorship, training aspects, and usually culminating in a presentation or pitch event/ demo day.

Agent Any third party acting on behalf of a bank or other financial services provider (including an e—money issuer or distributor) to deal directly with customers. The term ‘agent’ is commonly used even if the commonly used principle-agent relationship does not exist under the law of the country in question.

Anti-money laundering / Combating the fi-nancing of terrorism (AML/CFT)A set of rules, typically issued by central banks, that attempt to prevent and detect the use of financial services for money laundering or to finance terrorism. The global standard-setter for AML/CFT rules in the Financial Action Task Force (FATF).

Bank-based modelA mobile financial services business model (bank-led or nonbank-led) in which:

i) The customers has a contractual relationship with the bank and,

ii) The bank is licensed or otherwise permitted by the regulator to provide the financial services

Bank-led modelA mobile financial service business (bank-based or non-bank based) in which the bank is the primary driver of the product or service, typically taking the lead in marketing, branding, and managing customer relations.

Business-to-Government (B2G) Business to government payment e.g. the payment of taxes or other government fees.

Business-to-Person (B2P)Business to person payment e.g. salary payments

Branchless BankingDelivery of financial services outside conventional bank branches. Banking beyond branches uses

agents or other third party intermediaries as the primary point of contact with customers and relies on technologies such as card-reading point-of-sale (POS) terminals.

Conditional Cash Transfer (also Non-condi-tional cash transfers)Programmes aimed at reducing poverty by providing incentives (such as money or vouchers) conditional on the recipients’ actions. Non-conditional cash transfers are not dependent on the recipients’ actions.

CrowdfundingThe process of raising capital for a project or venture through a collection of (typically public) donors.

E-MoneyA type of monetary value electronically recorded and generally understood to have the following attributes:

i) Issued upon receipt of funds in an amount no lesser in value than the value of the e-money issued;

ii) Stored on electronic device (e.g. a chip, prepaid card, mobile phone, or computer);

iii) Accepted as a means of payment by parties other than the issuer; and

iv) Convertible into cash

E-Money IssuerThe entity that initially issues e-money against receipt of funds. Some countries only permit banks to issue e-money (see Bank-based model) whereas other countries permit non-banks to issue e-money (see non-bank based model).

E-Money AccountAn e-money holder’s account that is held with the e-money issuer. In some jurisdiction, e-money accounts may resemble conventional bank accounts, but are treated differently under the regulatory framework because they are used for different purposes (for example, as a surrogate

DEFINITIONs

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for cash or a stored value that is used to facilitate transactional services).

Float // e-floatThe total outstanding amount of e-money maintained on the premises by an e-money issuer.

Formal financial services (formally banked)Financial services offered by regulated institutions as opposed to informal financial services, which are unregulated. Some examples of regulated institutions include banks, remittance services providers, microfinance institutions and MNOs.

Financial deepeningThe development of a financial services system facilitating the provision of a range of financial assets in the economy.

Financial inclusionThe delivery of formal financial services at an affordable cost to all populations.

FinTechThe use of technology to improve the efficiency of the financial services sector. It covers both:

a) Traditional FinTech: Represents those larger, well-known firms providing supportive data and services for ‘brick and mortar’ financial services firms.

b) Emergent/ Disruptive FinTech: Smaller businesses and start-ups relying more on big data analysis, mobile and internet technologies.

Government-to-Person (G2P)Government to person payment e.g. to include the receipt of government benefits and salary payments.

Incubator (programme)These are development programmes for start-ups. They are generally more flexible and make no requests for equity in the firm, unlike accelerator programmes (See above). These programmes often offer management training, consulting, and office space too.

Informal financial servicesFinancial services offered by unregulated entities. Examples of informal financial services are susu

collection in Ghana, loan shark lending, and informal saving groups.

InteroperabilityThe ability of users of different mobile money services to transact directly with each other.

Know Your Customer (KYC)Rules related to AML/CML which requires providers to carry out measures to identify a customer.

Mobile Banking (m-banking)A service allowing customers to access their bank accounts via a mobile phone; sometimes, they are also able to initiate transactions. It is a sub-set of mobile financial services (See below).

Mobile Financial services (MFs) // Mobile MoneyA service with which the mobile phone is used to access a variety of financial services from banking to insurance, loans and savings.

Mobile money transfer // Person-to-person (P2P)A payment of value that is made from a mobile wallet, accrues to a mobile wallet, and/ or is initiated using a mobile phone.

Mobile payment (m-payment)Sometimes, the term payment is used to describe only transfers to pay for goods and services, either at the point-of-sale (retail) or remotely (bill payments).

Mobile Network Operator (MNO)A company that has a government-issued license to provide telecommunications services through mobile devices.

Mobile walletA financial account that is primarily accessed using a mobile phone.

Non-bank based modelA mobile financial services business model (bank-led or non-bank led) in which:

i) The customer has a contractual relationship with a non-bank financial services provider and,

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ii) The non-bank is licensed or otherwise permitted by the regulator to provide the financial service(s).

Non-bank led modelA mobile financial services business model (bank-based or non-bank-based) in which the non-bank is the primary driver of the product or service, typically taking the lead in marketing, branding, and managing the customer relationship.

Person-to-Government (P2G)Person to government payments e.g. payment of taxes, fees, fines or for services.

Payment service ProviderAn entity providing services that enable funds to be deposited into an account and withdrawn from an account; payment transactions (transfer of funds between, into or from accounts); issuance and/ or acquisition of payment instruments that enable the user to transfer funds (e.g. checks, e-money, credit cards and debit cards); and money remittances and other services central to the transfer of money.

Point-of-service (POs)A retail location where payments are made for goods or services.

Third Party ProviderAgents and other acting on behalf of a mobile financial service provider, whether pursuant to a services agreement, joint venture agreement, or other contractual arrangement.

UnbankedPotential customers, usually the very poor, who do not have a bank account or a transaction account at a formal financial institution.

Under-bankedCustomers who may have access to a basic transaction account offered by a formal financial institution, but still have financial needs that are unmet or not appropriately met. For example, they may not be able to send money safely or affordably.

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PART 1: COUNTRY HIGHLIGHTsEstablished Players and Rising stars

ESTABLISHED PLAYERS(SANGK)In this section we consider the four established players on the continent – South Africa, Nigeria, Ghana, and Kenya (SANGK). The first part of the analysis is a summary of their governments’ stance on the Information and Computing Technology (ICT) and Financial sectors. It is an overview of how the government aims to harness the power of these two sectors to achieve its wider development goals.

In the second part, the training, skills development initiatives and human resource environment is explored. It provides insight not only from a governmental viewpoint, but also from a business one too.

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In the 2015 budget speech the South African Minister of Finance, Nhlanhla Nene, highlighted the government’s immediate priorities5. The nine-point plan outlined the government’s strategy for building a sustainable and innovative economy. Two of the points focused on unlocking small business potential and encouraging private investment in dynamic sectors. The end vision was to ensure greater inclusion of the population who currently remain economically inactive.

South Africa was ranked second overall in the 2015 Brookings Financial and Digital Inclusion Project (FDIP) Report and Scorecard6. The report evaluated 21 developing countries against a number of criteria relevant to financial inclusion one of which includes mobile capacity. It ranked first for country commitment, adoption of traditional and digital financial services, and regulatory environment.

Innovation is not new to financial services in South Africa; the country was the first in the world to set up a Faster Payments system, and four of the five major banks incorporate a banking app (bar Capitec). While these banks have developed some great technology solutions, there’s a lack of interoperability between banks.

Telecommunications giants, Vodacom and MTN, have taken advantage of traditional banking’s weakness by dominating MFS. They have introduced financial services to the quarter of the population that remains unbanked; providing real-time, person-to-person (P2P) payment capabilities via their respective offerings, M-Pesa and Mobile Money.

On the ground

The startup culture in the country’s FinTech scene is thriving and in 2015 three South African FinTech start-ups made the majority of finalists at the SWIFT

Innotribe regional showcase in Cape Town, moving on to represent the continent with two other African start-ups at the international showcase.

The start-ups are YueDiligence, 2Quins, and ZAQ Finance. YueDiligence is a due diligence tool for entrepreneurs, investors, and service providers to assess deal readiness. 2Quins is a financial information tool that assists in meeting banks’ operational and regulatory reporting requirements more efficiently; and ZAQ Finance is a debt reduction, savings, and low-cost credit products service for low-income Africans to become more financially secure.

Networking organisations, incubators, accelerators, and major events have been emerging since the turn of the century to nurture and support technology entrepreneurs.

Some national initiatives include mLab Southern Africa, a vertical accelerator focused on mobile innovation and start-ups. It is backed by the World Bank, the Department of Science and Technology, among others. Tech4Africa acts as one of Africa’s biggest web, mobile and emerging technology conferences and annually hosts the Ignite startup competition which gives African start-ups exposure to vital industry players. Another initiative, Entrepreneur Traction, bridges the gap between potential young technology entrepreneurs and influential CEOs and venture capitalists.

Cape Town - The Cape IT Initiative (CiTi) is a non-profit organisation infusing the Western Cape’s technology sector and tech-enabled industries like financial services, retail and government. The Bandwidth Barn (forming part of CiTi), operating since 2000, is regarded as one of the leading ICT incubators in the world. They’ve set up a Bitcoin hub as well as a Virtual Reality community — both firsts in South Africa – and this year (2015) they also unveiled

sUMMARY

south Africa

Population: 54 million1

Adult population over 15 years old (% from MRV figures)2: 69.4

Nominal GDP/ Growth (2014)3: 349,817; 1.5

Percentage of Formally Banked 20143: 69

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Barn Khayelitsha — a co-working support hub for entrepreneurs in the area.

Barclays Africa also launched its Tech Lab Africa accelerator programme in Cape Town this year. It helps connect a global network of start-ups, corporate firms, and innovators. The venture aims to accelerate South Africa’s FinTech and digital health industry by helping scale innovative solutions.

Johannesburg – In 2015, AlphaCode launched in Sandton as the club for ‘next-generation

entrepreneurs in South Africa’s financial services industry’. It facilitates networking, co-working, and mentorship. JoziHub is an incubator backed by Omidyar and Google, and is aimed at connecting potential entrepreneurs and developers with critical resources. This year, Standard Bank launched its Standard Bank Incubator Programme to create and develop entrepreneurs in South Africa, and is accompanied by the incubator co-working space in Rosebank.

According to the 2014 skills trend survey by the Witwatersrand University’s Joburg Centre for Software Engineering (JCSE) on South Africa’s ICT sector, South Africa lacks critical skills and is falling behind countries that place greater emphasis on the contribution of technology to economic growth7. Countries like Kenya (who ranked first in the FDIP report), Nigeria, and Egypt.

New and emerging technologies are creating a strong demand for certain skill sets; and South Africa is lagging behind due to a deficit in the number of graduates in the science, technology, engineering, and mathematics (STEM) fields. Roughly only 10 percent of students who enter the basic education system achieve a pass in math or science subjects. The number of matric learners who passed mathematics in 2014 – attaining above 30 percent – dropped to 53.5 percent from 59.1 percent in 2013. The pass rate for physical science dropped nearly six percentage points in the same period.

Telkom Business reported on their blog in April that it estimated between 30,000 to 70,000 skilled IT

workers needed to enter the system in South Africa to solve the national IT skills challenge8. Professor Barry Dwolatzky, director of the JCSE, says digital technology is the route to absorb some of the youth unemployment in the country, which is currently two-and-half times that of adult unemployment. He warns that South Africa has to create future generations of tech savvy youth who can ‘use, adapt, and improve on the technology of the day’. “We are at risk of losing an entire generation if vital steps are not taken,” he said, adding that South Africa will not be able to achieve its National Development Plan without the contribution of an effective ICT sector.

One study highlighted some of the problems disadvantaged areas in South Africa have in developing students’ ICT capabilities9. Among the issues identified include the poor computer to student ratio, difficulty in access to the internet, and a lack of use of ICT involvement in schools’ general curricula.

MICT (Media, Information and Communication Technologies) Sector Education and Training Authority (SETA) is the body responsible for skills development in sectors including IT and telecommunications. MICT SETA have drafted a list of scarce and critical skills.

They have identified these in collaboration with industry stakeholders – that includes vendor-specific technical skills sets covering Oracle, Cisco, SAP, and Microsoft – and used the research to develop the Sector Skills Plan.

The plan is aimed at partnering with companies within the MICT sector to address these critical skills by training employees and unemployed candidates. The Plan indicated a demand for 6,281 potential vacancies in MICT by March 2014 with an emphasis on qualifications of the necessary market-level required by IT sub-sectors. In its most recent report published in 2015, the MICT SETA noted that it had achieved or even exceeded all its planned targets. These overachievements were primarily due to increased stakeholder participation from businesses and educational establishments.

HR/ PEOPLE AsPECTs

Number of those who passed maths (achieving 30 % or more) dropped from 59.1 to 53.5 per cent. 2014 2015

Only 10% of student who enter the basic education achieve a pass in math or science subjects.

Mathematics Pass Rates: 2013/2014

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Nigeria

Population: 177.5 million10

Adult population over 15 years old

(% from MRV figures): 54.4

Nominal GDP/ Growth (2014): 568,508; 6.3

Percentage of Formally Banked11: 44

To reduce its dependency on oil revenues the Nigerian government put in place a 10-year strategy, announced in 2012, to diversify its economy. Already one of its growth areas, the government focussed on improving the efficiency of its finance sector, which between 2009 and 2013, doubled in the percentage share it accounted for in government revenue13.

Seizing this opportunity, in October 2012, the Central Bank of Nigeria (CBN) announced its intentions – through the Financial Inclusion strategy – to increase financial access to 70 percent of the population in areas concerning remittances, savings, pension and insurance.

Under its “cash-lite society” initiative originally piloted in Lagos, it has sought to reduce the high reliance on cash payment within the country. The initiative hopes to modernise the payment system and improve the effectiveness of monetary policy. The scheme was rolled out to another six centres in 2013, accounting for nearly 90 percent of cash centres in the country. CBN has also issued regulations concerning MFS and has so far issued 20 licences to firms offering the service.

The government has demonstrated its equal level of commitment to its ICT sector. The telecoms market in Nigeria is open, highly competitive and in 2014 contributed 8.34 percent to Nigeria’s total GDP14. In June 2012, the Ministry of Communication Technology released its National Information and Communication policy intended to promote universal access to ICT and make the sector more attractive for businesses and entrepreneurs. This multi-layered policy included efforts to enhance ICT skills in schools, streamline regulation and taxation within the sector, and bring uniformity in how ICT was used in government ministries.

