At the World Economic Forum on Africa earlier this year in Durban, South Africa, “inclusive and sustainable growth” was top of the agenda. Financial inclusion, which is critical to the long-term reduction in poverty and achievement of economic growth, was discussed at length.

By enabling and broadening access to a wide range of financial services, people are not only better able to manage their day-to-day finances, but also plan for the future and cope with the financial impact of unexpected life events more successfully.

Access to banking has improved significantly over the past few years and, as we discussed in our podcast Fintech in Africa, there have been developments in the fintech landscape. But there is still a large proportion of the African population who remain unbanked. Banking in Africa still faces many challenges, from the lack of infrastructure to insufficient financial education. So how can the unbanked continent become banked?

The unbanked continent

Traditional banks are still struggling to reach the unbanked across Africa. In 2014, a staggering 66% of Sub-Saharan Africans did not have a bank account. The small size of national markets, a lack of financial literacy, low income levels, political instability and weak judicial systems have created a constrained African banking system. And banks continue to rely on traditional banking models of branch networks, expensive technology, inadequate systems and a limited talent pool.

The micro, small and medium entrepreneurs (MSMEs) in particular are disadvantaged when it comes to access to financial systems. In Uganda, 90% of the private sector is made up of MSMEs – entrepreneurs critical to growth of economies and job creation. In 2015, we conducted field research in Uganda to understand the banking habits and needs of MSME owners. We found that a large proportion of MSME owners in our focus group distrust banks.

Interviewees were wary to use ATMs or online banking platforms as they were afraid that their money would not reach the recipient. And it’s not just Uganda with trust issues, there’s similar feeling towards the banking system and banking technology across the African continent, as well as the same reliance on cash transactions.

Traditional banks are still struggling to reach the unbanked across Africa.

MSMEs owners often could not afford the fees charged to open and maintain a bank account, favouring cash and mobile money options. And bank branches are not always conveniently located, often meaning travel costs, long wait times and intimidating bureaucratic processes. The failure to regularly bank cash has a knock-on effect to the business as it impacts the financial track record and hinders the ability to access additional products like loans and insurance.

Unfortunately, the problems observed in the Ugandan banking sector can be seen across large parts of Africa. Many Africans choose to bank with credit unions, such as Savings and Credit Cooperative Organisations (SACCOs) instead of banks. SACCOs are member owned, governed and managed organisations. They are based on trust and members do not need documentation or collateral to apply for accounts or loans. Although SACCOs charge high interest rates they are very popular amongst micro entrepreneurs who need quick access to money.

Mobile money revolution

Banks and local credit unions have long been the only players on the financial services market in Africa, but over the last couple of years their dominance has been challenged by the emergence of alternative financial services providers. The main challenger? Mobile network operators (MNOs) who have seized the opportunity to create convenient, low-value, inexpensive payment options in the form of mobile money.

The rise of mobile phones enabled a revolution in African access to financial services.

Despite the challenges, financial inclusion in sub-Saharan Africa has improved dramatically with the advent of mobile money account ownership. The lack of traditional banking infrastructure and services has paved the way for fintech and telecommunication companies to revolutionise the financial services market on the African continent. The low penetration of banking and a high proportion of millennials has created the perfect breeding ground for fintechs in Africa to flourish.

In a few short years, the rise of mobile phones enabled a revolution in African access to financial services. M-Pesa, launched in 2007 by Vodafone for Safaricom and Vodacom, pioneered affordable mobile money payments. 10 years later, M-Pesa has 30 million users in 10 countries – 3 outside Africa – with an expanded range of services including international transfers, loans and health provision.

Mobile money has become a thriving business in Africa, with the highest levels if mobile money penetration in the world. In 2015, the market generated $656m in revenue. In the next four years this is expected to double to $1.3 billion. Most importantly, mobile payments in Africa have contributed significantly to increasing financial inclusion. At the end of 2016 there were 227 million registered accounts, more than their total number of bank accounts in the region. More than a million of those accounts were classified as active.

East Africa in particular has led the mobile money revolution. Kenya alone accounted for 16.6million active M-Pesa customers in 2016 which is almost two-thirds of the adult population. 31% of Kenya’s unbanked population use M-Pesa a for money transfers and 23% use it for bill payments.

Only the first step

There is still a long way to go and account ownership is a only the first step towards financial inclusion. To drive the real benefits of financial inclusion accounts need to be used not only more frequently, but across a broader range of financial services. According to Global Findex, while 58% of account holders in developing countries use their accounts to make or receive electronic payments, only 39% use their accounts to save. In many cases, individuals still prefer to use cash to pay for the majority of their expenses including utility bills, school fees and other day-to-day expenses.

Financial inclusion benefits not only the individual, but also banks, other financial services providers and the economies of developing countries as a whole.

A major benefit of having access to formal financial products is being able to actively save. This gives people access to cash reserves in the case of emergencies as well as a better track record when attempting to access credit facilities. The use of these types of products not only requires increased financial literacy but increased trust in the financial institutions which will hold these funds.

Financial inclusion is an outcome that benefits not only the individual, but also banks, other financial services providers and the economies of developing countries as a whole. Banks, as well as non-traditional financial service providers, have an important role to play alongside governments in re-building consumer trust – a key factor to improving financial inclusion.

Entrepreneurs are a vital part of the inclusive, sustainable growth that is so needed for the African continent as a whole. It’s now down to the commitment of all stakeholders to enable access to the financial products necessary to support and grow this band of game-changing innovators. It was reassuring to see that it was addressed at various World Economic Forum discussions but now it is time to turn talk into action and make real change happen. Financial institutions need to collaborate and thoroughly understand the preferences and behaviours of the unbanked. Only then can they take advantage of the fintech landscape and help propel the continent towards the goal of financial inclusion.