Branching Out

Like many other African and developing countries, Mozambique faces the challenges of trying to bank the unbanked. More than 70% of the population lives in rural areas, while banking penetration stands at between 10% and 15%. The problem for banks is that the majority of citizens are on low incomes, while the cost of operating a branch or an ATM in a village is expensive. The volume and size of transactions completed by this customer segment is often low, meaning that banks have a hard time recouping their costs due to high overheads.

However, just because the unbanked population does not use formal means, this does not mean they it is resorting to informal services. People are often well versed in the ways of money lending, informal savings groups and supplier credit, and other such means. The knowledge of these services, as well as other unorthodox saving schemes involving trades on animals, means that people are open to going down alternative routes.

Currently, there are over 4 billion mobile phones in use around the world, with most of them being in developing countries. With the introduction of the mKesh service by Carteira Móvel in 2011, banking services in Mozambique took a step into mobile banking as a means of accessing people in rural areas. mKesh, the first mobile financial service to enter the market, allowed people to easily send, deposit, and receive money entirely via their mobile phone. Since then, a number of other similar services have been launched and banks have been eager to get on board with this low-cost solution to increase the penetration of their services. In 2012, according to a report published by Juniper Research, mobile phone payments globally reached $600 billion, confirming the importance that this new service represents. The reason mobile banking works is because it is very accessible for the consumer. Via the use of agents which can be neighborhood shopkeepers, petrol stations, or lottery ticket sellers, people are able to transfer money to different villagers with a click of a button and feel sure that the money will arrive where intended; something that wasn’t quite as assured in the past. Mobile banking is also evolving to include more services than just the transferal of money. Millennium bim, a Portuguese bank that moved into the Mozambique market in 1995, in 2013 announced the launch of its new mobile services. “Millennium Izi is a new and user-friendly version of mobile banking that includes a customer services line that is also a transactional line,” Mario da Graça Machungo, Chairman of Millennium bim explained to TBY in an interview.

Meanwhile, the people at Banco Oportunidade Moçambique (BOM) have come up with another idea to attract those without mobile phones. Enter the new concept of mobile banks. “We have mobile banks that serve specific routes,” Pieter Van Der Merwe, CEO of BOM, explained to TBY. “[Mobile banks] visit rural areas, identify small farmers or traders, grant them loans, take their applications, and provide financial literacy training,” Merwe continued. A problem that many villages face in Mozambique is the lack of a steady electricity supply and constant telephony coverage. By having a roaming bank that visits a set number of places on set days, people are able to access the services offered by BOM.

In short, while mobile banking will not completely bank the unbanked of Mozambique, it, and other innovative techniques like it, will go some way toward teaching and encouraging members of the public to enter the formal banking system.