Sub-Saharan Africa’s Vast Untapped Financial Services Market

By Jan Sonnenschein, Consulting Specialist

The market for financial services in sub-Saharan Africa is significant and remains largely untapped. The large number of people in the region sending informal cash payments or not sending money at all because of the hassle, high costs, and risks of informal mechanisms represents a major opportunity for providers of mobile money or similar services.

These findings are from the analysis, Payments and Money Transfer Behavior of Sub-Saharan Africans, produced by Gallup and the Bill & Melinda Gates Foundation. The study sought to better understand how sub-Saharan Africans manage their money, with a special focus on the payment behavior of the poorest parts of the population and those living in rural areas. Through its World Poll, Gallup conducted nationally representative surveys in 11 African nations from June to October 2011 about respondents’ payment behaviors through services such as money transfers, international remittances, government and wage payments, utilities, and other bills.

Here are some of the top findings and policy implications from this research initiative:

• About 79 million adults (31% of all adults) in the 11 sub-Saharan countries surveyed use only informal cash payments.
• Even affluent groups, with the exception of university graduates, were more likely to only send money in cash by bus, courier, or in person than to exclusively use electronic channels (bank transfers, mobile-based transactions, or money transfer services such as Western Union). This emphasizes the need for improved financial services among all socio-demographic groups.
• Nigeria -- the most populous country in Africa -- offers especially exciting investment opportunities for providers of financial services. Nigeria alone has an estimated 34.8 million consumers who are using only informal cash payment options.
• While development policy has focused largely on international remittances in recent years, the rate of domestic remittances in all sub-Saharan countries surveyed exceeds that of international remittances, occasionally by a high multiple.
• Two-thirds of Kenyans who had sent money to family members or friends living in a different city or area in Kenya sent the money via a mobile phone. Uganda and Tanzania were second and third most likely (43% and 32% of remittance senders, respectively) to report mobile phone-based transactions.
• In all countries with the exception of Mali, a majority of people had access to a mobile phone -- they either owned one or could use the phone of a neighbor, friend, or relative. This suggests that the introduction or extension of mobile phone transfer systems would have the potential to simplify the lives of millions of sub-Saharan Africans.

For more in-depth findings and policy recommendations on this topic, read Payments and Money Transfer Behavior of Sub-Saharan Africans.