On the 6th of April, 2020, Eastern and Southern African telecoms giants, Safaricom and Vodacom, completed the acquisition of popular mobile money platform M-Pesa from Britain’s Vodafone, according to a statement by the companies. The acquisition of M-Pesa was done through a newly created joint venture by both firms.
This new deal which affords the telecoms operators an uninterrupted control of M-Pesa will see the expansion of the product in other African markets. This would bridge the gap between the financially excluded and unbanked with financial institutions. According to a joint statement by the telecoms giants, “the transaction, which was first announced in 2019, will accelerate M-Pesa’s growth in Africa by giving both Vodacom and Safaricom full control of the M-Pesa brand, product development and support services as well as the opportunity to expand M-Pesa into new African markets.”
The novel coronavirus is, among other things, daily highlighting the financial gap in Africa as governments scramble for solutions to serve the financially excluded, in the lockdown periods. While the need and importance of FinTech products are rising, telecoms operators in the continent have joined the list of corporations that are adding FinTech products in their services to help bridge the gap.
A report by the Center for Financial Inclusion indicates that approximately 4.2 billion people of the worlds over 7 billion constitute the active labour force, aged between the ages of 15 and 65. Of those, about 1.9 billion have a bank account in some kind of formal financial institution leaving 2.3 billion “unbanked” who do not have an account.
According to a report by the World Bank, mobile money is a driver of financial inclusion in sub-Saharan Africa. While the share of adults with a financial institution account remained flat, the share with a mobile money account almost doubled, to 21 percent since 2014.
The is because most governments haven’t set measures in place to ensure that individuals and businesses gain access to useful and affordable financial products and services that meet their needs and are delivered in a responsible and sustainable way. These products and services include transactions, payments, savings, credit, and insurance.
Financial exclusion is seen when governmental or institutional barriers hinder people or businesses from flexible and affordable access to basic financial services. With M-Pesa, Safaricom and Vodacom would be helping to bridge the financial divide in markets where it has its footprints.