Africa has had annual GDP growth rates in excess of 5% over the last decade. However, this growth has not translated into shared prosperity and better livelihoods for the majority of the population. There’s a reason growth has to be inclusive to be socially and politically sustainable in regions like Africa.
One key component of inclusive development is financial inclusion, an area in which Africa has been lagging behind other continents. Financial inclusion aims at providing access to safe, affordable, convenient, and lasting financial services to everyone, including women, youth, and rural populations.
Financial inclusion in Africa has “increased dramatically” from 23% in 2011 to 43% in 2017, making it nearly 7.2 million Fintech users in Africa, as per the World Bank Findex survey. Things have started to shape up in the areas of Kenya and Nigeria as the top nations that have opened their arms to Financial Inclusion.
A perfectly balanced ecosystem is being created by Telecom Operators, Banks, MFIs, Credit Bureaus, Mobile Financial Providers & handset vendors to reach sustainable Financial inclusion. Fintech companies like Yabx are determined to provide solutions that help achieve maximum financial inclusion.
Burgeoning Fintech startups are coming up with innovative business models, to increase financial inclusion across Africa, owing to the high mobile penetration rate and a high percentage of the population that is still unbanked. Fintechs like Yabx aim to enable the underserved with limited credit history, to get fair access to financial services tailored to their needs. Yabx transforms alternate data into financial identity using machine learning to predict the ability & willingness to consume financial products.
More and more companies are trying to touch the bottom of the pyramid population which requires client-centered innovation and the design of products targeting minorities and vulnerable segments of society, including older and disabled people. Not only the newbies, even the traditional banks like WEMA and Ecobank have also metamorphosed to fully digital banks, providing branchless customer service.
Sub-Saharan Africa is a major market for mobile money. The region saw a 14% annual increase of registered mobile wallets in 2018 to 396 million, according to trade group GSMA. Telecom companies are aiming to roll out digital-banking services in markets such as Zimbabwe, Tanzania, Kenya, and Nigeria, either in partnership with banks or as part of mobile-money services linked to banks and accessible through mobile phones.
Some of them have taken a step ahead by providing the necessary advisory and business management services to enable their businesses to thrive and expand anywhere, as a part of the financial inclusion initiatives. Digital credit delivered through mobile phones offers the promise of instant small loans to micro-entrepreneurs with no formal borrowing history in rural areas in a convenient, affordable manner.
Another important aspect of Financial Inclusion is bankability for women. A majority of the Africans trapped in the informal economy are women. With access to digital financial services, they will have the ability to earn money and to choose how to spend it. Millions of entrepreneurs will be able to get startup capital, do business efficiently without layers of middlemen, save, and invest in priorities like health and education that supercharge development.
Ample evidence prevails about the impact of digital financial inclusion on economic growth and the development of society. Smallholder cocoa farmers in Côte d’Ivoire who saved regularly were better able to feed their families than those who did not save, irrespective of the farmers’ annual income.
The World Bank reports that African governments have started to develop a regulatory framework to the fast-paced developments in digital banking and financial services to cater to challenges relating to competition, Anti-Money Laundering/Combating the Financing of Terrorism measures (AML/CFT), cybersecurity, consumer protection, and data privacy issues.
Despite the growth, there have been quite a few challenges like high data costs, finding skilled technologists to help deploy the platforms and regulatory holdbacks, that need to be addressed for accelerating the financial inclusion chapter in Africa.
Although digital technologies hold vast potential to improve human welfare, they also pose considerable risks, from the establishment of digital monopolies to cyberattacks to digital fraud. As previously excluded women become first-time users of digital technologies, they are particularly exposed to these and other risks, such as new forms of gender-based violence, abuse, and harassment in digital contexts.