How mobile money is proving to be a key technology driving development.

A system of payment that uses mobile phone networks to buy services and transfer funds is driving economic growth in developing countries. according to a new report by the GSMA, 

Mobile money technology is helping transfer funds to the most remote communities, facilitating access to affordable clean water and increasing financial inclusion.

GSMA’s study shows that mobile money has increased GDP by around 1.5% since 2013 in countries with a mobile money service. The number of people using the services grew by 12% in 2023.

The system was launched after mobile providers noticed customers were buying minutes and airtime as a form of currency that could be sent to relatives and later sold. Mobile money products can be accessed by people who do not have bank accounts, which makes them far more accessible than internet or mobile banking. 

Mobile money providers rely on a system of “airtime distributors”: small shops run independently. This keeps the set up costs low compared with traditional branch-based banking services.

The technology offers a huge opportunity for impact investors to reach in-need individuals with funds. GIF investment Y-Rise uses phone-based targeting to identify target households in a climate vulnerable region in Bangladesh. Funds are then sent to the most in-need households via mobile money.

In Bangladesh, three out of four people do not have a bank account, according to a survey by the Bangladesh Bureau of Statistics. Mobile money was key to the innovation’s success in Bangladesh, as it allowed households to receive funds irrespective of whether they had access to bank accounts or other payment options. Mobile money offered a cost effective and accessible way of receiving funds.

GIF provided a pilot grant of $230,000 in 2023 to support Y-RISE to conduct the first-ever rigorous research on the accuracy of phone based targeting.

Mobile money can also be a way for businesses to expand into developing countries in locations where payments would otherwise be a sticking point.

CityTaps offers a prepayment service granting access to affordable clean water in Sub-Saharan Africa.

GIF’s $500,000 convertible loan commitment and a c. $30k line of credit to CityTaps has enabled the innovation to deploy water meters across the region.

Mobile money is a key part of CityTaps’ product, with its mobile payments system allowing customers to load credits using mobile money.

Mobile money allowed CityTaps to launch their business in the region to a wide range of customers, and was instrumental in their ability to provide pre-paid water services to households.

Without access to clean, affordable water, individuals suffer several adverse effects including wasted time through having to collect water, the cost of more expensive alternatives, and the health impact of consuming contaminated water.

Through mobile money, CityTaps have been able to address this development challenge.

CityTaps is just one business in Sub-Saharan Africa making use of mobile money.

350 million adults in Sub-Saharan Africa were without access to a bank account in 2021 according to The World Bank, and mobile money has become a key part of the economy as an alternative.

A recent World Bank report emphasises how essential mobile money has been to economic development in Sub-Saharan Africa: “Sub-Saharan Africa has shown significant growth in financial inclusion over the past decade, much of it driven by mobile money account adoption.”

According to GSMA, Sub-Saharan Africa has the highest levels of global mobile money adoption. Mobile money increased GDP in the region by more than $150 billion (3.7%) between 2013 and 2022. Mats Granryd is GSMA’s Director General.

“Over the years, Sub-Saharan Africa has been a key driver of mobile money’s success, home to almost three-quarters of the world’s accounts,” he says. 

“Mobile money also remains a leading driver of the United Nations Sustainable Development Goals (SDGs), contributing to 15 of the 17 goals, including SDG 11 (Sustainable cities and communities) and SDG 12 (Responsible consumption and production).”

The GSMA Mobile Money Programme works to expand access to mobile money, aiming to reach the most vulnerable individuals.

GSMA supports providers in meeting industry standards, improving the reliability of mobile financial systems, and cultivating greater trust among customers.

The newest research shows that mobile money offers key opportunities for innovations in the impact investment space to access new populations in a more cost efficient way.

As Y-Rise and CityTaps show, organisations in the development space are already making use of mobile money, but there is huge potential for impact investments to leverage mobile money to drive development for the poorest and most disenfranchised communities.