How Fashion Entrepreneurs In Africa Can Utilise Mobile Money As A Banking Tool
The African fashion industry, composed predominantly of small and medium-sized enterprises (SMEs), plays a vital role in the continent’s economy. According to UNESCO, approximately 90% of businesses in the fashion sector are SMEs, directly contributing to local employment, economic empowerment, and cultural preservation. However, despite their potential, these enterprises often face significant financial challenges, including limited access to formal banking institutions. Traditional banks impose stringent requirements, such as high minimum balances, extensive documentation, and collateral obligations, which are difficult for many small fashion entrepreneurs to meet. Additionally, the geographical distribution of financial institutions in Africa is uneven, with a concentration in urban areas, leaving rural entrepreneurs with limited options. Consequently, mobile money emerges as a crucial financial tool that provides a viable alternative, allowing fashion entrepreneurs to engage in banking activities with greater ease and efficiency.
Financial inclusion remains a pressing issue in Africa, with a substantial proportion of the population excluded from formal banking services. The World Bank reported that, as of 2021, approximately 45% of sub-Saharan Africans aged 15 and above did not have a bank account. This financial exclusion limits entrepreneurs' ability to manage their businesses effectively, secure funding, and conduct seamless transactions. Mobile money provides a solution by leveraging the widespread use of mobile phones to offer financial services. In sub-Saharan Africa, there are more than 600 million registered mobile money accounts, and transactions conducted through mobile money exceeded USD 600 billion in 2022. This trend indicates the growing reliance on digital financial platforms, presenting a significant opportunity for fashion entrepreneurs to manage their financial operations efficiently without requiring access to traditional banks.
One of the primary advantages of mobile money for fashion entrepreneurs is its capacity to streamline business operations and reduce transaction costs. The ability to conduct cashless transactions facilitates faster and safer business interactions. Entrepreneurs can accept payments from customers, pay suppliers, and manage savings all through mobile money platforms. This eliminates the need to travel long distances to banks, reducing both transportation costs and the risk of handling cash. A study conducted on women second-hand clothing entrepreneurs in Dodoma City, Tanzania, highlighted that mobile money savings had a significant impact on income generation. By using mobile money, these entrepreneurs were able to manage their funds more efficiently, reinvest in their businesses, and mitigate financial risks associated with cash handling. The flexibility offered by mobile money allows for immediate transactions, ensuring that businesses can operate smoothly without delays caused by banking hours or long processing times associated with traditional banking systems.
Access to credit remains one of the most significant barriers to growth for African fashion entrepreneurs. Many businesses struggle to secure loans from traditional financial institutions due to a lack of formal credit history, collateral, or stable income streams. Mobile money services have begun addressing this issue by offering digital credit facilities, where entrepreneurs can borrow small amounts based on their mobile transaction history and usage patterns. This model of credit assessment provides a more inclusive financing approach, particularly for fashion entrepreneurs who may not have conventional financial records but demonstrate consistent mobile money transactions. The African mobile money market is expected to expand significantly, with projections estimating its growth from USD 674.8 million in 2023 to USD 3,448.4 million by 2032, reflecting a compound annual growth rate (CAGR) of 19.3%. This expansion suggests that more financial services, including microloans, will be available through mobile money platforms, enabling fashion entrepreneurs to invest in business expansion, procurement of materials, and scaling operations.
Market expansion is another key advantage of utilizing mobile money in the African fashion industry. With increasing internet penetration and the affordability of smartphones, digital commerce is growing rapidly. In 2022, sub-Saharan Africa’s e-commerce sector experienced a 29% growth, driven by mobile money’s role in facilitating digital transactions. Many fashion entrepreneurs are capitalising on this trend by establishing online stores and social media-based businesses that accept mobile money payments. The integration of mobile money with e-commerce platforms eliminates geographical limitations, allowing fashion businesses to reach customers across borders. This access to a broader market enhances revenue potential and supports the growth of the African fashion industry beyond local markets. Mobile money also provides a means for businesses to build customer trust through secure and traceable transactions, reducing the risks associated with cash payments.
Despite the numerous benefits of mobile money, several challenges hinder its full potential as a banking tool for African fashion entrepreneurs. Network failures and transaction limits imposed by mobile money service providers can disrupt business operations. Inconsistent network coverage, particularly in rural areas, poses challenges for entrepreneurs who rely on mobile transactions for business activities. Security concerns also remain a significant issue, as cases of fraud and cyber threats continue to rise. Furthermore, disparities in mobile money access exist along gender lines, with studies indicating that women are less likely to use mobile money services compared to men. This disparity can exacerbate financial exclusion among female fashion entrepreneurs, limiting their ability to compete in the market. Addressing these challenges requires collaborative efforts from policymakers, financial regulators, mobile service providers, and industry stakeholders. Implementing robust security measures, improving digital literacy, and expanding infrastructure to underserved areas are essential steps toward ensuring that mobile money can fully support African fashion entrepreneurs.
The strategic utilisation of mobile money presents transformative opportunities for African fashion entrepreneurs. By enhancing financial inclusion, improving operational efficiency, facilitating access to credit, and expanding market reach, mobile money can serve as a powerful banking tool that fosters business growth and sustainability. However, addressing existing challenges through targeted policies and technological advancements is necessary to ensure equitable access and long-term viability. As mobile money continues to evolve, its integration into the financial ecosystem of Africa’s fashion industry will likely shape the future of entrepreneurial success on the continent, empowering businesses to thrive in an increasingly digital economy.