Financial inclusion in Africa has been one of the biggest success stories in the last decade.
According to a report published by the International Finance Corporation (IFC), the implementation and expansion of digital financial services has resulted in an exponential rise in the number of people who have access to formal financial services.
Africa now has more digital financial technology implementations than any part country of the world, accounting for nearly half of the world’s nearly 700 million individual users.
Mobile money solutions and agent banking are now providing inexpensive, instant, and dependable transactions, deposits, credit, and even insurance opportunities in rural villages and urban communities where no bank has ever opened a branch.
This is literally banking at your fingertips – and it is open to all. It is a game-changer. However, the effect goes beyond the person. What matters to a small-scale entrepreneur or a smallholder farmer has a wider impact on society.
We are seeing signs of this ten years after the breakthrough of digital financial services in Sub-Saharan Africa.
According to field studies, access to mobile money services has increased households’ daily per capita consumption rate, lifting them out of severe poverty. Mobile money services have improved people’s lives, such as assisting women in transitioning from subsistence farming to business occupations and healthy livelihoods.
We now understand, more than ever, that financial inclusion is merely a means to an end. It is a driving force behind equitable development and balanced economic growth.
The aim of Financial Inclusion has always been to boost the financial sector’s capacity to better serve all citizens in Africa.
In Sub-Saharan Africa, 43 percent of the population is now financially included, and in countries such as Kenya, Tanzania, and the Democratic Republic of the Congo, the pace of financial inclusion has more than doubled in the last six years.
Mobile money and agent banking have been the primary drivers of Sub-Saharan Africa’s remarkable growth in financial inclusion over the last few years.
Traditional financial institutions account growth has lagged in general.
Though East Africa has long been the standout performer in terms of digital financial services evolution, West Africa is the latest growth market.
The spectacular growth of financial inclusion in Sub-Saharan Africa over the last ten years would not have been possible if financial service providers did not see a compelling opportunity in expanding their service scope.
Depending on the needs of the organisation, there are various ways to interact with the opportunities provided by digitization.
There are three specific interaction models for banks: become a digital bank, launch discrete digital channels or goods, or launch subsidiaries to operate digital banking operations.
Offering digital financial services does not have to be a one-size-fits-all proposition.
All three digitization paths allow institutions to embark on a digital journey with large or small investments and with large or small risks.
In the banking industry, there is increasing interest in moving toward an omni-channel strategy, in which digital is simply part of the overall business and encompasses anything from back-end customer relationship management to front-end mobile apps for consumers, open access to fintech partners, and a seamless user interface for clients across all digital platforms.
To get there, significant investments in technology and culture are needed, both of which have proven difficult to alter.
A decade after the launch of M-PESA, DFS is an established part of the daily routines of millions of Africans, employing hundreds of thousands of agents and making a significant contribution to the business of banks, MNOs, and MFIs, as well as national economies.
The extraordinary growth of digital financial services in Sub-Saharan Africa has created an entirely new demand for affordable, open, and long-term financial services.
This has resulted in a significant increase in financial inclusion, which has aided in the improvement of millions of people’s livelihoods and lives and has also accelerated the creation of entirely new services that did not previously have a charging mechanism, especially for micro-entrepreneurs.
Some pioneering companies with open cultures to creativity have reaped the benefits of digital financial services quickly.
Many others are just now starting to investigate its ability to provide programs and goods specifically targeted to low-income citizens.
People in Africa live predominantly in a cash economy, and the potential benefits that DFS can bring to people, companies, and governments are enormous.
It is projected that widespread use of digital finance has the potential to raise emerging economies’ annual GDP by US$ 3.7 trillion by 2025.
With a third coming from increased investment in the MSMEi sector and the other two-thirds from increased productivity of larger businesses and government.
Now the question is how we can get there?
To get a sense of where we’re going in the future, it’s useful to look back at what we’ve accomplished so far and how it all came to be.
Download the full report via IFC website