Financial inclusion is very often referred to as one of the key social drivers capable of helping the vulnerable layer of African society to step out of poverty. Over the years we observed a number of remarkable initiatives from global charitable foundations and a sizeable amount of capital being raised for the purpose. I can’t shake the feeling that up to this point banks have somewhat failed to deliver.
It’s hard to blame them, the high costs of operation into rural and remote locations, cultural elements and quite frankly the lack of governmental support, made for a low financial feasibility case for banks contemplating an expansion outside of major African cities.
Around 2007, It fell upon Safaricom, a telecom company, the audacity of experimenting with technology, thinking outside the box and launching what today is arguably one of the developing world’s best mobile financial services: M-Pesa. The ideas behind M-pesa started to form as early as 2002, when people in Uganda, Botswana and Ghana were using their phone’s airtime as means to transfer money. A few years later, Mozambique’s MCel introduced the continent first service authorising it’s clients to officialy swap airtime credit. They were followed by Kenyans transferring airtime to friends and relatives, who would then use or resell it. Long-story short, in Kenya over the past decade the proportion of people lacking access to financial services has fallen to 17 percent from 41 percent (IMF).
While we could go down memory lane about how an original African idea came to be an example of inclusion using creative means and the tools at hand, times have change and banks are now poised to aggressively venture outside their comfort zone dealing (almost) exclusively with the middle class in major African cities.
A number of Innovations such as blockchain and cryptocurrencies have brought tools to empower the creativity of regional players and encourage their fintech ambitions.
The case for financial inclusion
Reportedly, as of 2014, there were some 350 million unbanked adults in Sub-Saharan Africa alone, a staggering 17% of the global unbanked population (World Bank). We all know how hard statistics in the region are hard to come by, and I for one would look at this numbers as “conservative” to say the least. However, the numbers do represent an interesting opportunity both for the banks and for the population itself.
The right financial services offering have the power to enable individuals and families to get out of poverty and reduce inequality by integrating them in the creation and the development of a formal economy in their communities, likely translating into economic growth. The integration of communities into the regional and the national economy through banking, creates the ability to start and grow small businesses through micro-financing schemes bringing better long term prospects. Enabling financial inclusion through technology, particularly mobile is perhaps the shortest route to bring people into the ‘main economy’.
The race is on
Banks operating in Africa which fail to understand the opportunities in financial inclusion are bound to be left behind and even cease to exist. More often than not I listen to foreign bankers in Africa dismissing the status quo based on the “challenges” of integration and the “feasibility issues”.
The 2018 GMSM Mobile Economy report for sub-Saharan Africa shows that mobile penetration has risen by 44%, and that smartphone penetration has gone up by 75%. Smartphones are here, and they are now more accessible and affordable than ever.
Mobile phones are now paradoxically one of the most basic expenses in the priority list of the unbanked, rural population in remote areas of Africa.
There are however, bold bankers who are making their move towards capitalising on financial inclusion. Take TymeBank, South Africa’s first digital bank. TymeBank developed artificial intelligence to interact with its customers online and on kiosks rather than through the overhead of call centres and retail locations. The result is a low-cost account that Tyme hopes will appeal to the around 11m underbanked people in their country.
Smart traditional banks are also demystifying the challenges of financial inclusion. Take FNB – First National Bank. Last year they launched eWallet eXtra, a mobile bank account that can be opened with just a name and national identity number, and with no monthly fees. The service brought the bank 50,000 new customers in its first month of operation alone.
The time has come for bankers to wise up and bring digital banking to the masses.