Its success in this area was recognised in the 2013 UN Public Service Awards (Category 4: Promoting Whole-of-Government in the Information Age) where Nigeria took first place. Prior to that in 2011, Nigeria had also received the support of the International Finance Corporation (IFC), in promoting ‘Village Phone’ – a concept extending telecommunication services to rural areas.

On the ground

This has been supported by a number of measures within the country’s ecosystem. The Federal Ministry of Communications Technology (FMCT), through its Nigeria Federal Open Data Initiative, hopes to stimulate innovation and economic growth by opening government data. As well as the government’s push for a cash-lite society and ICT investment, there is also a high level of entrepreneurial culture which exists in Nigeria. Two areas are garnering significant attention: e-commerce and FinTech (specifically MFS).

Within the e-commerce space, the leaders are Konga and Jumia who have received backing of $40million and $150 million respectively to expend their operations in the country. Of the many FinTech players providing MFSs, Fortis Mobile Money is one of the most well-known and is still growing. Henry Nwawuba, Fortis Mobile’s Managing Director, said the company planned to deploy an additional 50,000 agents across the country. This is after the initial success recorded in Lagos where it has 950,000 users due primarily to its partnership with Nigeria’s largest telecom network, MTN Nigeria.

Though there are pockets of innovative centres around the country such as Wennovation Hub (which coaches and mentors start-up firms) in Ibadan; the

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sUMMARY

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majority of activity occurs in Lagos, the country’s former capital.

Lagos – Most notable among them is ccHUB: a community, open living lab and pre-incubation centre: essentially facilitating connections in the city; and Spark (an office space and accelerator hybrid) which is supporting firms. Of the better recognised growing firms are Vogue Pay and PagaTech – both payment processing providers.

Since VoguePay’s launch in 2012, it has processed over 950,000 transactions worth over N900 million ($4.5 million) in Lagos alone. PagaTech first came to international promin ence when it attracted the attention of Silicon Valley venture capitalists. To date the firm has over 3 million users across the country, making it the undisputed leader among the payment provider service led MFS firms. Other MFS firms making headway in Lagos are E-transact with 250,000 users, PayCom with 210,000 and Mkudi Mimo slightly behind on 190,000 users.

There have been several changes in the human resource capabilities of Nigeria’s ICT and banking sectors. The country’s banking industry recapitalisation policy implemented in 2004/2005 resulted in a spate of organisational reforms. The policy forced several banks to enter into merger and acquisition deals resulting in retraining for new positions, redundancies and organisational restructuring programmes. According to one research paper15 the policy has transformed the Nigerian banking sector into slave banks: adopting more authoritative approaches through harsher human resources (HR) policies.

As a result of these changes HR employees were also forced to “align their HR strategy and practices with the business strategy of the banks”. This was essentially a move away from the traditional routine processes many HR employees had previously undertaken, known as personnel administration.

Technology firms such as Cisco and Oracle have also mentioned the difficulty in recruiting for ICT skilled individuals in the Nigerian banking sector16. In a recent roundtable summit, the country manager of Oracle, Adebayo Sanni, among other top executives

from other IT firms, stated that there is urgent need to address the IT skills gap in the country, particularly in the banking sector.

To further validate this fact, a survey by the Convention on Business Integrity shows that 39 percent of firms in the country are struggling to recruit workers into specialised IT positions, and they believe that this shortage of ICT experts will persist for the next three years (until 2018/2019). Cisco also laments this dearth in ICT skills in Nigerian banking sectors and other industries. They estimate that 30,000 to 70,000 skilled IT positions are required annually, and question the country’s ability to recruit for these roles17.

Moreover, due to the banking sector’s intense competition many firms have implemented radical upgrades to their IT technologies. This has prompted significant staff training programmes to update the organisation’s understanding of these new systems. It has placed greater pressure on these firms’ learning and development functions. One paper18 posited that in line with technological advancement there is a need for HR capacity development in the Nigerian banking sector.

HR/ PEOPLE AsPECTs

PagaTech E-Transact PayCom Mkudi Mimo

user

s

3 m

250,000 210,000 190,000

Mobile Money Subscriber Numbers(Nigeria)

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Ghana



(% from MRV figures): 59.7



In October 2015, the Ministry of Education in Ghana held a workshop to finalise its framework on how best to introduce and promote ICT into Ghana’s education system. The event led to the finalisation of the policy document needed to actualise the country’s ambitions. In recent years the government in an attempt to improve ICT in the country has distributed over 60,000 laptops to school students. It has also given over 50,000 teachers training on ICT as part of its Better Ghana ICT Agenda22.

Within finances specifically, Ghana has recently completed the implementation of the Ghana Integrated Financial Management Information System (GIFMIS) designed to modernise its budgeting and public expenditure system; and improve the efficiency of its revenue collection. The construction of GIFMIS coincided with the eGhana project which aimed to improve citizen access to information and transaction capabilities23. The government (via the Bank of Ghana – BOG) has aims to increase financial inclusion and is doing this through MFS. Following talks with financial services and telecommunication firms it amended MFS regulations making the system less “cumbersome”24.

In March 2014, The BOG also released its National Payment Strategy – Strategic Payment Roadmap for Ghana. Of its many initiatives was the development of a Ghanaian Payments Council to address and ensure ‘buy-in’ from the various stakeholders involved in payment services. The Strategy also included plans to develop ‘ePayment and eMoney regulations’ by emulating the legislative practices in Australia and India for the former, and UK for the latter. Additionally it outlined the government’s plans to ensure all employees in the country are paid electronically by 2020.

On the ground

According to the National Communications Authority (NCA) of Ghana, the number of mobile phone users increased from 28.8 million in April 2014 to over 32.3 million in August 201525. This figure shows mobile phone ownership outnumbers Ghana’s population of 26.7 million by a ratio of 1:1.2.

The number of MFS users has increased rapidly in recent years after a slow start. It has helped improve access to financial inclusion by 16 percent between 2010 and 201426. The industry is led by MTN Mobile Money, followed by Tigo with Tigo Cash, and thirdly Airtel’s offering Airtel Money. Since it debuted in 2009, MTN Mobile Money – the market leader – has gained a subscriber base of 4.8 million with monthly transaction volumes of over GHS 18.5 million ($4.6 million) per month.

Besides the telecommunication companies operating MFS, other non-bank and non-MNO companies also

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sUMMARY

Subscriber Base Transaction volumes

MTN Mobile Money (Ghana)

4.8 million

18.5 million ($4.6 million)per month

15

The Ghana Investment Fund for Electronic Communication (GIFEC) is tasked with the provision of ICT, internet connectivity and infrastructure on behalf of the Ministry of Communication. Of its many projects is the training of citizens on ICT. The training is delivered through their nationwide network of Community Information Centres (CICs). However, these sessions only cover the basics rather than the more advance ICT skills needed in the FinTech sector. Nevertheless these basic desktop and internet related training models provide the much needed ICT skills in the country.

According to the Ministry of Communication, since 2010 300 CICs have been built and supplied with over 2,100 computers. Though only 56 percent of these CICs are equipped with the internet, they supplement the low rate of internet subscription in Ghana. The most recent (2013) statistics released by the Ministry of Communications shows that less than 10 percent of Ghanaians are internet subscribers. The level of internet connectivity in schools is relatively high at 69 percent, but recent studies have still evaluated the level of connectivity, schools’ ICT laboratories and even ICT teachers as “inadequate”28.

Beyond the ICT skills gap, there is also a shortage of adequate graduates needed to fulfil the roles in the FinTech sector. It is a view expressed by many in government29, tertiary education30, and those within the business sector. Many Ghanaian entrepreneurs have themselves expressed a lack of confidence in their business acumen, with only 14 percent believing they possess the skills necessary to manage a firm31. As a result many firms choose in-house training and refresher courses, but face the high possibility of flight risk and competition from the banking and public sectors.

This skills gap is clearly understood and there have been several initiatives and projects supported by the World Bank to address it. In 2006, it approved the Micro, Small and Medium Enterprise Project led by the Ghanaian Ministry of Trade and Industry. The project, recently completed in 2015, met its objective to improve the employability of Ghanaian citizens. The AITI-KACE, noted above, also addresses some of these skills gaps by offering courses to improve both ICT and management skills.

run cashless payment systems in Ghana. ExpressPay is operated Expresspay Ghana Limited, while MPower Payments and Slydepay are operated by SMSGH and Dreamoval Limited respectively. These payment provider services allow users to load funds from their bank accounts or preferred electronic wallet onto their account, enabling them to shop online, transfer funds or receive funds from anyone – locally or internationally.

There are also several hubs and supportive networks within the ecosystem of Ghana. One notable organisation is mFriday, a non-profit mobile web lab. In late 2012, the group collaborated with Vodafone Ghana and Kwame Nkrumah University of Science & Technology (KNUST) to develop TechHub, billed as the foremost mobile and web laboratory in Ghana. It is based in Kumasi, the capital of Ashanti; though most of Ghana’s technology ecosystem is based in Accra, the capital of Ghana.

Accra – The city is host to Meltwater Entrepreneurial School of Technology (MEST) an incubator programme providing training and mentoring for technology-based start-ups in the West African region. One of their alumni includes Beam; a firm assisting overseas based Ghanaians make both bill and gift payments for relatives and friends still in the country.

Other notable programmes include iSpace Accra and Impact Hub Accra both supporting new technology talent. These are joined by the Ghana-India Kofi Annan Centre of Excellence in ICT (AITI-KACE) a joint project between the Indian and Ghanaian government to stimulate the growth of the ICT sector. The government also launched an ambitious HOPE City project, to be based just outside of Accra. The project, estimated at £6.6 million ($9.8 million) will serve as an IT hub and architectural landmark; and is set to become the tallest building in Africa27.

HR/ PEOPLE AsPECTs

16

Kenya



(% from MRV figures): 57



Government

Kenya’s main strategic plan is Kenya Vision 2030 which aims to transform the state into a “middle income country providing a high quality of life” for its citizens. The plan outlines a structure consisting of three pillars, from which eight key foundations exist. Among these foundations is science, technology and innovation (STI).

One of its many flagship projects is the creation of the Konza Technology City (KTC), a technology hub and economic driver for businesses and start-ups. It is expected to create over 17,000 jobs (projected realisation, 2018); and to be one of the main contributors to Kenya Vision 2030’s aim to achieve an annual growth rate of 10 percent in GDP until 2030.

The project builds on Kenya’s on-going commitment to strengthen its ICT sector; through The East African Marine System (TEAMS) and Notational Optic Fibre Backbone Infrastructure (NOFBI). These network systems are intended to make the country more globally connected35; and improve

communication between Nairobi and other key towns in Kenya respectively. The latter will also aid Kenya in its communication with their government service delivery too, facilitating the use of e-government36.

Government support for finance “through improved access and deepening of financial services and products” also directly speaks to FinTech, and more specifically MFS. Among its many medium term goals are to: increase bank deposits (from 44 to 80 percent), reduce the share of those financially excluded from 85 to 70 percent, and encourage greater use of ICT in the financial sector37.

On the ground

The critical success factor for banks and insurers in Kenya today is the ability to meet customers at their point of convenience. There is unquestionably no other greater point of convenience than the mobile phone. According to a 2015 report delivered by Sterling Capital, a local brokerage firm, more than 90 percent of Kenya’s working population (the key target market for banks and insurers) owns a mobile phone38.

Safaricom has proven the most successful FinTech firm in Kenya as a result through its MFS, M-Pesa. It has managed to capitalise on this unbanked, mobile-owning population resulting in its dominance of the market. In the last four years, the Kenyan Treasury has received a total of KSh23 billion ($230 million) in dividends from Safaricom: no other company has ever come close to this figure in recent history.

The Kenyan Revenue Authority has also received at least KSh51 billion ($510 million) in taxes from Safaricom over the past half-decade, making the telecommunications firm the single largest tax payer in Kenya’s history eclipsing amounts paid by the Teachers’ Service Commission – the employer of all

Ownership34

Smartphone 15


67

No phone 18

sUMMARY

70%

85%

Bank Deposits Financially Excluded

44%

80%

Kenya Financial Inclusion Targets:Bank Deposits and Financial Exclusion

17

public sector teachers, and EABL, the largest brewer in East Africa39.

The apparent maturity of Kenya’s FinTech space is perhaps best exemplified by the big deals that have come to characterize the sector. Waze Tele, a Kenya based FinTech start-up that integrates mobile payments into commerce, supply chain and distribution, was acquired by the AFB Group for $1.7 million in May 2015. Another Kenyan firm, globally recognised is the crowdsourcing platform, Ushahidi, which is headquartered in one of FinTech’s global cities, Nairobi.

Nairobi – The city is filled with a vibrant technology ecosystem made up of incubators and accelerator

programmes. Incubator hubs such as Nairobi-based iHub are creating ever more competent app developers who can come up with good solutions.

From a base of nothing, Nairobi’s iHub technology hub has grown to more than 3,000 developers, designers and entrepreneurs40. In addition to incubators, which are producing the next generation of start-ups, some start-ups have already come to market with resounding success. One such start-up is FarmDrive, a unique platform transforming the way farmers get access to financial services. FarmDrive provides much more than just financing to smallholder farmers. It also provides record keeping and data analysis for its users.

The primary body responsible for ICT deployment within Kenya is the Information and Communication Authority (ICT Authority). Established in 2013, it sits within the Ministry of Information Communication and Technology, and aims to develop Kenya into a regional ICT hub and globally competitive digital economy. Its current and first strategic plan, The Kenya National ICT Masterplan: Towards a Digital Kenya, outlines how ICT will contribute to Vision 2030.

Within its plan the ICT Authority admits that investment in skills development, especially in comparison with that made in ICT infrastructure, has been low and identifies several problems at tertiary level education. However, the issue appears to lie earlier in the system at primary and secondary levels of education too.

Of the participants in a UNICEF study (2013) only a quarter of 12 – 17 year olds had access to the internet “Several times a day”. The majority, 42 percent, had access to the internet 2 – 3 times a week41. Data for primary schools is scarce to come by – another limiting factor in monitoring and improving internet

access – and the latest figures (2007) put computer use at just 11 percent42. This figure is only slightly lower than 13.5 percent of rural schools estimated to use computers in 201243.

