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Mobile tech drives Africa’s financial inclusion

Samuel Mungadze
By Samuel Mungadze, Africa editor
Johannesburg, 31 Oct 2022

New research urges African governments to work collaboratively with all role-players to introduce strong mobile tech-driven financial innovations in support of national development priorities and the social development goals (SDGs).

The study, “Digital finance platforms to empower all”, released last week by Vodafone Group, Vodacom Group, Safaricom and the United Nations Development Programme (UNDP), says this is how countries can accelerate progress and increase the impact of financial inclusion.

“The impact is potentially staggering, with the International Finance Corporation estimating digital finance has the potential to boost annual GDP of emerging economies by $3.7 trillion by 2025,” the report reads.

The analysis was conducted as part of the three telcos’ Africa Connected campaign, an initiative to drive sustainable development through collaboration and help close the divides that prevent progress in Africa’s key economic sectors.

The research, which examined 49 countries in Africa, Asia and Latin America, found that countries with successful mobile money services had an annual GDP per capita growth rate up to one percentage point higher than countries where mobile money platforms had not been successful or not introduced.

It says: “As post-pandemic economic recovery continues, with the cost of living and climate crises intensifying, governments are encouraged to leverage mobile financial services to strengthen financial inclusion, which increases economic resilience and furthers sustainable development.

“When managed correctly, mobile financial services can not only drive financial inclusion, poverty reduction and economic growth, but can also accelerate progress around the SDGs more broadly.”

Robust bonds

According to the study, collaboration and strong partnerships underpin this success and will drive future acceleration of progress.

As such, it says, governments and multilateral organisations should engage all stakeholders, including the UNDP, the Africa Connected campaign, and other telecommunications, fintech and finance businesses, to make the recommendations discussed in this report a reality.

“In doing so, Africa can continue to equitably expand access to mobile financial services, with all stakeholders working together to ensure these services are delivered in a responsible way that unleashes their full potential on SDG achievement to uplift and empower all citizens.”

Principals of the report call upon African governments to urgently create an enabling legal and regulatory environment.

They say policy-makers must create an open and level playing field where financial regulators allow both traditional banks and non-traditional financial service providers to operate.

This, they say, will allow digital finance innovation to flourish through greater interoperability and openness of payment rails.

Aiaze Mitha, global lead, digital finance for the SDGs, at UNDP, says technology transformed financial access for Africans.

In the last decade, he says, more of the population has gained access to basic financial services, with the figure increasing from 23% of the population in 2011 to around 55% in 2021.

“A lot of that has been unlocked through mobile financial services, simply because more people have access to a connected mobile device. These services are complemented by a physical network of agents, who allow people to convert cash into digital currency so that they can start stepping into the formal financial system and start building up a credit history that will enable them to qualify for more sophisticated financial services.”

Looking ahead, Mitha notes there are a few obstacles Africa still needs to address around financial inclusion.

“First, there’s access to affordable mobile financial services, which includes such things as digital connectivity, devices and cost of broadband access. I’d say digital identity is also an issue. Being able to identify yourself so that you can access financial services is a major obstacle because there is a lack of digital identification in many countries across the continent.

“Fortunately, there are several players coming together to ensure digitalisation does not widen the digital and financial divide. In that sense, building capacity around financial and digital literacy will be a key element of greater, more qualitative financial inclusion.

“Finally, the notion of embedded finance must be raised. Many people will use financial services for a purpose, to fulfil a specific need, not just for the sake of it. For example, financial services are being built into specific e-commerce, transport, mobility, or social experiences and use cases.

“This will most likely open new avenues for even greater inclusion once people have the tools and connectivity to engage with these use cases.”