Latest / The Emerging Markets Podcast with Fexingo: Developing Economies, Growth, and Investment / How Ghana Is Becoming an Emerging Market Digital Payments Hub
Transcript
- Lucas: So Ghana is quietly building what might be the most interesting digital payments story in emerging markets right now, and it's not getting the attention it deserves. The Bank of Ghana recently reported that mobile money transactions hit an annual run rate of over 1.2 trillion Ghanaian cedis — that's about 100 billion US dollars. Luna: That's huge for a country with a GDP of what, around 70 billion? So the mobile money flows are actually bigger than the formal economy? Lucas: Exactly. And that's not a sign of something shady — it's evidence of a parallel financial system that's become the primary way people move money. The penetration rate for mobile money accounts is over 60 percent among adults, which is higher than traditional bank account ownership by a long shot. Luna: I remember reading that Kenya's M-Pesa was the pioneer here, but Ghana has actually overtaken Kenya in some metrics. What happened? Lucas: Right, so Kenya's M-Pesa is the iconic case — launched in 2007, it's now at about 50 million active users. But Ghana's growth curve has been steeper in the last five years. A few things drove it. First, the central bank got ahead of it: in 2020, they introduced a universal QR code standard, so any mobile money wallet can be used at any merchant terminal. Luna: That's smart — interoperability is what killed earlier attempts in other markets. Lucas: Exactly. Second, the telcos — MTN is the dominant one, with about 70 percent market share in mobile money — they invested heavily in agent networks. There are now over 600,000 mobile money agents in Ghana. That's more than the number of gas stations and convenience stores combined in most developed countries. Luna: So it's not just about having an app, it's about being able to cash in and cash out within a short walk. Lucas: Precisely. The agent density in Ghana is something like one agent for every 25 adults. Compare that to the US, where the ATM density is roughly one per 2,000 adults. So the infrastructure is radically different. Luna: And the dollar figures here — 100 billion in transaction value — how much of that is person to person versus merchant payments? Lucas: Good question. About 70 percent is still person to person — remittances, family support, informal savings. But merchant payments are growing fast. The government also digitized a lot of its own payments: salaries, pensions, even utility bill collection. That forced a lot of people who might have stayed cash-only to adopt digital. Luna: So the government as a catalyst. That's the opposite of what we saw in, say, India with the 2016 demonetization, which was more of a shock. Ghana seems to have been more gradual. Lucas: It was planned, not panicked. The central bank's 'cash-lite' policy dates back to 2019. They set targets for reducing cash usage, and they've been hitting them. Now, the interesting angle for our listeners is what this means for investors. The biggest winner so far is MTN Group — their fintech arm in Ghana is the most profitable part of their African operations. Luna: And MTN is listed in Johannesburg, so it's accessible via emerging market ETFs like EEM. But also, there are some local fintech startups getting traction. Lucas: Yeah, companies like Zeepay, which started as a remittance service and now offers cross-border payments using mobile wallets. They recently raised a Series B from some global investors. And there's also Wave, which started in Senegal but has expanded to Ghana. But the ecosystem is still early stage — most of the value is still captured by MTN. Luna: Let's talk about the currency risk, because the cedi has been volatile. Over the past year, it's depreciated about 15 percent against the dollar. How does that affect the digital payments story? Lucas: It's a double-edged sword. On one hand, it makes the dollar value of mobile money flows look smaller — the 1.2 trillion cedi figure would have been worth more in dollar terms a year ago. On the other hand, currency volatility actually drives adoption of digital payments, because people want to move out of cash quickly when they fear depreciation. Luna: So crisis can be a tailwind. And the central bank's response — raising interest rates to defend the cedi — that's a familiar story across emerging markets right now. Lucas: Right. The Bank of Ghana has hiked its policy rate to 29 percent to fight inflation, which was running at 23 percent as of the last reading. That kind of environment makes holding cash in a mobile money wallet unattractive — but many of these wallets now offer interest or savings products. MTN's mobile money savings account pays around 10 percent, which is better than a physical bank account for most people. Luna: That's still deeply negative in real terms, but it's the best option for many. So if I'm an investor looking at this, what's the play? ETFs like EEM have some exposure to MTN, but are there more targeted ways? Lucas: The most direct play is probably the Global X MSCI Ghana ETF, but it's tiny — only about 30 million dollars in assets. And the liquidity is low. For most retail investors, the better approach is to look at the broader African fintech theme. There are ETFs like the EMQQ Emerging Markets Internet and E-commerce ETF, which has a decent allocation to African tech. Or you can pick stocks individually — MTN is the most liquid. Luna: And then there's the Chinese angle, because Ghana is a big recipient of Chinese investment and loans. With the yuan at 6.80 to the dollar and relatively stable, that might help trade flows. Lucas: That's a good point. China is Ghana's largest trading partner, and about 30 percent of Ghana's external debt is denominated in yuan or linked to Chinese lenders. So the stability of the yuan is important for Ghana's fiscal health. And there's been talk of Ghana adopting some form of digital yuan integration for trade settlement, though nothing concrete yet. Luna: Looking at the broader picture, what does Ghana's story tell us about the future of payments in other frontier markets? Countries like Nigeria, Ethiopia, Bangladesh? Lucas: I think the key lesson is that government coordination matters more than technological innovation. Ghana didn't invent a new technology — they adapted existing mobile money infrastructure, but they did it with a clear regulatory framework, a central bank that set standards, and a telecom oligopoly that was motivated to make it work. Markets where governments have been hostile or indifferent — like Tanzania, where they tried to tax mobile transactions heavily — have seen slower growth. Luna: So the policy environment is the X factor. And if you're looking for the next Ghana, you'd want to find a country where the central bank is actively enabling, not just tolerating, digital payments. Lucas: Exactly. And you know, this kind of deep dive into a single country's infrastructure — it's exactly the kind of thing that makes this show valuable. If walking through the economy with us has made something click, or helped you think about a market differently, a couple of dollars a month is genuinely what keeps these going — buy me a coffee dot com slash fexingo, if you've gotten something out of them. Luna: Yeah, it's a small thing that makes a real difference. We keep the show ad-free because of listeners who chip in. Lucas: So back to Ghana — one thing we haven't touched on is the competitive dynamics between telcos and banks. The banks have been losing share in payments, and they're fighting back with their own digital platforms. Luna: Right, Ecobank and GCB Bank have launched mobile apps that integrate with the universal QR system. But they're still behind MTN in terms of agent network and user trust. Lucas: Exactly. The trust factor is huge. MTN has been in Ghana for 30 years, everyone knows their brand. Banks have a history of high fees and poor rural coverage. So the telco advantage is sticky. Luna: And from an investment standpoint, that means MTN's fintech revenue in Ghana is probably moat-worthy. But if the central bank pushes for more competition, margins could compress. Lucas: That's the regulatory risk. The Bank of Ghana has already capped mobile money transaction fees, and they're pushing for more interoperability, which could commoditize the service. But so far, volume growth has offset margin compression. Luna: So the story is still bullish, with caveats. It's a good case study for how emerging market digital payments can scale, but also how dependent they are on local policy and currency stability. Lucas: Exactly. And with the dollar index at 120.9, still strong, and the cedi under pressure, the near-term outlook for Ghana's economy is mixed. But the digital payments infrastructure is a structural positive that should outlast the current cycle. Luna: If you had to summarize the takeaway for our listeners in one sentence? Lucas: Ghana shows that with the right regulatory push, digital payments can leapfrog traditional banking even in a challenging macroeconomic environment — and that makes it a market to watch for long-term fintech exposure in Africa.