The plan acknowledges this need and has put in place the School Laptop project (2014) which includes an evaluation of the curriculum, training for teachers, and the provision of broadband connectivity to schools. However, the project has already faced heavy criticism for its planning and management.

The ICT Authority has also been building relationships with industry leaders. In 2012, it partnered with SAP Africa to develop SAP Skills for Africa, an eight week programme and exam to boost graduates’ employability skills. More recently in early 2015, it signed a Memorandum of Understanding (MOU) with Microsoft, which will result in the software firm providing ICT skills training to up to 300,000 teachers and an accreditation as Microsoft Certified Educators on successful completion of the programme.

HR/ PEOPLE AsPECTs

18

RISING STARSLagos in Nigeria, Accra in Ghana, Nairobi in Kenya and Cape Town in South Africa always get mentioned as the FinTech hubs on the African continent.

However, there are other cities that are seeing a gradual convergence of favourable factors that will make them significant in the near future. The following three cities which fall into this group are: Addis Ababa (Ethiopia), Cairo (Egypt), and Luanda (Angola).

Ethiopia (Addis Ababa)

Population: Between 86.61 – 96.9 million2

GDP growth (annual %): 9.93

Formally Banked Population (%): 22

Mobile Phone Ownership (%): 234

The Ethiopian government has put the development and advancement of ICT at the heart of its strategic priorities. More specifically, it recognises the potential this sector can have on financial inclusion, particularly for its government services. This is most noticeable in the country’s e-Government Strategy and Implementation Plan (2011). In it, the government outlined plans to connect its e-Trade5 and e-Transport6 services to the ‘mobile gateway’. The gateway allows two-way communication between the government and its citizens via mobile phones and hand-held devices.

Equally as significant is the Ministry’s investment in the Ethio-ICT Village. The Village was opened in March 2013 and attracted the attention of major telecommunications firms such as Samsung, MTN, Tecno Mobile, Huawei and ZTE. Spread over 200 hectors, the Park aims to deliver over 300,000 jobs to Ethiopians7, and will no doubt aid the country’s telecommunication development.

The government recognises the need for MFS to reach those unbanked millions. In 2012 the National Bank of Ethiopia, the body in charge of financial services regulation in the country, issued guidance on Mobile and Agent Banking Services8. The government has also set itself targets to improve digital financial services, financial literacy and payments.

The National Bank of Ethiopia has also setup a Financial Inclusion Council made up of MNOs, banks and government officials. Many mobile network providers have been quick to see the potential for MFS as only 0.03 percent of Ethiopians had a mobile money account9. Within the past year M-Birr (MFS), HelloCash (MFS) and Online Hasib (e-commerce) have developed in Ethiopia.

More specifically in the capital, Addis Ababa, there’s a growing though nascent start-up community. As one of the goals of the Growth and Transformation Plan (GTP), a governmental programme to encourage entrepreneurialism, is the quasi-government entity the Entrepreneurship Development Centre (EDC). It is joined by iceaddis and xHub Innovation Society (the country’s leading technology hubs), as well as the Addis Ababa Science and Technology University. All three enterprises are helping to boost the development of the ICT sector and entrepreneurialism within the country.

19

Egypt has been experiencing relative political stability and economic growth especially when compared to the rest of Northern Africa. In 2014, it was one of only six countries in Africa to have a GDP of over $100 billion standing at $286 billion, Africa’s third largest after Nigeria and South Africa14.

Due to cultural consideration, Cairo has often not been counted alongside other African cities. It is commonly seen as a Middle Eastern one. This has partly played a role in excluding it when writers speak of emerging African FinTech centres. However, the country’s position also allows it to easily connect with European and North African countries; as well as the Middle East (due to its geographical and cultural proximity). The country is also highly influential and active on the international political stage too15. This makes it a great location for start-ups to launch into North or Sub-Saharan Africa, or towards the Middle-East.

Cairo is the largest city in Africa with a population of approximately 14 million people. This huge market together with the fact that close to 50 percent of Egyptians cannot access banking services, make it a fertile ground for financial service innovation.

Financial inclusion is clearly a priority for the government and very recently (September 2015) the Central Bank of Egypt began a field study looking at the reasons for financial exclusion in the country16.

It is hoped that the results of the study will feed into the national strategy to extend financial inclusion to more of the country’s population. It follows on from a recent partnership announced in March 2015 to extend financial services to Egyptians. The cooperation, between MasterCard and the Government of Egypt (represented by the Ministry of Communication and Information Technology), will involve the rollout of a digital ID linking “citizens’ national ID cards to an existing national m-money platform”17.

One of the brands with a growing presence in the Cairo FinTech space is Dopay, a start-up that enables employers to easily pay their employees through mobile technology. The company secured $2 million in seed funding in April 2015 and was part of Barclays’ accelerator programme in 2014. There has also been a spate of crowdfunding platforms within Egypt. The most notable of these being: Shekra (a Shariah compliant crowdfunding platform), Yomeken, and Zoomaal.

Egypt (Cairo)

Population: Between 86.610 – 89 .5 million11



Mobile Phone Ownership (%)13: 53

Angola is a leading oil and diamond producer in Africa. This has made it, after the end of a civil war that ravaged it between 1975 and 2002, one of the fastest growing economies in the world. The country has been experiencing an average annual GDP growth of 20 percent. Moreover, it is both politically and economically stable too.

As compared to other African cities Luanda, with a population of approximately 6 million people, is not a big city; but according to an estimate by the United Nations

the city will reach 10 million by 203022. Nevertheless, its economic context and government initiatives make it a good candidate for a future FinTech hub.

Firstly, the country is seeking to establish itself as a telecommunications hub on the continent. Current construction of the South Atlantic Cable System (SACS) will make it the first undersea cable linking Africa and South America. It is due for completion a year before the South Atlantic Express (SAex), another submarine communications cable between Africa and South

Angola (Luanda)

Population: Between 24.218 – 24.4million19



Mobile Phone Ownership (%)21: 65

20

America – giving it the first movers’ advantage.

The country already possesses the West African Cable System (WACS) linking it to Western African countries too. These projects will provide low latency between African and Asia, and Africa and Europe. Moreover, the country launched Angosat1 a communication satellite in 2014, created in collaboration with Russia, with the aim of delivering improved infrastructure for the telecommunications market23.

The government’s investment in telecommunications is clearly gaining traction. Angola is seen as a regional leader in technology adoption, and experts have estimated that by 2020, over a fifth of all connection will be 4G24.

There has also been noticeable growth in the country’s financial sector particularly with the increase in electronic means payment. Between 2012 and 2013 the number of Automated Teller Machines (ATMs) and Automated Payment Terminals (APTs) grew by 11 and 35 percent respectively25. Nevertheless, there is still exclusion from the economy with less than 30 percent of the country’s population holding a bank account26.

Financial innovation will play a major role in reaching out to the unbanked.

Changing government policy, a ready market in unbanked population and high GDP growth rates are the factors defining the next addition to the FinTech evolution on the continent.

ATM APT

Financial Inclusion in Angola(Number of Automated Teller Machines

and Automated Payment Terminals)

21

MFS Potential – Formal banked and mobile penetration rates

Account(age 15 +) - 2014

Mobile Subscriptionpenetration – 2015

Mobile Account (age 15 +) - 2015

Relative Population Size

less 10 m

10 m

20 m

30 m

40 m

50 m

60 m

70 m

80 m

90 m

100 m

over 180 m

SOUTH

CENTRAL

EAST

NORTH

WEST

Angola65

29

Cameroon

1.884

12

Congo,Democratic Republic of

17

9.2

44

Algeria

100 50

Morocco

41135

Tunisia

132 27

0.6

Niger28

7

3.9

SierraLeone

4416

4.5 Ivory Coast

8634

24.3

Nigeria

44

2.3

107

Egypt

1.1

14118

Ghana

11641

13

22

MFS Potential – Formal banked and mobile penetration rates

Account(age 15 +) - 2014

Mobile Subscriptionpenetration – 2015

Mobile Account (age 15 +) - 2015

Relative Population Size

less 10 m

10 m

20 m

30 m

40 m

50 m

60 m

70 m

80 m

90 m

100 m

over 180 m

SOUTH

CENTRAL

EAST

NORTH

WEST

Tanzania

75 40

32.4

Rwanda

7742

18.1 Kenya

89 75

58.4

Uganda

52

44

35

Zambia75 36

12.1

Zimbabwe

10832

21.6

Botswana

20.8

159 52

South Africa

14.4155

70

Ethiopia

34 22

1

23

PART 2: ACROss THE CONTINENTLegislative Framework and collaborative efforts in MFs

FINTECH REGULATIONS

In this section we focus on MFS regulations, currently the main FinTech product regulated by many African governments. Although predominantly dealt with through a joint collaborative effort between the central banking and regulatory bodies, each government differs slightly in its approach.

Some reacted more quickly than others to the fast growth of MFS, whilst others have chosen to adopt a “test and learn” method allowing the market to shape regulations. Irrespective of their various approaches it cannot be denied that the success of MFS has rested on governments’ reactions: whether with hesitation or full support of the growing sector.

24

Tunisia already has a significant proportion of its citizens accessing financial services through its La Poste service. Though not a bank nor a microcredit firm, over 6 million of the country’s 11 million have postal financial accounts. Of those in the country that are part of a formal financial service, 90 percent of them are with the La Poste system. La Poste offers a large array of FinTech products from MFS, domestic and international remittances (through MoneyGram and Western Union), bill payments and smartcard purchases. Nevertheless the Tunisian Central Bank (Banque Centrale de Tunise – BCT) is still trying to improve MFS for its citizens through regulatory reforms.

There are three institutions representing the government legalization process for the mobile money service. These are: Banque Centrale de Tunisie (BCT), the Ministry of Communication Technologies (MCT), and Société Monétique Tunisie (SMT), which is a technology arm of the BCT.

a) The Banque Centrale de Tunisie (BCT): defines the prudential regulation, control and supervises banks and other financial institutions. It is the primary regulator for MFS too. It has partnered with Societe Monetique Tunisie (SMT) for

the provision of switching and clearing services. In 2011, the BCT issued a circular on MFS, stating that they may only be used for payments – all loading needed to be dealt with at a bank branch or through the use of a prepaid card issued by a bank. This effectively left the development of MFS to banks.

b) The Ministry of Communications Technolo-gies (MCT): is responsible for the organisation of the telecommunications sector and oversees all planning, control and supervision of its activities.

In 2013, following a series of talks between the Ministry of Telecommunications and other stakeholders – they agreed a change was needed in MFS. The talks reached a standstill and in 2014, both World Bank and Consultative Group to Assist the Poor (CGAP) launched an assessment of the country’s MFS usage and market potential.

At present the business model practiced is a bank-led one, with MNO involvement limited to the development process. AML/CFT and KYC requirements must be performed at a bank with a photograph ID. However, there remains a lack of clarity about these elements (AML/CFT and KYC) and also interoperability.

Efforts are being made by Moroccan authorities to modernise its banking systems and increase financial services access to its population. The country is a significant financial centre in Africa, particularly for in¬surance where it is the second largest market after South Africa. In 2010, the CGAP conducted a favourable evaluation of the country’s financial inclusion strategy. Since then, the Bank of Morocco (BAM) has implemented the Strategic Plan (2013 – 2015) to address some of the concerns raised. The country has a lot to gain from using MFS as it has a high mobile phone subscription rate per 100 people. This figure has grown from 30 (2004), to 100 (2011)1 to over 135 in the most recent studies (2015)2.

There are two public entities responsible for the regulation of MFSs in the country. These are Bank Al-Maghrib (BAM), which is the Central Bank of Morocco, along with L’Agence Nationale de Réglementation des

Télécommunications (ANRT) – the Telecommunications Authority.

a) The Bank Al-Maghrib (BAM): is the prudential regulator and supervisor of financial institutions. Its responsibilities include monitoring and ensuring security payments systems and related standards are maintained. It also acts as the government advisor on aspects relating to the banking and financial sector. In 2014, BAM was given assistance3 by the European Investment Bank to promote financial inclusion in the country.

Some of the difficulties which had already been aired included the requirement for all MNOs and their respective agents be registered as public limited or limited companies4. However, amendments made to Loi N° 30-03 Relative aux Etablissements de Credit et Organisme Assimiles (2013) have not only put forward clearer definitions

TUNIsIA

MOROCCO

Northern Africa

25

In 2010, the Central Bank of Egypt (CBE) approved the use of MFSs for banks. It was a prudent move toward greater financial inclusion. Egypt has an economy heavily dependent on cash with an estimated 94 percent of transactions being cash-based5. The reasons for this are both cultural – such as the notion of social money pooling, Gam’eya; and sociological as there remains a general lack of trust in the financial services and banking sector.

This has resulted in a low banked rate of just 36 percent (as recently as 2011) when both formal and informal financial players are considered6. There are two main bodies responsible for the regulations regarding Egypt’s MFS. These are the CBE and the National Telecom Regulatory Authority (NTRA).

a) The Central Bank of Egypt (CBE): is responsible for supervising the financial activities, the banking business and for overseeing any new financial services coming onto the market. The CBE (in close collaboration with the Ministry of Finance) has delegated part of its responsibility to the Egyptian Banks Company (EBC). These mainly concern the oversight of the Debit Card Scheme and Shared Cash Network, The Automated Clearing House, and The Mobile Payment Network. EBC is also working closely with MasterCard to bring MFS to all people in Egypt.

b) The National Telecommunications Regu-latory Authority (NTRA): ensures the total coverage of the mobile services network. It also monitors the technical and economic efficiency of MNOs in the country. The body benefits from close collaborations with the CBN and was consulted when MNOs were being given the opportunity to provide MFS. The NTRA has also been pressuring the CBN to make some amendments to MFS regulations. They have lobbied for the increase in the daily limits placed on MFS transactions and for the CBN to explore how the service might best facilitate international remittances.

The 2010 regulations released by the CBE only allow banks to deliver MFS. This is subject to being licensed by the CBE itself. Non-banks must partner with banks, though ultimate responsibility for the service rests with the bank. As part of AML/CFT and KYC requirements, service providers are required to obtain and send a copy of the account holder’s identification document onto the partnering bank, if conducted by a service provider. The regulations also include maximum limits on users’ account balances, and their daily and monthly withdrawal volumes too.

