THE Central Bank of Lesotho (CBL) says a more financially-inclusive society in Lesotho can only be achieved through policies that prioritise the creation of level playing ground for mobile money to flourish.
This is contained in the recent CBL working paper titled “The Financial Inclusion Conundrum in Lesotho: Is Mobile Money The Missing Piece In The Puzzle?”
It was written by Lira Sekantsi and Sephooko Motelle who are both employed at the bank.
Sekantsi is the Analyst-National Payment in the System Oversight Section in the Department of Operations and Dr Motelle is the Deputy Director of Supervision.
The paper shows that the number of registered mobile money customers in Lesotho increased from 10% in June 2013 to approximately 57% of the population in December 2015.
Vodacom Lesotho and Econet Telecom Lesotho are the two operators of mobile money platforms launched in Lesotho in 2013 and 2012 respectively.
Approximately only 38 percent of the adult population in Lesotho have bank accounts, indicating that the majority of the adult population still lacks access to basic financial services.
The paper therefore recommended a positive relationship between financial inclusion and mobile money in Lesotho through the realignment of relevant policies to allow mobile money to grow even further.
“The findings suggest a strong evidence of long-run steady state relationship between financial inclusion and mobile money in Lesotho with positive and statistically significant long-run coefficients, which are consistent with a priori expectations,” part of the paper states.
“In addition, the estimated ECM models provide evidence that mobile money also has significant impact on the dynamics of financial inclusion in the short-run in Lesotho.
“For instance, the results suggest that, on overage, 16% to 85% of the disequilibrium of financial inclusion is corrected in the current month following a shock in the previous month. Furthermore, the findings show that mobile money Granger causes financial inclusion both in the short-run and long-run in Lesotho.”
The findings further underscore the importance of mobile phone diffusion and hence mobile money in extending financial services in Lesotho.
“This is because it has resolved the hurdles of limited banking infrastructure by allowing the previously unbanked and under-banked sections of the population to access financial services.
The paper noted that this could also serve as a breakthrough for previously unbanked and under-banked population people by enabling them to build an accounts history that would consequently help them to open formal bank accounts with the banking industry in Lesotho.
“Therefore, policy makers in Lesotho should promote and facilitate interaction and investments in mobile phone technology deployment and its related financial services. In addition, financial inclusion policies should be directed to leveling the playing ground for mobile money to flourish to create a more financially inclusive society in Lesotho.
“In this regard, the legal and regulatory framework should be friendly and accommodative to enable more innovation in mobile money and other digital financial services. This would contribute drastically to financial development and consequently faster economic growth.”
The paper also called on mobile network operators to work harder to scale up the use of mobile money in remote areas of the country, where the majority of people still do not have access to financial services.
It said this could be achieved through greater customer education, improving network coverage in rural areas of the country and growing agent networks in rural areas by negotiating with Chinese businesses, which have more reach in rural communities to become agents and hence act as cash-in and cash-out points.
“More importantly, the MNOs should endeavor to promote the use of mobile money in its electronic form in carrying out transactions. These would help resolve many of the hurdles related to liquidity management by the MNOs.
“Lastly, MNOs should work towards forming many partnerships with all commercial banks and other financial institutions in Lesotho to ensure interoperability between MNOs and commercial banks. This would lead to more access to banking services and allow innovation of more services,” the paper further states.