Mobile money can level the SME playing field

By Diego Gutierrez, Chief Officer: Vodacom International Markets

Mobile money can drive financial inclusion, growth, and productivity for small to medium sized enterprises (SMEs). We know how important SMEs are in providing jobs and contributing to the economies of developing countries. This is why we should encourage SMEs across Africa to implement mobile money services to streamline and grow their businesses.

1. Where to start?

For many SMEs on the continent, opening a mobile money account might be the first time they have used formal financial services. The mobile money industry has already created various successful and compelling value propositions for SMEs. These include the ability to transfer funds, pay bills, save, borrow and acquire insurance coverage via mobile phones, which has had a major effect on businesses within Africa.

2. Mobile money service benefits for SMEs

SMEs typically need to pay and be paid frequently, sometimes in large amounts or over long distances. They also need to manage their working capital to get the most from it, which means turning it over as often as possible – increasing the speed of the cycle from cash to inventory to receivables and back to cash. Being able to receive payment from clients quickly speeds up the conversion of receivables to cash. Similarly, being able to arrange delivery and pay over the phone increases efficiency on the other end by moving cash into inventory quicker and with less time and cost to arrange. By allowing customers to make payments remotely via mobile money, either through mobile enabled solutions or online, SMEs can also extend their pool of customers and sell their goods and services more widely.

3. Build a digital record of transactions

By digitising the business activities conducted by SMEs, which were previously cash-based, and perhaps undocumented, mobile money services can create a record of transactions, which is important for small businesses. The adoption of mobile money can also make it easier for SMEs to register and operate in the formal economy by facilitating the tracking of sales and recording employee pay. Just like paying suppliers, SMEs can use mobile money services to pay employees anywhere and at any time, reducing the need to carry large amounts of physical cash.

COVID-19 has created great economic uncertainty and increasing unemployment. Mobile money offers a significant opportunity to generate economic growth through enabling the formalisation of SMEs and management of cash flow, which may contribute towards mitigating the effects of the pandemic on the continent.