EGYPT

of MFS and other concepts, but also created a Payment Service Provider category to lead MFSs.

b) L’Agence Nationale de Réglementation des Télécommunications (ANRT): is responsible for the supervision of the postal service (La Poste) and the telecommunications sector. Its duties include the promotion and maintenance of a fair and competitive market.

Under the Payment Service Providers category, which is determined by the BAM, firms are able to transfer funds and execute payment transactions. AML/CFT and KYC requirements include the individual’s national ID and address. These requirements are for both the sender and recipient. There was no indication during the research for this report that interoperability is mandatory.

Following months of engagement between Safaricom and the Central Bank of Kenya (CBK), it was agreed that M-Pesa could be brought onto the market in March 2007. Within less than two years the service had amassed 4.5 million active customers. It was its astronomical rise and pressures from the Kenyan Bankers Association, which resulted in the service being called into question by the Ministry of Finance in late 2008. In a controversial statement, the Ministry expressed doubt that M-Pesa “will end up well”7. It instructed the CBK to conduct a risk assessment into

M-Pesa’s services and to determine its place within Kenya’s legislative framework.

CBK was satisfied with M-Pesa’s security and risk procedures – which were benchmarked against global standards on the prevention of money laundering. CBK’s legal team also settled the Banks’ main dispute, namely that the operation was not a banking business as defined by the Banking Act. The risk assessment was published in Kenya’s Gazette in early 2009. The following year, the CBK issued the

KENYA

Eastern Africa

26

When the Bank of Uganda (BOU) was first approached by the mobile network operators (MNO) to offer MFS it permitted them to go ahead on two conditions. Firstly, they must partner with a licensed financial institution. Secondly, they must apply to the BOU for a “letter of no objection” which will be granted based on the legal agreement made between the MNO and licensed financial institution. Following this, in 2013 the BOU issued the Mobile Money Guidelines to provide clarity on the industry about the rules to follow.

It is common practice in Uganda for collaborating regulatory bodies to enter into Memorandums of Understanding (MOUs). This year (2015) both the BOU and UCC agreed on the terms of their MOU and established the Joint Working Group for Mobile Financial Services (JWG-MFS). Their MOU is said to formalise the relationship between both bodies concerning the “approval, regulation and supervision of mobile money services (MFS)” in Uganda8.

There are two main bodies governing MFSs in Uganda: the BOU and the UCC.

a) The Central Bank of Uganda (BOU): under the Financial Institutions Act (2004) regulates all licensed financial institutions. If the MFS operator is not a licensed financial institution, then they must partner with a licensed institute in order to offer MFSs. It is the responsibility of the licensed financial institute to carry out due diligence on the MNO.

They must obtain proof and review the latter’s – financial position, business plan, risk management proposal and technology system, and adherence to AML/ CFT measures.

The BOU has issued MFS guidelines which stipulate the approval process of MFSs, information to be displayed at agent stands such as the agent’s identity number and dedicated phone numbers for the MNO9 involved. However, though BOU supervises the MFSs, it is the responsibility of the MNO to supervise its own agent network.

b) The Uganda Communication Commission (UCC): authorises MNOs to offer MFS as a value-added service. It is also responsible for ensuring network availability (network system uptime) thereby allowing the service to run, and the mechanisms for ensuring fair market competition.

At present MFS are mandated to use systems which are interoperable with other payment systems in the country and even internationally. The regulation also state AML/CFT and KYC which include customer identification through any one of the following: a valid passport, driving permit, voter’s card, financial card, identity card among other items. The guidelines also state that limits will be placed on the frequency, volume and value of transactions; these limits and any revisions thereof must be sent to the BOU for its approval before their commencement.

UGANDA

Guidelines on Agent Banking, which outlined that non-banks could act as MFS agents. Regulation of the MFS market is governed by two bodies: The CBK, and the Communications Commission of Kenya (CCK).

a) The Central Bank of Kenya: Submitted a National Payments System Bill in 2011, though passed in the same year, its notice of commencement was only recently announced in 2014. For the most part the legislation has codified into banking laws what already existed within the MFS market. It has legitimised the existing business models of MFS and “letters of no objection” given by the CBK for new MFS businesses; as well as provided clarity for those new entrants to the market.

The notable features of the new Bill are its increased focus on ring-fencing and the safeguarding of funds; and general risk management practices of MFS firms. The former includes limits on how much and where money, saved into banks for e-money purposes, is stored. The second principle relates to consumer protection. It requires providers have disclosure mechanisms and open channels

for consumer complaints. It has also incorporated a fine for MFS providers that fail to comply with disclosure requirements.

b) The Communications Commission of Kenya (CCK): regulates Kenya’s telecommunications services. It is responsible for granting the licenses to entities to offer mobile telecommunication services.

The National Payment System Regulations (2014) validate the AML/CFT and KYC practices which had existed in the market. This includes the obligation to verify customers’ identities through official documents such as birth certificates and driving licences. The new regulations also do not mandate interoperability. Instead they encourage market-led interoperability through the CBK’s recognition of a Payment Service Provider Management Body (PSPM). It is yet to be seen whether this will be enough to address the World Bank’s earlier concerns regarding M-Pesa’s dominance of the market due to this lack of interoperability.

27

As part of its “test and learn” approach the Bank of Tanzania (BOT), though it kept a close watch on the development of MFS, waited to understand the growing market before choosing how best to regulate it. Concurrently, the BOT visited the Philippines in early 2012 to gain an insight into how the country had been governing its MFS sector. Following this visit, and discussions with the Alliance for Financial Inclusion’s (AFI) Mobile Financial Services Working Group which included other MFS stakeholders, BOT released the first draft of its Mobile Payments Regulations in April.

In May 2012, an updated draft was released which introduced the licensing regime for non-banks offering MFS. It requires MNOs (and any non-banks) to obtain a license as wholly-owned subsidiaries. The regulations also maintained the arrangement requiring MNOs hold trust accounts with commercial banks at 100 percent cover. The BOT decided on a licensing arrangement in conjunction with the body responsible for regulating the telecommunications industry – Tanzania Communication and Regulatory Authority (TCRA).

Together the BOT and TCRA regulate the quality of the service received by consumers and ensure financial prudence by MNOs and financial institutions.

a) The Bank of Tanzania (BOT): was given powers via the Bank of Tanzania Regulations to administer and regulate non-bank entities in offering payment services. BOT is empowered to regulate, monitor and supervise the payment, clearing and settlement system; as well as conduct full oversight of any bank and financial institution or infrastructure service provider within Tanzania.

However, its powers are limited to banks and other financial institutions, largely ignoring the role of MNOs. Currently, MNOs need to obtain “letters of no objection” from the BOT and a pre-requisite for this is a partnership with a regulated financial body. This guarantees that consumer funds are protected in the banking system and are backed with a 100 percent liquidity prerequisite.

By 2006, The National Bank of Rwanda (NBR) had already begun, aided by both the Monetary and Capital Markets Department (MCM) and East AFRITAC (AFE), a modernisation of its financial systems, predominantly relating to its monetary policy and operations. This had been the result of a Financial Sector Assessment Programme (FSAP). At the same time, the NBR sought to modernise its national payment systems.

Critical to the process was the increased efficiency of low-value payments, the automation of high value government payments and the introduction of Real Time Gross Settlement (RTGS) among other aspects. Following the completion of these tasks, the NBR requested the support of the AFE in drafting the proposal to be put to the Rwandan Parliament. In it, the NBR outlined its aim to become a regional ‘financial hub’ and to broaden access to financial services.

Rwanda was introduced to MFS in 2010, later than its neighbouring countries. Two years later, it released the regulations governing MFS. There are three main regulatory bodies charged with providing guidance to the MFS – banks, mobile network operators, insurers and agencies. These are: The National Bank of Rwanda10 – Central Bank (NBR), the National Payment Council (NPC), and Rwanda Utilities Regulations Agency (RURA).

a) The National Bank of Rwanda (NBR): oversees all aspects concerned with the payment system including the licensing of banks and non-bank providers. The main legislation governing MFS is Regulation Governing Payment Provider Services (2012). In it the NBR sets out the definitions

of ‘branchless banking’, provides the scope of ‘payment services’, process and requirements for licences (for supervised institutions11), agency agreements, interoperability12, and consumer due diligence and KYC principles.

I. National Payment System Council: is governed by the NBR and is tasked with developing a policy and guidelines for payment systems in Rwanda. It is made up of representatives from various bodies including microfinance, telecommunication firms, government officials and the governor of the NBR.

b) Rwanda Utilities Regulations Agency (RURA): is tasked with regulating certain public utilities among which include “telecommunications network and/ or telecommunications services”. Its three main aims are to: ensure fair market competition, improve access through affordability and availability, and protect consumer rights and interests. Before a supervised institution can be licensed by the NBR, it must first be certified by the RURA as a Payment Service Provider13 operating in its network.

Rwanda’s legislation allows non-bank such as MNOs to lead MFS operations, but they must obtain a license to conduct the service. Supervised institutions (i.e. banks, non-bank financial institutions or microfinance institutions already supervised by the Central Bank) are exempt from this license requirement. Within the AML/CFT regulations, clients are required to provide photographic identification before they are allowed to open an account through an Agent.

TANZANIA

RWANDA

28

There are two primary bodies responsible for regulating the MFS sector in Zimbabwe. These are the Reserve Bank of Zimbabwe (RBZ) and Postal and Telecommunication Regulatory Authority of Zimbabwe (POTRAZ). Initially, POTRAZ had complete oversight of the MNOs, but with the emergence of MFS, this responsibility is now shared with the RBZ. With no unique legislation or guidance around MFS and its activities this has reportedly caused regular clashes between the regulatory bodies.

The main legislative piece used by the RBZ is the National Payment Systems Act (2001) which does not mention MFS or its components. Only financial institutions are governed by the act, so MNOs must partner with financial institutions covered in the Act to offer MFS.

a) The Reserve Bank of Zimbabwe (RBZ): has primary responsibility and oversight and is guiding the retail payment services in Zimbabwe. These are performed over two separate departments: the National Payment Service Department (NPSD) and the Banking Licensing Supervision and Surveillance Division (BLSSD).

I. National Payment Service Department (NPSD) – proactively seeks to encourage innovative solutions for the payments service modernisation ecosystem in such areas as MFS and in increasing the use of low value payment systems.

II. Banking Licensing Supervision and Surveillance Division (BLSSD) – has more of a supportive role, assisting the NPSD in the application and approval of financial institutions intending to introduce new MFS products.

The RBZ has a set of internally developed operational guidelines and frameworks to regulate MFS. These guidelines are supposedly based on the Bank of International Settlements and the Bankable Frontiers Association. With little transparency concerning these guidelines, their enforcement is subject to interpretation. Nevertheless, all financial institutions must apply for ‘permission’ to offer MFSs. Both financial institutions and MNOs offering MFS must send weekly reports to the RBZ about the volume and values of their transactions.

b) Postal and Telecommunication Regulatory Authority of Zimbabwe (POTRAZ): allows MNOs to offer MFS, which it regards as ‘value-added services’. Its primary concern relates to how their services are administered and the services’ robustness.

The absence of any specific act, guideline or regulation concerning MFS means the RBZ (through the NPSD) communicates to the sector using monetary policy statements. This absence also means the RBZ cannot enforce MNOs or financial institutions to comply on these matters; instead it relies on moral suasion. All MNOs and financial institutions have been persuaded to use the ZIMSWITCH gateway to offer MFS – part of the Zimswitch Instant Payment Interchange Technology (ZIPIT) system – thus ensuring interoperability in the industry.

This lack of legislation has meant there are no clear guidelines on aspects relating to AML/CFT and KYC within Zimbabwe’s MFS sector. Neither is there a mandate on MFS systems being interoperable.

ZIMBABWE

southern Africa

b) Tanzania Communication and Regula-tory Authority (TCRA): was established under both the Tanzania Communication and Regulatory Authority Act (2003), and the Electronic and Postal Communications (Licensing) Regulations (2011). It ensures MNOs perform to the required standard whenever any financial transactions are carried out through their services.

The BOT and TCRA have a good working relationship which has been formalised through a Memorandum of Understanding (MOU).

AML/CFT and KYC are conducted on a tiered basis with the minimum requirement of identity documentation including such items as voter registration cards, passports, or employee cards. The tier level determines the size and daily transfer limits as well as the maximum account balance permissible for customers. A key aspect of the updated regulations is interoperability. The regulations are in line with the BOT’s National Financial Inclusion Framework released in 2013, which aims to “build on the country’s recent successful experience with mobile money services... to increase Financial Inclusion” in the country14.

29

The Central Bank of Nigeria Act (2007) included provisions for the Central Bank of Nigeria promoting best practice and financial inclusion. At the same time the Financial System Strategy 2020 was erected to ensure competitiveness in the country’s economy. Since then the CBN has been very forthcoming in the development of guidelines to manage the growing use of MFS. These have included: The Regulatory Framework for Mobile Payment Services in Nigeria (2009), and the Regulatory Framework for Licensing Super Agents.

a) The Central Bank of Nigeria (CBN): holds the primary oversight for MFS providers through the Central Bank of Nigeria Payments Division. This is legislated through the National Payment Systems Management Bill and the guidance given in the Mobile Money Regulatory Framework. The NPS Management Bill provides management, administration and supervision of payments, and the clearing and settlement systems.

While the Regulatory Framework for Mobile Payment deals with creating an enabling environment for mobile payment services, and in specifying the minimum technical and business requirements needed for MFSs. It also defines the three major models for the implementation of MFS:

I) Bank-Focused Model: where banks provide MFS using the mobile phone as the delivery channel. This model may only be used by licensed financial institutions.

II) Bank-Led Model: where a bank or consortium of banks in partnership with other organisations jointly provide MFSs by leveraging on a mobile banking system.

III) Non-bank Led Model: allows non-banks, who have registered with the CBN as Payment Service Providers, to deliver MFSs. The model is applicable for any organisation except, licensed deposit

As the first country in Africa to be introduced to MFSs, the South African Reserve Bank (SARB) made its stance known on the product in 2006 with its Position Paper on Electronic Money. This was more recently followed up in the Position Paper on Electronic Money (2009) and Position Paper on Interoperability (2011).

