by Obinna Chima
The untapped benefits in financial technology companies (fintechs) can help create jobs and increase the productivity of both workers and firms in Nigeria and other countries in Africa, a new report has stated.
The report titled: “FinTech in Sub-Saharan African Countries : A Game Changer?,” authored by Amadou N Sy, and published by the International Monetary Fund (IMF), noted that fintechs could be the critical stepping stone towards a digital economy for Africa—a continent where most countries are still overly dependent on a few dominant sectors.
It stressed that fintechs—if exploited well—could yet prove key to structural transformation in the continent.
It noted that the use of mobile money has grown exponentially over the past 10 years, making the region the global leader in mobile money innovation, adoption, and usage.
Mobile money accounts now surpass bank accounts in the region and greater financial inclusion has benefited large swathes of the population, it stated.
“While access to traditional banking services remains almost a mirage for most Africans, the near-universal availability of mobile phones has allowed millions to access mobile money services.
“Mobile money accounts now surpass bank accounts in the region and greater financial inclusion has benefited large swathes of the population that remain unbanked including the poor, the young, and women,” it added.
It showed that sub-Saharan Africa remains the only region in the world where close to 10 per cent of GDP in transactions occur through mobile money. This compares with just seven per cent of GDP in Asia and less than two percent of GDP in other regions.
Most African users now rely on mobile payments to send and receive money domestically. Increasingly, they are taking advantage of new services to also send and receive money internationally.
In addition, they use mobile money to pay their bills, receive their wages, and pay for goods and services.
Innovation is allowing Africans to move up the “financial services value chain.”
“From mobile payments, customers in sub-Saharan Africa are gaining access to mobile banking and other services as they open saving accounts, take out loans, purchase insurance, and invest in Government securities or in stock markets with a few touches of their mobile phone. “They can even ‘borrow’ electricity and pay later instead of sitting in the dark. New innovations in fintechs are proceeding rapidly. New technologies are being developed and implemented on the continent, and they have the potential to yield significant benefits for Africa. “Recognising this, foreign investors have stepped up their backing for African fintech firms, while those firms develop solutions adapted to the region, for example, to cater for the relatively lower internet speed in some areas.
“The falling price of smartphones will also help the region reap the rewards of internet-based solutions,” it stated.
Continuing, the report added: “In our new paper, we suggest that the challenge now is for the continent to leverage this success in mobile money. It needs to transition to other fintech services and a digital economy.
“Greater digital inclusion and innovation will not only spur economic growth but a growth that comes with new jobs—the number one preoccupation on a continent that will see more than half the world’s population growth by 2050.
“Africa is well positioned to meet its fintech and digital challenges, and with the right policies in place, it could reap a “digital dividend.” But first, policymakers need to address the existing large infrastructure gap in the region, starting with electricity and internet services.
“Secondly, Africa will need to balance the perennial demands of fast-moving innovation against the slower pace of regulation. Good regulation is needed but stifling innovation would be costly.”