Central Bank lauds mobile money transfer schemes

Rose Moremoholo

MASERU

MOBILE money transfer platforms have helped empower consumers and brought thousands more into the financial sector, according to the deputy governor of the Central Bank of Lesotho (CBL), Masilo Makhetha.

Makhetha was speaking at the launch of the Mobile Money Campaign on Monday. The campaign to promote the use of mobile money platforms will end on Friday.

Launched in 2012, Vodacom’s M-Pesa and Econet Telecom Lesotho’s Ecocash have helped thousands in rural areas make financial transactions and save money.

Nearly 70 percent of Lesotho’s 2 million people live in rural areas.

The central bank sees the platforms as a solution to its ambition to bring more people, especially those in rural areas, into the financial sector.

Lesotho’s geography means some people live in far-flung areas in the mountains where commercial banks don’t see economic value in putting branches.

Using the existing mobile network, money transfer platforms have bridged the gap between customers and the financial services. Distance is no longer a barrier.

Once thought to be just a convenient way to communicate, the mobile phone is now providing ways to send and receive money as well as paying bills. The result is that a farmer in the backwaters of Mokhotlong, for instance, can pay for his fertilizer in Maseru.

People once considered unreachable by commercial banks now have access to financial services.

Banks too have been quick to tap into the mobile money market, both as a way of fending off competition from mobile networks and enhancing convenience.

Insurance companies have also entered the fray, using the platforms to offer simplified products and easier ways of paying premiums.

All these, according to Makhetha, have helped improve levels of financial inclusion in Lesotho. And this is happening without the need for huge investment in Automated Teller Machines (ATM) and bank branches in remote areas, he noted.

“It cannot be disputed that mobile money is changing the face of banking globally. Traditional banking was built with branches, cards and large deposits in mind, whereas billions of users are small depositors and business located far from branches,” Makhetha said.

He said this means the conventional banking system has not been able to provide financial services to larger numbers of low-income and poor people especially in the remote areas because of the high costs of physical infrastructure and operational costs.

“On the contrary, mobile phone systems can be placed anywhere as long as there is wireless phone connection and this overcomes the problem of distance and lack of bank branches in remote areas,” Makhetha said.

“For people without bank accounts they can easily use this system which will enable them to save and use money in a safer manner than putting it under mattresses”.

He revealed that since last December M-Pesa and Ecocash have circulated at least M68 million. Comparative figures for the same period last year are not available.

As of December 2015 there had been 751 743 airtime purchases, 243 169 cash withdrawals, 321 768 bill payments and 221 257 domestic money transfers.

Makhetha however said the tremendous growth has not been without huge challenges, most of which have nothing to do with system but market dynamics.

The use of the platforms as a way to pay salaries is yet to catch on in the market.

This is despite the mobile money’s “potential to reduce the hurdles of salaries processing of contracts and casual workers by different organisations in the country including the government of Lesotho,” said Makhetha.

He said banks, mobile operators, retailers and independent companies have to work together to enhance the use of mobile money platforms.

“In this context, payments and banking must be available everywhere for people to trust it. We have to strengthen the legal and regulatory framework. To this extent, e-money regulations have been drafted”.

“Even though the Payment System Act 2014 is in place there is need for further improvements on the legal and regulatory framework.”

He said there is need also to promote mobile money literacy among low income groups because people in the most remote areas of Lesotho don’t understand how to use mobile money.

Other problems have to do with the concentration of mobile money agents in towns and their lack of liquidity. Makhetha said there is an opportunity for Lesotho to reach the same level as Kenya and Tanzania in mobile money usage.

“For this to happen we appeal to mobile money operators to protect the system because there are people who abuse its usage. For example, pyramid schemes that are taking advantage of people,” he said.

A 2011 survey showed that Lesotho has a very high level of access to financial products – the highest among 15 countries surveyed. The FinScope survey revealed that only 19 percent of Lesotho adults are not financially served.

This is compared to 27 percent in South Africa, 31 percent in Namibia, 33 percent in Botswana and 37 percent in Swaziland. The writers of the report on the survey were however careful not to equate access to financial products to financial inclusion.

This high level of inclusion, they said, is driven by very high usage of insurance, primarily funeral insurance (formal as well as informal), which is used by 62 percent of adults.

The survey found that 38 percent of adults have a bank account and a further 23 percent have another form of formal financial service.

This, the report said, means that 61 percent of Lesotho adults are formally included. A further 20 percent are only served by informal financial services.

“Informal usage is very important. In total, 62.4 percent of the adult population use informal financial mechanisms, spread across informal savings, insurance and credit.’’