In the former position paper, SARB outlines that the transference if “not normally due to the beneficiary in terms of an obligation” is classified as “deposit-taking” under the Bank Act, No. 94 of 1990. As ‘deposit-taking’ is defined in the Banks Act No. 94 of 1990 as the “business of a bank”, only banks may undertake MFS. A recent legislation, the Financial Sector Regulation Bill (currently in its second draft – October 2015), is said to represent a huge restructure to the country’s financial regulations, has reaffirmed SARB’s position on MFS. Though the Bill does not make any explicit reference to MFS, it does state that acceptance of deposits are defined as financial products regulated by the prudential and conduct authorities.

There are two governing bodies within the country tasked with regulating the provision of MFS. These are SARB and the Independent Communications Authority of South Africa (ICASA).

a) The south African Reserve Bank (sARB): oversees and supervises the National Payment System. SARB is also responsible for regulating the payment, clearing and settlement systems, powers

given to it via the National Payment System and South African Reserve Bank Acts. It is possible for a non-bank to enter into an agreement with a bank to offer these MFSs. Before a bank partners with an MNO, to offer any MFSs, it must inform the SARB.

b) The Independent Communications Author-ity of south Africa (ICAsA): provides regulation of the telecommunications services, such as mobile phones. It is given its authority under the Electronic Communications Act 36 of 2005.

Under Guidance Note 6 (released in 2008), banks are allowed to open low level MFS accounts without having to undertake face-to-face KYC procedures i.e. without any documentary evidence. However, most banking institutions have still chosen to take a more prudent approach. This has been in an attempt to avoid AML/CFT violations and the personal penalties which could be levied against bank compliance officers. This, together with the relatively low daily transaction limits on these forms of accounts has made MFS less attractive for South Africans.

Neither the Position paper on Interoperability or Electric Money mandates interoperability within MFS. This omission was intentional with the hope that it will encourage innovation within the sector. However, the papers are clear about emphasising this position of interoperability as the most preferred option.

NIGERIA

sOUTH AFRICA

Western Africa

30

money banks and telecommunication companies – MNOs – that intend to offer MFSs.

b) The Nigerian Communication Commission (NCC): is responsible for the telecommunications sector required to support MFS. Telecommunication firms are excluded from the non-bank led model, until “regulatory issues between the NCC and CBN are regulated”. It is also to ensure telecommunication firms are “not given [an] undue advantage” because of their wide coverage15.

These most recent guidelines fail to mention any updates on AML/CTF. Instead they refer to the CBN’s AML/CFT Regulations (2009). However, in 2012, the CBN released the Proposed Three-Tiered KYC Requirement Approach. The document outlined maximum deposit and cumulative balance amounts, together with the customer ID requirements for each of the three stages. The minimum KYC requirements at all levels includes a name, date of birth, gender and address. The guidelines require that all MFS providers ensure interoperability and interconnectivity.

The Bank of Ghana (BOG) released Guidelines for Branchless Banking in 2008. It was a set of guidelines delivered with the foresight of MFS being a major force within the country. At this point MFS was still only gaining traction via WIZZIT in South Africa, and M-Pesa in Kenya. The only provider of MFS in Ghana at the time, MTN Mobile Money, had only gained 200,000 of its potential 8 million subscribers.

The guidelines stipulated that MFSs were to be undertaken only by licensed deposit-taking financial institutes and their agents (such as Telecommunication firms, fuel distributor firms and retail outlets). As a means of facilitating interoperability, it also insisted on a many-to-many arrangement between banks and their agents. This meant MNOs had to collaboratively propose MFSs with at least three banks. However, in July 2015, the BOG replaced this document with the Guidelines for E-Money Issues in Ghana, it also released Agency Guidelines too.

a) The Bank of Ghana’s (BOG): original Branchless Banking guidelines created complexity and essentially blocked any direct communication between MNOs and the BOG. As many banks were also uninterested in banking the unbanked – content with their existing client base – they failed to properly invest in the scheme. The many-to-many arrangement also left banks fearful of the “free rider” problem from other banks involved in the scheme. It left MNOs in a precarious position, conducting these activities knowing they were

breaking the law, and also attracting customers who ultimately belonged to the banks.

These issues were highlighted to the BOG by Consultative Group to Assist the Poor (CGAP), who demonstrated how the Branchless Banking guidelines had inadvertently caused Ghana to lag behind its competitors in MFS and financial inclusion. These new guidelines removed all these constraints: the many-to-many scheme, forced banking and MNO partnerships, and indirect communication with MNOs. It also required that at least 80 percent of interest made from MFS deposits be passed onto customers, and that non-banks had to participate fully through wholly-owned subsidiaries – Dedicated Electronic Money Issuers (DEMI).

The Guidelines for E-Money Issuers in Ghana is intended to increase financial inclusion, and safeguard and mitigate against risks associated with MFS. They have avoided mandating interoperability in the aim of this aspect becoming a market-led process.

It also adopts a three level risk-based approach to KYC each with maximum balance and daily and monthly transaction limits. The type of identification documents varies depending on the level of account opened. All three accounts require that the customer provide their name, date of birth, residential address, telephone number and an acceptable form of identification document.

GHANA

31

CountryYearMFs

Introduced

Mobile Money Penetration

(2015)

Enabling Environment

Regulations

OverallEvaluation of

Enablin Environment

Business Model: Bank- led, Non-

bank or Payment Provider service

AML/CFL&KY

Interoperability (Mandated - M.)

Tunisia 2010 0.6 Bank-ledDifficult/Unclear

Legislationis unclear

Difficult

Morocco 2010 - Non-bank led Difficult - Difficult

Egypt 2013 1.1 Bank-led Medium M. Medium

Kenya 2007 58.4 Both Simple Not M. Easy

Uganda 2009 35.1 Both Simple M. Easy

Rwanda 2010 18.1 Both Simple M. Easy

Tanzania 2008 32.4 Both Simple M. Easy

Zimbabwe 2011 21.6 (No regulation) Uncertain Not M. Difficult

South Africa 2004 14.4 Bank-led Medium Not M. Medium

Nigeria 2011 2.3Both – non-bank led excl. MNOs; and PPS

Medium M. Difficult

Ghana 2009 13Both – wholly separate entity

Medium Not M. Medium

Enabling Environment – Mapping the legislative landscape.

32

Dominant payments player faces challenge

M-Pesa is the most high-profile and successful FinTech firm in Africa. It is owned by Safaricom, a firm which Vodafone owns a 40 percent stake. Since its launch M-Pesa has entrenched itself in the financial services system through banking collaborations thereby further expanding its offerings. Its latest collaborations with Kenya Commercial Bank and Commercial Bank of Africa separately, have resulted in M-Shwari and M-Pawa both loan services. Each product has been of huge commercial success. M-Shwari has over 10 million customers in Kenya, while M-Pawa has 1.8 million customers in Tanzania.

That success has attracted a new competitor in the biggest bank in Eastern Africa by deposits – Kenya’s Equity Bank. It has a network of 200 branches across Kenya, Uganda, Rwanda, Tanzania, and South Sudan. Having previously launched a service with Safaricom which failed, it has now sought to gain full control of the process by diversifying and becoming a mobile virtual network operator (MVNO) through its subsidiary, Equitel.

The firm has leased over 60 percent of another MNO’s (Airtel) network infrastructure. It plans to roll out its MVNO to Uganda, Tanzania and Rwanda through this deal with Airtel. Its latest service facilitates mobile banking through the use of a film-like label which is stuck onto the customer’s existing SIM card. The service attracted 1 million subscribers during its initial1. It has had a cumulative monthly growth rate in SIM uptake of 93 percent in its first year2.

Equitel has so far gained a market share of 2.2 percent at the expense of Orange Money and Airtel, the local arm of India’s Bharti Airtel. Safaricom has mounted a strong campaign to limit Equitel’s growth, and in August 2015, increased transfer tariffs for third-party users3. It has also argued that Equitel’s thin SIM technology presents security risks; however, these claims have since been dismissed by courts.

southern and Eastern Africa

MOBILEFINANCIALSERVICESCOLLABORATIONS

The growth of MFSs in Africa has predominately been led by MNOs; however, many governments have defined them as ‘financial products’ thereby requiring financial oversight. This has led to a dual regulatory system between Central Banks and Telecommunications departments.

This, together with the intense competition, has forced firms to enter into partnerships to provide more innovative products and services. Below is a review of some of the major collaborations occurring across the continent beginning firstly within the Southern and Eastern regions, and then in Northern and Western Africa.

Orange Money has loaned 60 % of Airtel’s network infrastructure telecommunications.

2.2% OF THE MARKET

Equitel’s Profile: Mobile Virtual Network Operator

33

Orange Moves East

As well as facing Equitel’s growth, Safaricom is also dealing with a fresh challenge from Orange, through its Orange Money service, particularly within the realm of international remittances. Its counter-attack is a partnership with MTN Mobile Money allowing international remittances between their services.

The deal permits M-Pesa customers (based in Kenya, Tanzania, Democratic Republic of Congo and Mozambique) and MTN Mobile Money customers (based in Uganda, Rwanda and Zambia) to more easily transfer money between each other. Orange Money has in turn moved into Botswana, partnering with Visa Card, to enable Orange Money account holders to use approved point-of-service (POS) terminals and e-commerce websites.

Tackling the smaller markets

M-Pesa delayed its launch into Lesotho by a few months to learn from its distribution channels in Tanzania. It was preceded to Lesotho by First National Bank (through its FNB eWallet) and Econet Telecom Lesotho – ETL, through its Ecocash offering. Econet has since developed a funeral cover service with Alliance Insurance; a deal the insurance firm has also entered with Safaricom allowing the payment of insurance premiums via the M-Pesa platform4.

Though often overlooked because of the larger countries which surround it, the Swazi government is trialling the use of Swazi MTN’s services to distribute welfare funds. However, one major concern stopping the deal from progressing is the low coverage available on its national borders with South Africa. Swazi MTN is also working with Ericsson on the deployment of the Ericsson Converged Wallet to enhance the stability and security of Swazi MTN’s MFS offerings.

Orange Money enters the lexicon

Orange SA is one of the primary players in Northern and Western Africa through its Orange Money, MFS. It debuted the product in Ivory Coast in 2008 and grew to more than 100,000 subscribers in a year. It is now so pervasive that the French phrase “faire un Orange Money” (“Do an Orange Money”) is part of local vernacular.

Since then, it has expanded into 13 African countries and has over 13 million subscribers. Roughly 30 million EUR ($32 million) are exchanged via Orange Money. The service is primarily in Western and Northern African countries. Through its part ownership of Mobinil in Egypt it has partnered with BNP Paribas and Emriates NBD to offer MobiCash. While in Tunisia, the service is provided in conjunction with Tunisian Post as MobiMoney.

Orange’s expansion

Orange is seeking more bank partnerships to expand distribution including one with the Bank of Africa Group, following a successful partnership in Madagascar. Orange was also reported to be in talks to buy four of Airtel’s African businesses in an attempt to accelerate its expansion. The firm is also discussing the possible acquisition of Airtel units in Burkina Faso, Chad, Republic of Congo and Sierra Leone.

“The international transfer service reserved exclusively for Orange customers is now available t o Burkina Faso’s Airtel Money customers, and vice-versa.,” announced Thierry Millet, Orange’s head

of mobile financial services. The interoperability between the two firms builds on Orange Money’s success in the remittance market in Western Africa. Launched only in August 2013, it has already garnered 20 percent of all remittances between Ivory Coast, Mali and Senegal5. Western Union and MTN are collaborating to gain a strong foothold in this lucrative remittances corridor.

The deal mirrors a similar collaboration which had existed between MTN Ivory Coast and Airtel Bharti Bukina Faso allowing interoperability between their respective clients. Orange also announced in September 2015 Africa’s first mobile crowdfunding

Northern and Western Africa

Mali

CoteD’Ivoire

Senegal

Remittance Corridor: Ivory Coast-Mali-Senegal

(Orange Money’s Market Share)

200m

2013

34

platform, called Orange Collecte, in partnership with French charity-giving site HelloAsso.

Tangled web of Technology partnerships

There are four main technology partners used within the field of m-money. They are Mahindra Comviva, Tagiattitude, Pyro Mobile Money, and Verifone. These firms collectively account for 40 percent of the MFS partnership deals conducted in Northern and Western Africa.

Originally launched as Bharti Telesoft in 1999, Mahindra Comviva6 was a subsidiary of the Bharti Group, before Tech Mahindra acquired a controlling stake (51 percent) of the company in 2012. In April 2010, it worked with Maroc Telecom in Morocco to deliver MobiCash through its award winning mobiquity™ system. It deployed the same mobiquity™ financial solution in 2013, in its partnership with Gabon Telcoms (an affiliate of Marco Telecom).

In contrast to Manhindra Comviva’s interconnected partnerships, Tagiattitude has worked predominately with smaller or less geographically spread firms. Many of its collaborations with: Afrimarket, Celpaid Cote d’Ivoire, Qash Mobile Banking, and Flooz, are not under the same corporate umbrella or connected by history, but from both major MNOs and independent payment service firms.

Verifone Mobile Money is another large powerful technology provider similar to Manhindra Comviva,

and has fostered working partnerships with the MTN Group across its 16 countries of operation, enabling customer use of MTN Mobile Money, and retail use of its payment terminal solutions. More recently, it has jointly worked with Bharti Airtel in Ghana bringing contactless payment services to the latter’s 1.5 million customers. Its coverage in both Nigeria and Morocco is hugely impressive. In the former, Verifone claims to work with all 12 major banks, whilst in the latter provides 80 percent of the 26,000 terminals in use.

Government initiatives and schemes

More significantly is Verifone’s partnerships with national bodies. In May 2008, the firm came to an agreement with leading transaction switching and payment firms, Ferlo and Byte Tech from Senegal. The deal resulted in the distribution of Veriofone’s payment solutions throughout the Union Economique et Monetairy Ouest Africane (UEMOA) countries7 and Cameroon.

Verifone has also worked with the Nigerian government, first in 2012 and later in 2014. The first deal was a systems solutions project costing $17.8 million, whilst the second project involved the roll out of more than 100,000 devices as part of the government’s cash-lite initiative.

MasterCard has so far worked with both the Nigerian and Egyptian governments in developing national identification cards for their respective citizens. In March 2015, Egypt elected to work with MasterCard to create digital (mobile based) IDs linked to the national ID cards. The digital ID cards are intended to improve P2G services in the country.

