Digital technology is changing the continent’s landscape. Innovation is boosting financial inclusion in Africa. Financial services are essential in our private and professional spheres. Financial services facilitate investments in people’s health, education, and businesses. According to the World Bank, 34.2 percent of adults in Sub Saharan Africa have a bank account- nearly half of the global average of 62 percent. However, within the same subset, 45 percent of these individuals have a mobile money account, compared to the rest of the world, coming in at 2 percent.

 

What is financial inclusion

Financial inclusion is the provision of affordable, accessible and relevant financial products to individuals and businesses that had previously not been able to access these products.

 

Who is excluded?

In developing economies women are 20 percent less likely than men to have an account at a formal financial institution and 17 percent less likely to have borrowed formally in the past year ( Global Findex ). Even if they can gain access to a loan, women often lack access to other financial services, such as savings, digital payment methods, and insurance. Further more than 40 percent of MSMEs in the least developing countries reported challenges in obtained financing, as compared with 30 percent in middle-income countries and just 15 percent in high-income regions. There are many reasons why people are financially excluded. The main reasons are no valid identification, inadequate education, no credit history, geographic challenges and financial products being too expensive.

 

Source: World Bank

Why inclusion matters

Inclusion is important on the continent. Financial inclusion helps micro, small medium enterprises obtain financing to grow their businesses. It also smooths income trends, helps individuals save money and boosts countries’ gross domestic products. Financial inclusion in Africa particularly among poor people, is crucial to achieving inclusive growth. Women disproportionately face financial access barriers that prevent them from participating in the economy and from improving their lives. Promoting financial inclusion for women will aid in achieving gender equity and poverty reduction.

 

 

Types of digital financial services

Digital Financial Services: a broad range of financial services accessed and delivered through a variety of digital channels, including payments, credit, savings, remittances and insurance.

 Agent Banking: a third-party business that is engaged to provide customers with a selection of financial services, often including deposit and withdrawal, on behalf of a financial service provider.

 Mobile Money: a type of electronic money (E-Money) that is transferred electronically using mobile networks and SIM-enabled devices, primarily mobile phones. The issuer of mobile money may, depending on local law and the business model, be an MNO, a financial institution or another licensed third-party provider.

 Mobile Wallets: an account that is primarily accessed using a mobile phone, usually provided by a non-bank and linked to a pooled bank account which holds the associated funds.

 Bank-to-Wallet: transactions between bank accounts and mobile wallets.

 

 

Financial inclusion makes financial sense

Ernest & Young estimates that banks could generate incremental annual revenue of $200 billion by better serving financially excluded individuals and MSMEs in 60 emerging countries. Banks must structure highly relevant and potentially simplified financial solutions that meet the specific needs of their customers at an affordable cost. There is also a huge opportunity for tech companies to develop accessible digital financial tools.

Financial inclusion in Africa benefits everyone. Committed public private partnership is required to facilitate greater levels of inclusion and economic growth.

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