Remittances Provide Strong Mobile Money Opportunity

In September 2013, only three months after launching mobile money services in Lesotho, Vodacom had already signed up 260,000 mobile money users, equal to 13% of the population. While the instant success of M-Pesa in Lesotho demonstrates the large opportunity for growth within the country, BMI believes expansion into cross-border transactions between South Africa and Lesotho will sustain growth over the long term.

Vodacom has leveraged its experience of launching mobile financial services in four other markets, Tanzania, Mozambique, DRC and South Africa, for its expansion into Lesotho. The operator set up well-prepared and well-informed distribution agents and offered 30% extra airtime for those who topped up using M-Pesa in order to quickly increase awareness and stimulate strong initial uptake of the service.

Mobile Money Offsets Stagnating Subscriber Growth
Lesotho Mobile Growth Forecast, 2010-2017

This was complemented by fundamental macroeconomic circumstances favouring uptake of mobile money in Lesotho. Approximately 80% of people in Lesotho do not have access to the formal banking sector, both because of the high cost of banking services and because nearly 72% of the population live in isolated and mountainous rural areas, according to BMI in 2012. These factors enabled the operator to record a 60% increase in transactions each month and expand services to include payment of utility bills and transfers between M-Pesa and bank accounts ahead of schedule.

Although mobile penetration in Lesotho is set to stagnate around 68% during our forecast period to 2017, which could limit mobile money usage, BMI believes the prospect of introducing mobile money services across the South Africa-Lesotho border should provide substantial growth opportunities. The World Bank estimates that in 2012 US$602mn of remittances flowed into Lesotho, equal to 27% of the country's GDP for 2011. Remittances may also increase in the coming years, as declining demand for Lesotho's textile and manufacturing exports could drive an increasing number of people to seek work across the border in South Africa. Vodacom is already preparing to tap into this opportunity, with talks between the Central Bank of Lesotho and the Reserve Bank of South Africa to facilitate cross-border transactions already underway.

This article is tagged to:
Sector: Telecommunications
Geography: Lesotho, Mozambique, Tanzania, South Africa

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