The pace of deals within the continent is fast and is unlikely to stop as other countries outside of Kenya, South Africa and Nigeria continue to embrace MFS. Many of these new products and services are moving beyond simple m-payments and transfers. They are branching into international remittances, investments options, savings products, and other aspects contributing to financial deepening.

80% of the 26,000 terminals

Verfione Terminals in Morocco

35

North East West SouthCentral

Percentage and geographical spread of MFS deals over time.

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

5 10 15 20 25 300

TOTAL

1

0

0

2

6

13

25

47

36

30

19

3

36

PART 3: DERIVATIVEs ANDDRIVERssecondary Effects of FinTech and start-up enablers

SECONDARY EFFECTS OF FINTECHThe increased use of mobile technology, specifically mobile phones has been of huge benefit to many people. Prior to the existence of FinTech, the development of MFS and introduction of M-Pesa, telecommunications were already significant contributors to countries’ GDP output. In 2006, tax contribution from mobile communications accounted for between 3.5 and 5 percent of total GDP in Kenya, Rwanda, Tanzania and Uganda1. Since then, these East African countries have gained from the success of M-Pesa and the proliferation of MFS. The latest figures now put total mobile communications at over 6 percent of Sub-Saharan Africa’s GDP – the largest of any comparable region2.

The full coverage of how this total has been derived is best dealt with elsewhere3. This report is intended to focus specifically on the secondary effects of FinTech, principally on MFS which is the most developed area of this sector. However, there are some intersections between MFS and mHealth, and MFS and m-Agri(culture). These will be considered briefly and only in their relation to FinTech. The focus here is on how this revolution in the financial services is having an effect on everything from consumer saving to inflation and wider financial deepening.

37

In itself MFS does not encourage saving or act as a means of reducing “hot stimulus” i.e. the discouragement of immediately spending any received monies4. M-Pesa, one type of MFS, has been known to be used as a ‘rudimental bank account’ by its users. However, the service alone is not enough to encourage better saving choices or create saving habits. Instead, it provides a good foundation to encourage saving behaviour. By simply accompanying the service with regular SMS messages prompting users to save has proven sufficient enough to encourage this behaviour. Preliminary findings suggest that it is the regularity of the messages, rather than the actual saving mechanism which is the main factor resulting in the behavioural change.

However there are more innovative products on offer which have used MFS to encourage saving. One example is Jipang KuSave (JKS) which utilises microfinance (specifically microloans) to ensure saving. The concept works by the customer setting a savings target over a period of time. They are then given a series of interest free microloans part of which they are ‘forced’ to save for their chosen future date. As the customer repays their loans, they are eligible for even higher loan amounts – which are split between immediate use and ‘forced’ savings. Eventually, the customer will have enough

savings to form part of their future loans or savings target.

This method of saving helps break the cycle of individuals having to rely on expensive credit options during times of low/erratic income or ‘shocks’. Though not originally intended as a saving tool, M-Pesa has certainly allowed its customers to be more prudent with their spending. Since its introduction M-Pesa customers have increased savings for “emergencies” – self-insurance. From 2008 to 2009 there was an increase of 10 percent (from 12 to 22 percent5). One possible explanation for this is that customers now have another platform from which to regularly check their bank balance and progress towards a saving target.

The fear that m-money transactions will cause an increase in inflation in African countries has been proven wrong in various research papers. There is good reason behind the immediate concern. M-money transactions have been shown to increase both the velocity of money and the money multiplier effect: both concepts traditionally linked with increases in inflation. However, these transactions appear to have “loosened the link between these variables and inflation”6. This means inflation will be more difficult to predict based on these two components7.

More encouragingly, recent research has suggested that this link between the use of m-money transaction

presents no cause for concern over “its potential inflationary consequences”8. Though the study conducted uses data from Uganda, a country with a relatively short (five year history) in MFS, it is still highly significant for monetary policy. The study also stated that the wide spread acceptance of MFS might “reduce inflation”. This is due to the quicker transference of money to locations where it is most needed. Many African communities studied show great reliance on informal insurance networks of friends and family during shocks. MFS facilitates this re-distribution of wealth in a way which is quicker, safer and cheaper than traditional money transfer methods.

saving

Inflation

Forced Savings

Cycle 1 Cycle 2 Cycle 3 Cycle 4

Jipang KuSave (JKS)- Microloans Scheme

The increased use of mobile phones in itself helps with the spread of information. This is particularly important during turbulent or unexpected events when extra financial or social support is required. Many of the communities studied in Kenya, Tanzania and Mozambique rely on an informal insurance system. They seek financial assistance from those within their wider network rather than through financial

institutions. The spread of MFS increases access to and quickens the delivery of credit through friends and family. Further proof of this risk sharing behaviour has been shown in the timing of domestic remittances9 which reach their peak during lean seasons.

(Domestic) RemittancesSo far most of the research focussing on the effects of

sharing Risk!

38

Conditional cash transfers (CCT) have proven immensely popular and have grown significantly. In 1997 only three countries relied on such methods, a decade later nearly 30 countries had adopted the technique12. They have been adopted by several non-governmental agencies, though their use and analysis, especially from an academic standpoint on financial inclusion, remains relatively low13.

MFS offers a further opportunity to distribute CCT as adoption rates continue to reach the previously ‘unbanked’. While this might prove more efficient, it is not without risk, especially if they were to reach the wrong recipient14. Evidence suggests that sharing

mobile phones is common practice in many of the African communities studied15 - it would therefore be difficult to be completely certain of who will access the funds.

Even so, CCTs programmes can encourage the use of MFS by requiring or at least incentivising individuals to opt into these products. From there, beneficiaries have access to financial instruments, thus contributing to greater financial inclusion. It is here that MFS might intersect with several other areas such as mAgri and mHealth – both of which are discussed in more detail below.

Conditional/ Non-conditional Cash Transfers

MFS has also proven useful as a means of safety to avoid possible cash theft. One study found MFSs were being used extensively for very short-term transactions of less than two hours16. It seemed customers were using MFS as a storage device to avoid carrying cash. The researchers were able to quantify how much customers were willing to pay17 for this benefit.

Though there has been this noted increase to customer safety, many criminals have started

targeting MFS agents18. Recent surveys conducted with Network Agents have found the threat of armed robbery remains a top three concern19. However, it must be noted that this threat has reduced between 2013 and 2014 (from 0.71 to 0.5520). For both years the greatest concern of agents remained the risk of fraud21 22 and having to deal with customers when an error in the service occurs.

safety

Financial Inclusion/ Financial Deepening

Perhaps the biggest benefit of MFS is its contribution to financial inclusion and ability to target the previously “unbanked”. Many have questioned if M-Pesa (the runaway success) has been able to achieve this aim. There are many statistics which indicate that it has only managed to attract

the wealthier, urban ‘already banked’, educated citizens of Kenya23. Though correct, these are only the characteristics of early users: parallel to those innovators and early adopters demographics noted in the technology adoption lifecycle.

remittances using MFS has concentrated on domestic remittances – those occurring within the country. Early studies stipulated that MFS could change the direction, regularity, and amount of remittances . Recent evidence appears to support these earlier claims. M-Pesa users appear to generally send and receive remittances more frequently than non-M-Pesa users.

However, aggregate amounts of domestic remittances have not changed. This indicates that M-Pesa remittances are generally smaller than remittances sent through postal services or traditional remittance firms. These traditional firms are mainly used when sending larger amounts. Even when higher transaction thresholds are allowed, MFS users have still been known to prefer traditional

remittance services such as MoneyGram, Western Union and financial institution branches over MFS10.

One possible explanation is that MFS users who are often younger might have fewer financial and moral obligations. They are, therefore less likely to send larger remittances. It might also simply be brand loyalty amongst the older generation for these well-known traditional firms. Another interesting finding – perhaps supporting these conclusions – is the slight change in remittance recipients.

M-Pesa users were more likely to send and receive remittances from friends and their wider-family, rather than from children to their parents. The authors have speculated that this could imply M-Pesa users possess or are more ‘in contact’ with a larger network as a result of using M-Pesa11.

39

Overall the numbers are hugely positive. Those excluded from financial services in Kenya has dropped from 39.3 to 25.4 percent between 2006 and 201324. More recent adopters (of M-Pesa) are less affluent and account for 72 percent of the total consumption

of the early adopters indicating its continued penetration among less wealthy individuals. In fact, MFS is slowly being adopted by a broader share of the population. The key figure being that the rate of adoption of M-Pesa in ‘unbanked’ households doubled between 2008 and 200925.

MFS has also increased financial deepening across the continent. This can be noticed in the ‘ripple’ effects caused through MFS’s introduction. Since its launch M-Pesa has given its users, many of whom were previously unbanked, access to many financial products – see Financial Deepening Through M-Pesa below.

As a result several African countries are looking at ways by which to better regulate the new sector, ensure market fairness and safety by reviewing their AML/CFT procedures, and reap the full benefits of financial inclusion: all components of financial deepening. However, it is important to note that financial inclusion is not an end in itself, but a means to poverty alleviation. Unfortunately, too many studies and statistics still fail to focus on MFS’s ability to ensure this ultimate outcome.

25.4 %

39.3 %

Financially Excluded Total consumptionof early adoption

100 72

2007 2014

Improvements in Financial Inclusion: Total Consumption of M-Peas

(Original against Current)

Beyond MNOs, many government and international stakeholders are considering how best to use this new development to better distribute welfare payments and financial aid. One example is through the USAID’s Better Than Cash Alliance which advocates and conducts research into the greater use of FinTech in its work. The alliance has supported economic development in countries like Malawi26.

USAID has also been exploring FinTech options, one of which includes the use of digital payment27 for its programmes in Uganda28. The pilot project report (delivered in March 2014) concluded that it was successful and that there was “great potential” for this form of transaction.

Other services such as Changamka and MamaKiba in Kenya are targeted MFSs for outpatient and maternity care. They encourage pregnant women to save for health facility-based deliveries and later the on-going care of their baby. In Ghana, MicroEnsure (in collaboration with Tigo and Bima) and in Nigeria (with Airtel) has developed a freemium opt-in model for life insurance. This gift has been developed presumably as a means of attracting and retaining clients as the MFS sector becomes increasingly competitive.

A study of farmers in Mozambique looked at how FinTech services could have an effect on saving and

the use of fertilizer. The two groups for comparison in the study were: those paid interest on average savings by the end of the test period, and those given training on MFS and fertilizer use to both them and their two closest friends. Preliminary results indicated that the farmers from the first group were more likely to save to receive higher interest amounts, and felt less pressure to lend to their friends. It demonstrates the effect customised interest-bearing MFS accounts could have on savings, MFS adoption, and the frequency of expenditure.

The Nigerian government has also combined FinTech and mAgri to improve the communication with and education of farmers. Though marred by controversy29, the phone-for-farmers project will give farmers on purchase of their mobile phone an e-wallet account. From this they will regularly receive vouchers to spend on fertilizers and seeds at subsidised rates.

The use of FinTech and specifically MFS within Africa, particularly in the Sub-Saharan region is hugely significant. It is even more so as many of these services did not exist on the continent until as recently as 2010. Moreover, there is clearly more room for growth as many of the continent’s largest economies: Nigeria, South Africa, Egypt, Morocco, and Algeria: have yet to fully exploit their MFS potential.

MFs Intersections with mHealth and mAgri

40

Ownership: Safaricom

40% Vodafone 35% Government of Kenya

25% Free Float

Kenya Statistics

Market Share76.2 % (March 2015)

Agents85,759 – 79% market presence of National Agent Network

Mobile Money Subscribers: 20.6m Mobile Money Subscribers

Merchant PaymentsKsh 11.6bn ($113 m)Causing a 5 % decrease in Kenyan Cash use

Financial Deepening Through M-Pesa

HowM-PesaWorks

Customer can dispatch e-money via SMS text messages.

The M-Pesa system adjusts the e-money balances on both accounts.

E-money can then be exchange with an agent for cash

The individual sends e-money to the Agent

Debited from the customer’s M-Pesa account and credited to the Agent.

Both parties will receive an SMS from M-Pesa confirming the transaction.

Customer can withdraw money at an ATM by selecting <<Withdraw Cash>> from the M-Pesa menu then <<From ATM>>

They will select enter the ATM number and receive an SMS from M-Pesa with a six-digit code (which expires after 10-minutes)

Having entered their six-digit code and mobile number, then customer receives the money.

Customer will receive an SMS from M-Pesa confirming the transaction.

Customer can also top up their account by going to an agent with their phone and ID

Customer tell the agent how much they want to add onto their phone

Customer gives the agent cash, in exchange for the e-float

Both parties will receive an SMS from M-Pesa confirming the transaction

The most successful FinTech, specifically MFS in Africa is M-Pesa. Through its multiple collaborations – with banks, financial institutes, and various bodies – it has helped improve financial deepening and reduced the level of financial exclusion in Kenya.

Fundraising/ Crowdsourcing (CHANGA NA M-PESA)Raise funds for a variety of projects or events such as weddings, funerals, charities etc.

Transaction History(SAFARICOM M-LEDGER) Allows users to keep track of the M-Pesa account

Utility Bills (OKOA STIMA)This is a short-term loan for individuals to use to pay for their electricity bills.

M-KOPA: A savings account which allows users, through a pay-per-use instalment plan to acquire solar energy systems.

Insurance/ Health Insurance M-Pesa users can now pay move into their Saving and Credit Co-operative (SACCO) accounts and also pay their insurance premi-ums without the need to visit any insurance offices.

Linda Jamii Micro-Health Insurance: M-Pesa users are now any to access micro-insurance for inpatient and outpatient care.

E-commerce (LIPA NA M-PESA ONLINE) Facilities the use of online shopping using the available balance on the person’s M-Pesa account.

School Payments (LIPA KARO NA M-PESA)Links school payments (e.g. registration, school fees, fund raising, activity fees) between M-Pesa users and schools which hold Bank accounts with Kenya Commercial Bank.

PesaPal: Developed a web-based interface allow-ing schools to be able to track various school payments.

Facilitating P2GMany users, through the eCitizen portal, can access government services and make pay-ments for a variety of government services.

Faini Chap Chap: Now traffic offenders can pay their fines through a system linked with a few law courts in the country.

Investment (M-PESA + OLD MUTUAL)Through this partnership, users of M-Pesa can create and top-up Unit-based investments through monthly contributions via their phones.

