Cash-Lite: Mobile Money Expands in Nigeria

Who needs a bank when you have a mobile phone?

Last week, following regulatory approval from the Central Bank of Nigeria (CBN), the United Bank of Africa (UBA) launched U-Mo, a mobile banking product that will be accessible to more than 80 million people across Nigeria. Now, almost half the country's population will be able to transfer and receive funds using their cellphone -- without having to have a traditional bank account with UBA.

For the rich world, mobile banking is a low priority: Only 16 percent of consumers in the United Kingdom think it's important, according to a Datamonitor survey. But in emerging markets, being able to perform simple banking transactions with a mobile phone is a big deal. The same survey found that 60 percent of consumers in Brazil feel that "technology is important making the development of mobile banking a priority for banks."


The adoption of mobile phones in developing nations across Africa, Asia-Pacific and Latin America has been a clear driver of economic development. Deloitte estimates that every 10 percent increase in mobile phone penetration results in a 1.2 percent increase in GDP. Additionally, cellular access has also empowered people, primarily the poor, by allowing those who have normally been excluded from participating in the financial system access to banking transactions that the rich world takes for granted.

U-Mo is being positioned as an enhancement of CBN's "cash-lite" banking initiative, meant to reduce the need for hard cash and teller banking while expanding financial inclusion. "With this service, a subscriber does not have to have a bank account before performing banking and other financial services; people can store money in their phones and use it to do business," said UBA Group Managing Director Phillips Oduoza.


With a U-Mo account, which can be opened in just a few minutes with very little information, people can virtually hold money in their cellphone at a cheaper rate than keeping it in a bank and use their phones to send and receive money to and from any part of the country. There are three U-Mo levels, the highest of which allows customers to spend up to NGN 1 million (USD 6,267) per day.

"We have over 80 million connected telephone lines while only 25 million Nigerians have bank account, leaving a major gap of about 55 million," said Oduoza. "U-Mo is going to address that by providing banking services to unbanked Nigerians. They can also transfer money to any mobile number... spend the money directly from their mobile phones to pay for goods and services."


But it's not just banking services that are improved and expanded by the technological advancements of the cellular world. "Mobile communication opens up information sharing long dominated by traditional barriers and gives a voice to the traditionally unheard," says Jon Fredrik Baksaas, president and CEO of Telenor Group, an international mobile communications firm based in Norway. "It is a tool to enhance economic, health and educational activities...Access to a mobile phone is no longer a luxury. Today it is a necessity and a driver of development both for the individual and the nations."

For James Kwabena Addo, director of FIT Group Holdings and a venture capitalist from Ghana who has experience developing finance programs in sub-Saharan Africa, it's a simple equation: "The more cellphones you put in the hands of Africans, the higher their economic growth is."


Ibid., 2.

image: phossil, Flickr Creative Commons