As of 2014, more than 60 percent of adults in Sub-Saharan Africa did not have bank accounts. However, with the growth of digital financial services — including mobile money accounts — companies and organizations work to help more individuals access financial services in Sub-Saharan Africa.
Increasing Access to Financial Services
Overall, financial access benefits Africans by making it easier to save money, receive loans (often for entrepreneurial purposes), and prepare themselves for abrupt changes in the economy. The traditional banking sector in Sub-Saharan Africa has struggled for over a decade, due to “limited physical banking infrastructure and substantial levels of poverty and financial exclusion.”
As a result, mobile money accounts have become increasingly popular in Sub-Saharan Africa, and are the primary reason that financial inclusion has been improving over the past few years. The Partnership for Financial Inclusion was formed in 2012 with the goal of increasing access to digital financial services in Sub-Saharan Africa. Since then, the organization has helped more than seven million Africans become more financially secure.
New Tech Brings New Worries
However, persuading Africans to use digital financial services is not always easy. The Partnership for Financial Inclusion found that many have grown accustomed to using informal financial services and are often mistrustful of formal banking systems. Additionally, they may also be skeptical of new technology or lack the knowledge necessary to use it. Fostering trust in new digital financial services is crucial and primarily driven by banking agents, who help individuals understand and use these services.
The spread of digital financial services increases demand for banking agents, which in turn, creates new job opportunities for Africans. Many DFS (digital financial service) agents are small-scale business owners who have begun offering banking services to their customer base, while others are primarily banking agents, hiring others to help expand their network.
DFS Perks for Women
Interestingly, a study by the International Finance Corporation found that women tend to be more successful than men at being DFS agents. While gender bias prevents many African women from being successful entrepreneurs, some have been able to become thriving DFS agents. On average, female agents register 12 percent more transactions per month than their male counterparts. This could be due to the fact that more female agents were located in low-income areas where these services are less readily available.
The overall success of these banking agents and the growth of trust in digital financial services is reflected in the fact that globally, most of the markets that had more mobile money accounts than traditional bank accounts in 2015 were located in Sub-Saharan Africa. This region is leading the world in the adoption of digital financial services, which companies hope will encourage entrepreneurship and create jobs.
Future of Digital Financial Services in Africa
For small-scale entrepreneurs in particular, DFS are very beneficial. Madagascar entrepreneur Voahirana Mamy Ravelonoro explained the ease with which she was able to get a loan for her restaurant because of these services. She received a text message that she had been approved for the loan, and all she had to do to receive the money was show the banking agent the message and verify her identity.
Additionally, companies, including FinTech and Kalon Venture Partners, are committed to investing in African entrepreneurs, with the goal of creating jobs, increasing GDP, and improving access to financial services. In 2016, investments in startup companies increased by 33 percent. According to IT News Africa, FinTech companies “are looking to go after African problems and opportunities,” improve financial access and spur job creation and the spread of technology.
Kalon Venture Partners is dedicated to investing in “high growth technology companies, with innovative business models, geared to existing and emerging institutions and their consumers.” CEO Clive Butkow refers to Africa as new frontier with “incredible financial inclusion opportunities.”
With the increase in digital financial services and and investments in African entrepreneurs, the percentage of Africans without access to financial services in Sub-Saharan Africa should continue to decrease, eventually improving financial stability throughout the region.
– Sara Olk