A report, the “financial inclusion insight (FII),” has stressed that digital financial services (DFS) can play a key role in managing expenses and setting individuals and households on paths to stay out of poverty permanently.
The new research report by InterMedia, which is a FII Survey Tracker, was released recently.
According to the report, through digital technology, financial services can reach billions of new customers quickly and efficiently.
It noted that digital accounts cut the costs of transactions by as much as 90 per cent. In addition, it showed that digital accounts give people the ability to save and budget for the first time in their lives, allowing them to withstand financial shocks and direct money toward specific uses, such as education and healthcare. Also, new customers and financial interactions have a domino effect of growth, touching providers, merchants, service providers, etc.
“When cash transactions that once circulated outside the formal economy are channeled within it, merchants and providers have new customers and new revenue, which can inspire more services and innovation. DFS gives people a secure way to save, which allows them to build cushions against financial shocks that would otherwise pull them right back into poverty,” it added.
Furthermore, it showed that more than 90 per cent of the world’s poor are covered by a mobile signal, which allows people to conveniently make payments digitally rather than in person.
It pointed out Africa is living proof that DFS can effectively reach the unbanked, stating that in Cote d’Ivoire, Somalia, Tanzania, Uganda and Zimbabwe, more adults use a mobile money account than a traditional account at a financial institution. In Tanzania, ownership of mobile money accounts surged from one per cent of the population in 2009 to 32 per cent in 2014, according to the report.
Also, 60 per cent of Africans live in rural areas (per United Nations). DFS is the only way to reach them cheaply, affordably, and at scale.
“In total, the worth of Africa’s mobile money market is expected to top US$14 billion in just another five years,” as a result of greater adoption of DFS.
Based on its findings that four out of 10 adult Nigerians do not have access to any form of financial services, it concluded that “life is not only more difficult, but also more expensive” for these set of people.
“These individuals must rely on informal services, which are not always trustworthy, such as: keeping their savings hidden — in pots, under mattresses, in fields where they constantly worry about thieves; sending money to a family member in another village is risky and can take days; obtaining even a small loan for an emergency is often impossible.
“When they do use a formal service—like cashing a check or sending money—they often pay high fees and conduct transactions in person, which can mean giving up valuable time and traveling long distances,” it added.
Its findings on trends in mobile money and other digital financial services in Nigeria showed that the potential for increasing financial inclusion is ripe—particularly among young people.
“Those who are unaware of mobile money are largely young (15-34 years, 60 percent), educated (70 percent), and employed (60 percent). This group has the financial skills and equipment required to register and use mobile money, and could potentially use the service to pay school fees.
“More than four in 10 Nigerians experience some form of economic vulnerability, and financial inclusion is needed to create resilience. Most of the vulnerable are numerate and few are literate.Nine in 10 are poor and nearly two-thirds live in rural areas,” it added.