East Africa is the cradle of the mobile money revolution. This revolution is transforming economies and societies around the world.
The region has made huge strides in access to mobile phones and mobile financial services. Today, 66 per cent of the adult population of Kenya, Rwanda, Tanzania and Uganda actively use mobile money.
Tanzania boasts the first interoperable system between mobile network operators.
Mobile broadband is driving access to the Internet across Africa, connecting millions more people to information and to a growing range of digital services.
New technologies underpin applications in smart agriculture, financial inclusion, logistics and trade, government services and revenue collection, as well as social protection initiatives such as cash transfer programmes for the most vulnerable.
However, substantial challenges remain. Digital divides have been a hot topic over the past decade; they remain pronounced between genders, rural and urban populations and between socio-economic groups.
New research from the Pathways for Prosperity Commission shows how digital exclusion is not random but mirrors — and actually risks exacerbating — deep inequalities.
People with low education, women and low-income earners are the least likely to benefit from digital technology. This could mean that they fall even further behind, especially as more basic government services are being offered online.
Affordability is key. Now is the time to develop new business models that make smartphones and digital services available at lower costs to ensure low-income earners benefit from them. These models could include cross-subsidisation, differential charging for services across consumer categories — or even public subsidy systems.
Ensuring that low-income communities access information will have huge development benefits, and could also positively impact operators’ bottom lines by giving them a new client base whose incomes and spending power is likely to grow.
Effective use of technology
Regulators were key players in the early success of mobile money in East Africa. A decade ago, Kenyan and Tanzanian regulators took a stance of “test, monitor, then regulate,” long before the concept of “sand-boxing” (allowing startups to conduct live experiments under regulatory supervision) became commonplace.
Those regulators took a strong stance and were not swayed by the vested interests in the banking sector who argued that mobile operators introduced unfair competition into the financial sector.
This more considered approach to regulation paid off, and mobile operators created platforms for the cost-effective delivery of financial services, revolutionising the way that banking is done in the region.
Over the past 10 years, the penetration of financial services in Kenya has passed 75 per cent, ahead of many upper-middle income countries.
In Tanzania, access to formal financial services has grown at an extraordinary rate, due to a progressive policy of promoting competition and interoperability.
In 2006, just nine per cent of Tanzanians had access to financial services. By 2017, that had increased to more than 65 per cent.
This progress is encouraging but it is not enough. Now, policymakers and businesses have to work together to ensure the region is the seat of the next generation mobile revolution, to harness the opportunities that digital technology brings with it, and extend its benefits to reach low-income and marginalised communities.
At the same time, they must cooperate to protect people from the risks that technology presents, from gambling addiction through to fake news and misinformation.
Countries should now focus on more than just giving citizens access to mobile services, towards ensuring more effective use of technology — from the apps on people’s phones, to delivery of services in local languages, to computer coding. This includes better basic literacy levels and including digital education.
Authorities have to push harder to make their countries digital-ready by investing in infrastructure and building on the significant investments that have already gone into fibre-optic cable networks that provide the backbone for digital services.
They need to connect these networks to the global undersea cable network, and work with businesses to create an environment that is conducive to investment. They should provide space for innovation, be agile, issue licences for new products in a timely manner and encourage startups through tax incentives.
Businesses need to find new models that allow users in lower-income and marginalised communities to access their products and services.
That means developing solutions at an appropriate price point. For example, motorbike taxi ride hailing apps such as SafeBoda, already huge in Asian markets, are taking off here, lifting casual drivers out of the informal sector and into more formal employment.
A digital-ready country means putting poor and marginalised people’s digital needs at the centre of strategy. Now is the time to create effective digital architectures for the next generation.
Governments need to come together with the private sector, technologists and citizens, including our younger “digital natives,” to collectively identify key issues, to manage tradeoffs between different sectors and co-create nationally appropriate solutions.
If we work together on this challenge, we can help to extend the huge economic and social benefits of technology to everyone, closing the digital divide and unleashing a wave of growth and progress that can be sustained for decades to come.
Benno Ndulu is academic director at the Pathways for Prosperity Commission on Technology and Inclusive Development and is a former governor of the Bank of Tanzania.