Moving from Prepay to Subscription

Why on earth is there no solid electronic payment system in Africa? Why are people buying MTN cards and texting the numbers to family members to transfer money? Why? WHY?

On a continent of nearly a billion people why are the financial institutions here in such disarray that they can’t figure out this basic necessity, a need that is holding back at least half the continent from progressing in areas of business and commerce? What’s stopping progress in this area? Is it government? Is it foreign policy? Is it individuals?

The majority of people in developed regions of African countries still have no access to credit cards. Of the African banks that do offer credit or debit cards, most of those cards aren’t accepted internationally. Likewise, there’s no real infrastructure for accepting credit cards at many retail outlets here. Even Visa and MasterCard users will find a hard time making successful transactions in places like Uganda.

I don’t care how many villages rely on cash as their sole means for economic support, electronic transfer is the only way to compete in the current global climate. Thus, more African financial institutions need to lay the groundwork for capacity building in this area. There’s obviously money here, otherwise prepay adoption of mobile phones wouldn’t exist. Yet it does, and it’s growing exponentially. Someone is failing to turn this money into real upward growth and it’s my belief that financial institutions play a large role in propagating progress.

The explicit barriers I’ve seen in Uganda have been:

• lack of city planning (no real addresses outside of P.O. Boxes makes it hard to track people)
• lack of enforcement (finding people in a place with no addresses is impossible)
• lack of foresight (by companies going for immediate cash versus continuous revenue)
• overwhelming poverty (the middle class is still largely dwarfed by the poor)
• lack of education (leads to ignorant conflicts related to tribe, ethnicity and religion)
• lack of government transparency (with the amount of corruption here it’s no wonder)
• lack of faith by foreign investors (leaving African institutions to fend for themselves)
• excessive taxation of the private sector (discourages entrepreneurship)

All of this amounts to city the size of Kampala (about 2 million people) that is still largely ruled by cash assets among individuals. This means If I want to buy something that’s 20 million shillings, I’m probablly going to have to pay in cash. It’s also a huge hindrance to web based businesses like MountBatten that literally have locals go to a bank and leave cash deposits with a specific name on an envelope to ensure the cash arrives to the right person.

If you’re wondering what prompted this rant, it has a lot to do with the metrics represented in this post by WhiteAfrican that cites the recent findings reported in the African Mobile Factbook. An overwhelming number of the markets profiled have yet to convert their pre-pay customers into subscribers because they can’t. There’s no reasonable system in place to make that a possibility and although this is a problem the mobile industry faces, it’s indicative of wider problems facing Africa.

My feelings were recently echoed on the Google East Africa Forums. One of the members posted this comment a few weeks ago which sparked a debate that’s still going on today:

One main challenge for online business I’ve found in sub-Saharan
Africa, for at least those who have access to the internet, is that
they cannot buy goods online because banks there do not issue credit
cards. Even the few banks that do, their credit cards are not accepted
by foreign merchants. There are students who want to buy books online
but cannot because they don’t have credit cards.

What’s going to play the biggest role in changing financial operations in Africa for the better?