Current Accounts (M-SHWARI)Essentially a banking service similar to a current account allowing users to: save, earn interest, and borrow using their M-Pesa accounts.

Merchant Payments (LIPA NA M-PESA MERCHANT SERVICE)A service which makes it easier for merchants to accept payment for M-Pesa. Customers can pay for goods and services via their phones.

International Remittances (M-PESA IMT)Allows M-Pesa users to receive international remittances from over 200 countries through the partnerships the firm has built with international remittance services like Western Union.

Rent payments (LIPA KODI)Tenants can pay their rent through their phones. The account links with their housing agents, landlords and real estate businesses .

@

Financial Deepening Through M-PesaFinancial Deepening Through M-Pesa

41

















@


42

















@


43

HIGHLIGHTED START-UPENABLERS There is no shortage of economic growth in Africa. Six of the world’s ten fastest growing economies of the past decade are in sub-Saharan Africa. Here are the many FinTech accelerators, incubator, and co-working spaces across the continent supporting the next generation of entrepreneurs.

Activspaces Based in Douala, Cameroon’s largest city, ActivSpaces is primarily a technology hub which runs both an incubation and acceleration programme. It also offers various levels of membership from the minimal (providing a well-functioning co-working space) to the most advanced, the Activation Bootcamp. Through the Activation Bootcamp members are able to take advantage of the organisation’s legal team, mentorship, and seed funding opportunities.

ccHubStyled as Nigeria’s first open living and incubation space, ccHub is intended to act as a catalyst for the many stakeholders in Nigeria’s start-up ecosystem. It offers a range of supportive systems to its members including networking opportunities, mentorship, training and even funding.

standard Bank Incubator programmesDeveloped through Standard Bank as a means to educate, empower and develop entrepreneurs, the Bank has created a range of programmes. It includes two incubators one concentrating on business the other on technology. It also has a virtual incubator providing a co-working space in Cape Town and other locations, and a business development programme providing 12-months of support for those who have attended its incubator programmes.

Wennovation HubWennovation is another start-up hub in Nigeria offering a range of services and programmes. Among these is its Innovation Management service which provides firms with advice on how best to build and develop a business.

Incubators

44

Flat6LabsFlat6Labs chooses teams from all over Egypt, and brings them to Cairo to receive three months of intensive mentorship and training, culminating in a Demo Day. Flat6Labs invests between 50,000-75,000 EGP ($8,000 - $12,500) in its start-ups in exchange for a 10-15 percent equity stake, and offers further investment of 250,000 EGP ($40,000) in start-ups that demonstrate promise.

N2V LabsOfficially based in Amman, with access to their centres in Riyadh, Dubai, Cairo, and Silicon Valley. It was launched in Feb 2011, by parent company National Net Ventures. In addition to N2V’s funding vehicles for seed, early stage and Joint Venture start-ups, N2V recruits web and mobile talent as entrepreneurs-in-residence, providing salaries, seed funding and 3-6 months of mentorship and training to accelerate their ideas into start-ups.

Tech Lab: south Africa Barclays Africa launched an accelerator for health and FinTech start-ups in South Africa. It offers a 13-week accelerator program aimed at providing 10 FinTech and e-health start-ups with access to business mentors, industry leaders, influencers and other experts.

Tech Lab Africa is also the first program on the African continent that, in addition to convertible note financing options, will provide ventures the option to use a Simple Agreement for Future Equity (S.A.F.E.) investment structure for immediate financing rounds during and after the program.

Plug and Play EgyptRising Tide Fund provides funds for start-ups on a case-by-case basis, ranging from $10,000 to $1 million. Plug and Play provides office space and fulltime mentorship in Cairo, bringing start-ups to their facilities in Silicon Valley four times a year for bootcamps to prepare

for potential venture capital investment. It is based in Cairo, Egypt and was launched in February 2011, by Dr. Ossama Hassanein of Rising Tide Fund; Saeed Amidi of Plug and Play International; and Hazem El Wassimy of Plug and Play Egypt.

startupbootcamp: south Africa and KenyaStartupbootcamp’s FinTech accelerator was announced back in February 2015, supported by multiple big brand backing — including financial services groups Lloyds and Rabobank, payment giant MasterCard and SBT Venture Capital. Startupbootcamp argues that having multiple big brand backers gives its accelerator an edge. Some of its previous alumni include:

• Creditable; south AfricaCreditable enables credit unions, lenders, businesses and individuals to give loans to their customers, employees, suppliers and family professionally in just five minutes.

• M-Changa; KenyaM-Changa’s proprietary technology enables anyone to quickly and inexpensively manage a remote fundraiser through their mobile phone.

Impact Hub AccraHub Accra had already been in existence for two-years having launched in 2013 before it joined the Impact Hub Network and was re-branded Impact Hub Accra. The establishment aims to promote entrepreneurship within the Ghanaian ecosystem through the many workshops, events, and programmes it offers.

Tahrir2 (Tahrir squared)Tahrir squared was launched on April 1st, 2011, by Samer al Sahn, the former CEO of software development company eSpace and Mohammed Gawdat, the Managing Director of Eastern and Emerging Europe, Africa, and the Middle East at Google. It is based in Alexandria, Egypt.

Accelerators

The ispace FoundationSituated in the capital of Ghana, Accra; iSpace provides a unique co-working space for the technology community in the city. It is a non-profit organisation run using the membership fees and sponsorships it receives.

JoziHubA technology hub based in Johannesburg, JoziHub aims to harness the power of innovation, start-up and creativity to develop advances in the field of network and community technology. It is a shared space for firms offering a range of benefits depending on the level of membership purchased.

BongoHiveThe organisation stands as Zambia’s first technology and innovation hub having been founded in 2011 in Lusaka. It aims to build entrepreneurial capacity for its members through issue-specific workshops and seminars as well as run developer courses. It does this through its co-working space, incubator programme and consulting.

kLab (knowledge Lab)The mission behind kLab is to promote, facilitate, and develop ICT solutions in Rwanda (it is based in Kigali) in an attempt to bolster the entrepreneurial community in the city. It does this by hosting a

Co-working spaces

45

number of events and by providing both technical and business assistance to its members.

xHub Innovation societyAs part of the growing ecosystem in Addis Ababa in Ethiopia, xHub Innovation Society provides a co-working space for IT entrepreneurs and supporters. As part of its membership packages, residents are able to access its wide network for advice, business tools, training, and workshops.

iLab: LiberiaiLab Liberia is a non-profit computer laboratory providing access to cutting-edge technology, expert IT assistance and a community leveraging technology for the good of Liberia. It offers free relevant ICT courses that are open to the public. iLab also hosts technology events and serves as a meet-up space for a range of tech enthusiasts and professionals.

IceaddisHelps facilitate creative projects and events in the capital of Addis Ababa by providing them with a co-working space bringing together entrepreneurs and creative individuals. It also functions as an innovation hub. Iceaddis is special because it was the first

innovation hub and co-working space to establish itself in Ethiopia.

Among its many activities are the consultancy and start-up support it gives to its members through the experience of its management team and the leverage it has gained through some of its strategic partnerships.

Hive Colab The organisation is one of the first technology hubs to exist in Uganda. Situated in Kambala it provides both a co-working space and an innovation hub for its residents. The firm offers mentorship, advice and guidance through its inhouse consultants. It claims to provide everything a firm needs from creating a visible identity to market growth.

AlphaCodeAlphaCode based in Sandton (South Africa) is a shared co-working space for the next generation of financial services entrepreneurs in the country. It brings together a variety of influential people in the FinTech space facilitating collaboration through its many events, mentorship opportunities and market insights.

CiTi (formally known as Cape IT Initiative)A technology hub intended to build the capabilities of the region was established in 1998 and is one of the oldest technology hubs in South Africa. It is the first firm to launch both a Digital Currency Hub; and First Reality Community in South Africa.

Innovations Hub: south AfricaThe Innovation Hub’s is Africa’s first internationally accredited Science and Technology Park. It is a subsidiary of the Gauteng Growth and Development Agency, an agency of the Gauteng Department of Economic Development. The Innovation Hub covers several key sectors including IT, Biosciences, Green Technologies and Industrials. The organization is home to 47 businesses. These are made up of companies who utilize the Innovation Hub’s Business Incubator Program which gives them access to complimentary Wi-Fi connectivity and mentorship.

The Innovation Hub is also behind the launch of ground-breaking initiatives including the Gauteng Accelerator Program, an initiative designed to build entrepreneurial skills in the biosciences sector. It also breathed life into the Open Innovation Solution Exchange, a web-based platform that connects innovators with solution seekers to tackle service delivery in government and increase competitiveness in the private sector.

Meltwater Entrepreneurial school of Tech-nology (MEsT): MEsT Incubator programmeOne of the most famous educational programmes

and incubator hubs operating in the West African region, MEST offers entrepreneurs sourced from Ghana and Nigeria, a structured, intensive, full-time 12-month programme. During the programme students (Entrepreneurs-In-Training - EITs) are given access to training and mentoring – covering all aspects of business management (finance, resourcing, sales, and marketing), specific computing and software development courses, and soft skills too.

The organisation has a significant amount of financial backing and has gained international attention for its work. Of particular mention, though not necessarily a focus of the enterprise, has been the increasing number of women who have participated in its programme. In its 2015 cohort, eight of its 30 EITs were women.

Toward the end of the programme, EITs form teams to solve a pertinent problem, which they must take to the market. The most promising, determined through a pitch to the MEST board, are invited to enter the MEST incubator which comes with seed funding for their business. One business which has come from the programme is:

• MeQasa

A property search engine allowing users to find vacant spaces for rent or to purchase, for both residential and business purposes around Ghana.

Innovation Centres

46

1. World Data Bank (2014): Population, total.

2. World Data Bank – Most recent values (MRV)

3.World Bank - Denotes the percentage of respondents who report having an account at a bank or another type of financial institution; having a debit card in their own name; receiving wages, government transfers, or payments for agricultural products into an account at a financial institution in the past 12 months (% age 15+).

4. Pew Research Centre (2015): Cell Phones in Africa ~ Communication Lifeline

5. South African Treasury Department: 2015 Budget Review: Rebalancing the economy for growth

6. Brookings Institute (2015): The 2015 Brookings Financial and Digital Inclusion Project Report ~ Measuring Progress on Financial Access and Usage

7. Joburg Centre for Software Engineering (2014): 2014 JCSE ICT Skills Survey

8. Telkom Business Blog post (2015): ICT Skills Gap: How Can We Tackle this Challenge? Available on: 23/04/2015 (http://www.telkombusinessblog.co.za/?p=2163)

9. Mlitwa, N. and Koranteng, K. (2013), Integration of ICT Into Curricula in Western Cape Schools: The Activity Theory Perspective, The Journal of Community Informatics, Vol. 9, No. 4


11. World Bank - Denotes the percentage of respondents who report having an account at a bank or another type of financial institution; having a debit card in their own name; receiving wages, government transfers, or payments for agricultural products into an account at a financial institution in the past 12 months (% age 15+).

12 Pew Research Centre (2015): Cell Phones in Africa ~ Communication Lifeline

13. Organisation for Economic Co-operation and Development – OECD (2015), African Economic Outlook: Nigeria (2015); From 6.7 percent to account for roughly 15.2 percent of total government revenue.

14. Johnson, O. (2015); Federal Ministry of Communication Technology; 4th ICT Industry Stakeholders Forum ~ Connected for Growth Presentation

15. Okafor, E. (2013); ‘Reforms in the Nigerian Banking Sector and Strategies for Managing Human Resources Challenges’; European Journal of Business and Management; Vol. 5, No. 18.

16. Okwuke, E. (2014); ‘Cisco laments dearth of ICT Graduates in Nigeria’; Daily Independent, 14th July. Available from: http://dailyindependentnig.com/2015/07/cisco-laments-dearth-ict-graduates-nigeria [Accessed 4-10-15]

17. Adepetun, A. (2015); ‘Dearth of IT skills in Nigeria worries experts’; The Guardian, 22nd April. Available from: http://www.ngrguardiannews.com/2015/04/dearth-of-it-skills-in-nigeria-worries-experts [Accessed 4-10-15]

18. Onwe, B. (2013); ‘The Nigerian Financial market and the Challenges of Information technology-based operational Services’. Arabian Journal of Business and management review. Vol. 2, No. 6.


20. World Bank - Denotes the percentage of respondents who report having an account at a bank or another type of financial institution; having a debit card in their own name; receiving wages, government transfers, or

REFERENCEsEsTABLIsHED PLAYERs (sANGK)

47

payments for agricultural products into an account at a financial institution in the past 12 months (% age 15+).


22. Ghanaian Ministry of Education, (2013); Basic Education Information; Available from: http://www.ghana.gov.gh/index.php/gov-t-projects/ministry-of-education [Accessed on: 07-11-15]

23. Government of Ghana ~ Ministry of Communication; Project Document; Available from: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2005/11/15/000012009_20051115145331/Rendered/PDF/34330.pdf [Accessed 07-08-15]

24. Botsio, M. (2013); ‘Moving Towards a More Financially Inclusive Ghana’; Available from: http://cfi-blog.org/2013/07/18/moving-towards-a-more-financially-inclusive-ghana/ [Accessed: 7-11-15]

25. Ghanaian National Communications Authority (2015); ‘Mobile Voice Subscription Trends For June, 2015’ Available on: http://www.nca.org.gh/40/105/Market-Share-Statistics.html [Accessed on: 7-11-15]

26. Appiah Acquaye, N. (2015); ‘MTN Ghana holds 2nd Mobile Money forum in Accra’ Available from: http://www.biztechafrica.com/article/mtn-ghana-holds-2nd-mobile-money-forum-accra/10462/#.Vi-ksfnhDIU [Accessed: 7-11-15]

27. Takyi-Boadu, C. (2013); ‘Hope City Project Relocated’; 23rd May, Available from: http://www.modernghana.com/news/465294/1/hope-city-project-relocated.html [Assessed: 7-11-15]

28. Acquah, B. Y. S. Status of implementation of the ICT Curriculum in Ghanaian Basic Schools (2012) Journal of Arts and Humanities (JAH), Volume 1, No – 3, December

29. Opuni Opoku, N. (2014); ‘Disconnect between education, industry cause of high unemployment – Tony Aidoo’; 13th Jan.; Available from: http://www.myjoyonline.com/news/2014/january-13th/disconnect-between-education-industry-cause-of-high-unemployment-tony-aidoo.php [Assessed: 7-11-15]

39. Ashiadey, B. (2015); ‘Academia must rethink curricular... to bridge gap within industry’; 19th Aug. Available on: http://thebftonline.com/business/education/14975/Academia-must-rethink-curricular-to-bridge-gap-with-industry.html%5d [Accessed: 7-11-15]

31. Omidyar Network, (2013); Accelerating Entrepreneurship in Africa: Understanding Africa’s Challenges to Creating Opportunity-driven Entrepreneurship


33. World Bank - Denotes the percentage of respondents who report having an account at a bank or another type of financial institution; having a debit card in their own name; receiving wages, government transfers, or payments for agricultural products into an account at a financial institution in the past 12 months (% age 15+).


