On February 12 and 13, the Second Annual CTED Conference took place in Abu Dhabi, titled: “Enhancing Economic Development through Technology: Focus on Africa and other Developing Countries”. Read below guest blogger Elizabeth Dickinson‘s post on the Mobile Money Panel:

“When Njuguna Ndung’u was named Kenya’s Central Bank Governor in 2007, just over 11 million of his fellow Kenyans—or about three out of every ten—had cell phones. Even fewer Kenyans had bank accounts; Ndung’u estimates the number was well below 30 percent.

Fast forward just five years, and Kenya has seen a revolution in both—telecoms and financial inclusion. As home to one of the first and most successful mobile banking systems in the world, Ndung’u told the CTED conference in Abu Dhabi on February 12 that a new 19.2 million customers now had access to mobile banking. “This was a market that nobody knew existed,” he said.

Mobile banking, called M-Pesa in Kenya, offers users something that many of them lacked access to before: a way to store, transfer, and even save their money. Many, though far from all, users are dealing with transactions too small in value to open traditional bank accounts. But the average deposit in an M-Pesa account is just $12.70. In total, Ndung’u explained, M-Pesa now holds the equivalent of $10 million in deposits.

“In revolutionary way, we expanded financial inclusion within a few years,” added Benno Ndulu, governor of the Central Bank of Tanzania, which has seen a similar mobile banking explosion in recent years.

The system works precisely because of its simplicity and convenience—a way to leapfrog over some of the traditional difficulties in financial inclusion. There is no better example than physical infrastructure; where it wouldn’t be profitable to build a bank branch in every village, mobile phone agents can easily set-up shop. “Banks [in Tanzania] have 320 branches around country. This system has as many as 84,000 agents around the country.”

“We have seen as policymakers that the market works,” said Ndung’u. “We come from a region where there are missing institutions. But now we can create platforms that are credible and adaptable to the conditions that we have.” Perhaps the greatest testament to how transformative mobile banking can be is just how widely it has now spread throughout the continent. A report by Juniper Research suggests that 200 million users could be taking advantage of mobile money by 2013, with 40 percent in Africa and the Middle East.

As mobile banking sprints across the globe, the central bank governors warned that regulations had not—at times—kept pace. “If there was an outage for 30 min, who is responsible and what happens?” asked Louis Kasekende, deputy Central Bank governor in Uganda. He cautioned that any loss in confidence in the system—such as an outage or bank run—could jeopardize user confidence, and even set back expansion. Equally important, they noted, would be trying to understand the impact of having more and more financial transactions on the grid, rather than in the informal sector.

These questions could hardly be more urgent—and that might be a good thing. Because getting to real financial inclusion may now be only a matter of years away.”