Equity Analysis /

Ghana mobile money: Exploring Africa’s fastest growing market

    Nkemdilim Nwadialor
    Nkemdilim Nwadialor

    Equity Research Analyst, Financials

    Rohit Kumar
    Rahul Shah
    Ayodeji Dawodu
    Olabisi Ayodeji
    Tellimer Research
    21 August 2019
    Published byTellimer Research

    The prospects for mobile money in Ghana are exciting. A recent World Bank report highlighted Ghana as the fastest growing mobile money market in Africa, with an 85% compound annual increase in the value of Ghana’s mobile money transactions in 2015-18. In this report, we explore the structure of Ghana’s mobile money space and identify the companies that are adapting and thriving.

    Five factors that make Ghana an exciting prospect for mobile money: 

    1. Low banked population, 50% of all adults in 2018 vs 80% for Kenya. 
    2. High mobile money uptake (42% of adults had mobile money accounts in 2018, vs the global average of 35%). 
    3. Strengthening digital infrastructure, which could see mobile money platforms integrate with the broader financial ecosystem.
    4. Rapid adoption of agency banking. 
    5. Supportive regulatory environment.

    Mobile network operators (MNOs) MTN, AirtelTigo and Vodafone currently dominate the mobile money landscape, having gained regulatory support back in 2015 when they were authorised to establish stand-alone mobile money platforms. The breadth of their network reach has also been key in enabling MNOs to attain dominance, with a current total market share of c96%. Banks are also pushing their digital banking channels, but with less success, leaving mobile money as the major driver of improved financial inclusion in Ghana.

    The impact of mobile money for banks is mixed. On the upside, banks can leverage improving digital infrastructure to drive low-cost digital banking offerings and mobile money penetration also deepens the market for banks (rural financial access is still very low at 37%). On the downside, banks could reduce margins on digital banking products due to competition and there could be a potential shift of deposits from banks.

    The top banks in the digital space are Ecobank and Standard Chartered, which like other non-indigenous banks, have developed strong digital banking franchises. Both banks are leveraging technology to gather cheap retail deposits and can achieve notably lower cost of funds than peers within our coverage (2-3% in FY 18 vs 5-8% for GCB and CAL). CAL is investing heavily in its digital finance infrastructure and we expect it to become a strong contender in the medium term. More broadly, our pick is GCB due to its strong balance sheet position and potential to reprice its expensive deposits.

    MTN Ghana has the highest exposure to mobile money, with a reported 90% share of mobile money transactions in Ghana, amounting to cGHS231mn (cUS$43mn) in revenues or 20% of its topline. MTN trades at 10.7x consensus 2019f PE, a 38% discount to mobile money telecom peers.