Bridging the Financial Gap and Unlocking the Potential of Informal Businesses Through Mobile Money in Four East African Countries

Analysis of Research ICT Africa's 2011/2012 nationally representative survey data on informal businesses across 12 African countries shows that the informal sector is mainly a cash and face-to-face driven sector. Informal businesses rely on cash for transacting financially with their customers and suppliers and even for sending money. At the same time informal businesses still mostly communicate in person with customers and suppliers. This study seeks to investigate reasons behind these patterns among informal businesses and explore avenues through which communication and financial transaction channels among informal businesses can be enhanced. The lack of access to bank accounts is prevalent among informal businesses across all the countries studied. Few individuals use personal bank accounts for business purposes or have a dedicated business account. Conversely, many own and make use of mobile phones for business purposes. Based on these findings, this paper shows how mobile technology can be capitalised on through the form of mobile money to create financial inclusion of the informal business sector and how banks and/or mobile operators could use transaction data generated from mobile money transfers to generate transaction histories, and trial balances that may be used for business plans and gaining access to formal financial services