Addressing the financial services needs of MSMEs in Sub-Saharan Africa

Opportunity presented by Enterprise customers

In a previous blog, we highlighted how mobile money still remains largely focused on individual customers with over 99% of registered accounts owned by individuals. However, Enterprise customers represent a large and untapped opportunity for mobile money providers.

To better understand the needs of MSMEs in Sub-Saharan Africa and how mobile money operators can best address their financial needs, the GSMA Mobile Money team partnered up with two leading consulting firms and operators over the past year to conduct two studies.

What MSMEs need

To assess the pain-points and financial services needs of MSMEs, GSMA partnered with Sofrecom and a leading mobile money operator to conduct quantitative and qualitative research on the topic in a Central African country with a thriving mobile money industry.
We found that MSMEs operate in a rich ecosystem, engage in diversified interactions with suppliers, providers and public authorities, and conduct frequent transactions.

While cash is the most common payment mode, its use tends to decrease when the transaction size increases. Despite being tailored for individual needs, mobile money ranked as the 2nd payment mode and is already used by more than 80% of respondents for professional purpose (figure 1).

The most frequent business use-cases include accepting customer payments and paying providers and suppliers. Mobile Money is valued for the proximity and service of its agents and for the flexibility and ease of processing a payment.

On average, nearly 60% of the respondents face working capital issues. Businesses struggle to manage cash tensions as there is a lack of savings and access to credit is complicated, especially at formal financial institutions. It is understood that these difficulties are the main reason for them seeking loans, while investment is less-often mentioned by enterprises surveyed. According to the McKinsey Global Institute at least 200 million MSMEs in emerging economies have no or insufficient access to credit, blocking their growth. In Africa, over 50% of MSMEs are unserved or underserved, accounting for 35m MSMEs and a $528b credit gap. These numbers would be even higher if they took into account the large number of informal businesses active in the continent[1]. 70% of respondents to Sofrecom’s survey claimed receiving credit through informal channels, which are valued for the minimal guarantee requirements and the flexibility offered.

The pain-points of online MSMEs

Prior to this, in 2017 the Mobile Money team partnered with Dalberg Design and a leading Mobile Money Operator in Western Africa, to assess the pain-points and needs of online MSMEs. Dalberg Design used a combination of research and prototyping methods, engaging over 50 participants to outline the journey of online MSMEs. This would typically involve five steps: Online set-up of the business; receiving an order; organizing a delivery; order acceptance; and potential returns/ product exchanges.

While pain-points would typically differ according to merchant type (small merchant vs. online vendors) there are a common set of challenges for online MSMEs which include: lack of set-up support to build websites and integrate digital payment solutions; and non-existent tracking tools for delivery, payment and refunds. Furthermore, online MSMEs are ill-equipped to make refunds and there is a lack of clarity on customer support and liability in case of losses/ refunds.

Mobile Money providers can help to address these needs

A large number of payment providers such as Ant Financial, Mercado Libre and MasterCard have designed dedicated value propositions and have already launched innovative initiatives targeting MSMEs by providing access to credit.

While just a few mobile money players have developed a tailored offering for businesses, this is perceived as a strong opportunity by the industry and 49 per cent of mobile money providers participating in our Global Adoption Survey cited enterprise solutions as one of their top three strategic priorities for 2018.

Mobile money providers are well-placed to serve MSMEs thanks to their strong-presence on the ground. While most mobile money providers seem to be at an early stage of specifically addressing MSMEs needs, a large number of formal and informal MSMEs is already using mobile money for business purposes. Mobile money providers are therefore ideally positioned to capitalise on the opportunity in emerging markets and provide tailored offerings for MSMEs that can help to reduce their pain points and support further digitisation of the economy.

Read the report

[1] McKinsey Global Institute, September 2016, Digital Finance for all: Powering inclusive growth in emerging economies.