35. The East African Marine System (TEAMS): TEAM’s vision is to become the “leading provider of cost effective international fibre optic bandwidth in Africa”

36. E-government is defined on the website as “E-government generally involves using ICTs to transform both back-end and front-end government processes and provide services, information and knowledge to all government customers that is the public, businesses, government employees and other government agencies.” Available from: http://www.information.go.ke/?p=292 [Assessed: 7-11-15]

37. Ndung’u, N., Thugge, K., and Otieno, O. (2009); Unlocking the Future Potential for Kenya: The Vision 2030; Available on: http://www.csae.ox.ac.uk/conferences/2009-edia/papers/509-owino.pdf [Assessed: 7-11-15]

38. Sterling Capital Limited (2015); Kenya’s Sector Outlook 2015

39. Herbling, D. (2014); ‘KRA ranks Safaricom top taxpayer for seventh year’; Business Daily; 21st Oct. Available from: http://www.businessdailyafrica.com/KRA-ranks-Safaricom-top-taxpayer-/-/539546/2494830/-/fi7bshz/-/index.html; [Assessed: 7-11-15]

48

40. Financial Times, (2015); ‘The Africans who got it alone to cut risk, not increase it’; 11th Sept; Available from: http://www.standardmedia.co.ke/business/article/2000175990/the-africans-who-go-it-alone-to-cut-risk-not-increase-it [Assessed on: 7-11-15]

41. United Nations Children’s Fund – (UNICEF), (2014); A (Private) Public Space ~ Examining the Use and Impact of Digital and Social Media Among Adolescents in Kenya.

42. United Nations Educational, Scientific and Cultural Organisation (UNESCO); (2015) Information and Communication Technology in Education in Sub-Saharan Africa ~ A comparative analysis of basic e-readiness in schools.

43. Ogembo, J., Ngugi, B., and Pelowski, M., (2012); Computerizing Primary Schools in Rural Kenya: Outstanding Challenges and Possible Solutions; The Electronic Journal of Information Systems in Developing Countries; Vol.52

1. Central Statistical Agency of Ethiopia, (2012); Population Projections 2012.



4. The Mobile Economy, Sub-Saharan African 2015 (GSMA)

5. Relevant sections for the purpose of this report include: the provision of business investor information, provision of business loans, and fine collections amongst other services.

6. Relevant sections for the purpose of this report include: motor insurance renewal, collection of traffic fines, and online ticket booking.

7. Fekade, B. (2013); ‘Ethio ICT Village to embrace 15 companies’; 23rd March; The Reporter; Available from: http://www.thereporterethiopia.com/index.php/news-headlines/item/253-ethio-ict-village-to-embrace-15-companies [Accessed on: 8-11-15]

8. National Bank of Ethiopia, (2012); Licensing and Supervision of The Business of Financial Institution ~ Regulation of Mobile and Agent Banking Servicers

9. The World Bank, (2015); The Little Data Book on Financial Inclusion ~ Global Findex Database 2014

10. Central Agency for Public Mobilisation and Statistics (CAMPUS) ~ Population clock, (2015); Accessible from: http://www.capmas.gov.eg/?lang=2 [Accessed on: 8-11-15]



13. Groupe Speciale Mobile Association (GSMA), (2015); Subscriber penetration figures ~ The Mobile Economy: Arab States.

14. World Bank Data (2014); Gross Domestic Product ~ GDP.

15. Cillers, J., Schunemann, J., and Moyer, J., (2015); ‘Power and Influence in Africa: Algeria, Egypt, Nigeria and South Africa’; African Futures Paper 14, March 2015

16. Egypt: Central bank conducts financial inclusion survey, (2015); 27th Sept.; MEIR eDaily; Available at: http://www.asiainsurancereview.com/News/View-NewsLetter-Article/id/33901/Type/middleeast/Egypt-Central-bank-conducts-financial-inclusion-survey [Accessed on: 8-11-15]

17. MasterCard Press release, (2015); Available at: http://newsroom.mastercard.com/press-releases/egyptian-government-and-mastercard-collaborate-to-extend-financial-inclusion-to-54-million-citizens-through-digital-national-id-program-2/ [Accessed on: 8-11-15]


RIsING sTARs

49

1. Making Finance Work for Africa (MFW4A); (2012); Morocco: Financial Sector Profile; Available from: www.mfw4a.org/morocco/financial-sector-profile.html [Accessed on: 8-11-15]

2. BuddeComm, (2015); Morocco – Telecoms, Mobile and Broadband – Statistics and Analyses.

3. The objective of the project was “a comprehensive package of technical assistance and capability building aimed at supporting the new regulatory framework of payment service providers” in Morocco. Proposal Document to Coordination Unit (November 2013)

4. ‘Société Anonyme’ (S.A) and Société Anonyme à Responsabilité Limitée (S.A.R.L) respectively.

5. Chakravorti, B.; (2014); The Hidden Costs of Cash, Harvard Business Review; Available from: https://hbr.org/2014/06/the-hidden-costs-of-cash [Accessed on: 8-11-15]

6. Firpo, J., El Sayed, C., Breul, P., (2011); International Finance Corporation – IFC Mobile Money Scoping, Country Report ~ Egypt

7. Wahome. M, (2008); Michuki: Probe Cash transfer; Daily National; 9th December

8. Tumusiime-Muteile, E. (2015) ; ‘Effective regulations will further enable ICTs to promote financial inclusion’; Speech by Governor of the Bank of Uganda ~ Digital Impact Awards Africa

9. Commonly referred to collectively as ‘telecos’

10. Also known as ‘Banque Nationale du Rwanda (BNR)’ as most legislation is given in French, Kinyarwanda, and English: the three official languages of the nation.

11. See art. 2 (3) n° 06/2012 of 21/06/2012 “bank, a nonbank financial institution or a microfinance institution within the meaning of the Laws governing those institutions and duly supervised by the Central Bank”

12. See art. 21 n° 06/2012 of 21/06/2012 “Financial institutions and mobile network operations shall be interconnected to offer services to virtually all banked and unbanked” allowing the easy transfer of money between different providers.

13. See art. 2 (8) n° 06/2012 of 21/06/2012 “any entity providing services enabling cash deposits and withdrawals, execution of Payment Transactions... Money Remittance and any other services functional to the transfer of money”

14. http://www.afi-global.org/sites/default/files/publications/tanzania-national-financial-inclusion-framework-2014-2016.pdf

15. Paper Delivered at the EFInA by Emmanuel Obaigbona (Regulatory Frameworks for Mobile Payments Services in Nigeria)

FINTECH (MFs) REGULATIONs

19. Instituto Nacional de Estatistica, (2014); Angolan Population Consensus 2014 ; Available from : http://www.ine.gov.ao/xportal/xmain?xpid=ine [Accessed on : 8-11-15]


21. BuddeComm, (2015); Angola – Telecoms, Mobile and Broadband – Statistics and Analyses.

22. United Nations ~ Department of Economic and Social Affairs: Population Division, (2014); Population Facts; August 2015, no. 2014/2

23. Awad, M. (2012); ‘Angola aiming for telecommunications satellite in 2014’; IT News Africa; 20th November

24. The Mobile Economy, Sub-Saharan African 2015 (GSMA)

25. Deloitte, (2014); Angola 2014 Banking Review: Annual performance of the sector in Angola.

26. World Data Bank (2014): Account (% age 15+).

50

1. Obulutsa, G. (2015) ; Kenya’s Equity Bank starts mobile pay service to challenge Safaricom. Reuters; 20th Jul. Available from: http://www.reuters.com/article/2015/07/20/kenya-eqty-bnk-idUSL5N1001P220150720 [Accessed: 10-11-15]

2. Equity Banking Group (2015); Investor Briefing& Performance Q3 2015 Performance (Oct. 2015)

3. Special Correspondent (2015); East Africa: Safaricom Increases Charges to Equitel Customers; 26 Aug. Available at: http://allafrica.com/stories/201508261340.html [Accessed on: 10-11-15]

4. Makakane, M. (2014); Collaboration between Alliance Insurance, Vodacom M-Pesa, and Econet Ecocash, a smart move towards making financial services more accessible to farmers in remote areas; 4th Mar.; The Silo; Available at: http://www.thesilo.co.ls/collaboration-between-alliance-insurance-vodacom-m-pesa-and-econet-ecocash-a-smart-move-towards-making-financial-services-more-accessible-to-farmers-in-remote-areas/ [Accessed on: 10-11-15]

5. GSMA: The Mobile Economy Sub-Saharan Africa, 2015

6. It was rebranded in 2009, following the Acquisition of Jataayu Software as Comviva.

7. The UEMOA countries consist of: Senegal, Ivory Coast, Togo, Benin, Niger, Mali, Burkina Faso and Guinea Bissau.

1. GSMA: Taxation and the growth of mobile in East Africa (2009)

2. GSMA: Mobile Economy Sub-Saharan Africa (2013)

3. Ibid.

4. Zollman, J., and Cojocaru, L. (2015); Cashlite report: Are we there yet? Rethinking The Evolution of Electronic Payments in Kenyan Based On Evidence in the Kenyan and South African Financial Diaries. Nairobi, Kenya: FSD Kenya

5. Jack, W., and Suri, T. (2011); Mobile money: The Economics of M-Pesa; NBER Papers in Productivity, Innovation and Entrepreneurship

6. Walker, E.J, and Adams, C.S. (2015); Mobile Money and Monetary Policy in East African Countries; University of Oxford.

7. It should be noted that their study focussed primarily on East African countries that had adopted MFS.

8. Aron, J. and Muellbauer, J. (2015); Does mobile money cause inflation: Evidence from inflation models for Uganda. [VOX Draft]

9. Aker, J. C., and Mbiti, I.M., (2010); «Mobile Phones and Economic Development in Africa; Journal of Economic Perspectives, 24(3): 207-32.

10. InterMedia, 2013, “Mobile Money in Tanzania: Use, Barriers and Opportunities”, Available at: http://www.intermedia.org/mobile-money-in-tanzania-use-barriers-opportunity-2/ [Accessed on: 10-11-15]

11. NBER: Working Paper Series; Mobile Money: The Economics of M-Pesa

12. Campos, N. F., and Coricelli, F. (2010); How financial development can maximise the impact of social protection policies in low-income countries; Available from: http://www.voxeu.org/article/how-cash-transfers-boost-financial-development [Accessed on: 10-11-15]

13. Ibid.

MOBILE FINANCIAL sERVICEs COLLABORATIONs

sECONDARY EFFECTs OF FINTECH IN AFRICA

51

14. Aker, J. C., and Mbiti, I.M., (2010); «Mobile Phones and Economic Development in Africa; Journal of Economic Perspectives, 24(3): 207-32.

15. Ndiwalana, A., Morawczynski, O., and Popov, O. (2012); Mobile Money Use in Uganda: A preliminary Study: Found nearly 70 percent (69.6) reported sharing ownership of their mobile handsets.

16. Economides, N. and Jeziorski, P. (2015) Mobile Money in Tanzania; Available from: http://www.stern.nyu.edu/networks/Mobile_Money.pdf [Accessed on: 10-11-15]

17. In this study 400 shillings extra per kilometre

18. Etukuri, C. And Masaba, S. (2013); Who is killing mobile money agents?; 22 May; New Vision; Available from: http://www.newvision.co.ug/news/643042-who-is-killing-mobile-money-agents.html [Accessed on: 10-11-15]

19. Helix – Institute of Digital Finance (2015); Agent Network Accelerator Survey: Kenya Country Report 2014

20. Figures are the weighted average of the first three choices then indexed between both years to allow better comparisons.

21. Mukumuza, K. M, and Ainebyoona, E, (2015); MTN denies Shs21b mobile money fraud; 23rd Mar.; Daily Monitor; Available from: http://www.monitor.co.ug/News/National/MTN-denies-Shs21b-mobile-money-fraud/-/688334/2662424/-/5cv7qdz/-/index.html [Accessed on: 10-11-15]

22. Asare-Donkoh, F. (2015); Mobile Money system in Ghana may be teh next big challenge in dealing with money laundering – Thompson Essel; Available from: http://www.eyeghana.com/mobile-money-system-in-ghana-may-be-the-next-big-challenge-in-dealing-with-money-laundering-thompson-essel [Accessed on: 10-11-15]

23. Jack, W., and Suri, T. (2011); Mobile money: The Economics of M-Pesa; NBER Papers in Productivity, Innovation and Entrepreneurship

24. Central Bank of Kenya & FSD Kenya (2013); FinAccess National Survey 2013: Profiling developments in financial access and usage in Kenya

25. Ibid.

26. Chilumpha, F. And Msowoya, N. (2015); Malawi takes key step to advance digital payments and drive inclusion growth; 30th April; Better-Than-Cash; Available from: https://www.betterthancash.org/news/media-releases/malawi-takes-key-step-to-advance-digital-payments-and-drive-inclusive-growth [Accessed on: 10-11-15]

27. Digital payments are defined “as a programme related payment using an e-payment process and not be physical cash or checks” (Digitizing Payments for USAID Beneficiaries in Uganda, 2014. pp. 88)

28. USAID, (2014); Digitizing Payment for USAID Beneficiaries in Uganda – Pilot Report; Available from: https://www.usaid.gov/sites/default/files/documents/1860/Digitizing_Payments_for_USAID%29Beneficiaries_in_Uganda.pdf [Accessed on: 10-11-15]

29. Eze, A. and Maduekwe, O. (2013); Phone for Farmers and Mobile Money Initiative; 7th Feb.; This Day Live; Available from: http://www.thisdaylive.com/articles/phone-for-farmers-and-mobile-money-initiative/138703 [Accessed on: 10-11-15]

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