People are better able to create and expand enterprises, invest in their children's education, and handle financial shocks when they have access to financial systems.
Sub-Saharan Africa has a population where the majority of people live in poverty and are likely undeveloped. The gender and economic divide in financial inclusion persist in Sub-Saharan Africa, as it does in other continents. According to the United Nations' latest population estimates released on June 21, 2017, Africa remains the world's second-largest continent, with a population of 1,256,268,025 (16 percent of the global population) and 40.2 percent of the population living in urban areas as of the end of January 2018.
In comparison to the other continents, the continent has the highest fertility rate of 4.7 percent (Oceania 2.4 percent, Asia 2.2 percent, Latin America and the Caribbean 2.1 percent, Northern America 1.9 percent, and Europe 1.6 percent), with a yearly population rate change (increase) of 2.55 percent, the highest among all continents. The majority of its inhabitants (59.8%) have resided downstream (in rural areas and villages), sometimes outside of the mainstream economy. In such circumstances, policy targeting may be difficult, and identifying people who lack access to financial and economic inclusion entails a significant financial cost in and of itself, though the benefit outweighs the cost in terms of numbers, and it necessitates commitment from leaders and managers of the respective economies. Coupled with a widespread phenomenon on the continent of imperfect, untrustworthy, and in some cases non-existent data, this could make decision-making imprecise and data unreliable, affecting plans, policies, and the ability of countries to address stated challenges or improve their economic and social fabric.
Financial exclusion is caused by a variety of hurdles and causes, including access, social and cultural issues, poverty, education, and a long list of others. Financial exclusion is undoubtedly one of the reasons why some economic policies fail to properly target citizens, resulting in continuing poverty and inequality. Lack of access to basic necessities such as a bank account or mobile money could result in huge changes being missed. Countries around the world have recognized the importance of creating inclusive societies and are supporting efforts to increase financial inclusion. At the country level, Sub-Saharan Africa has achieved some progress in terms of financial and economic inclusion over the years.
Ghana is committed to promoting and emphasizing financial inclusion as part of its continuing efforts. Since 2012, the country has made precise and clear promises to improve financial inclusion through the "Maya Declaration," and has set a lofty goal of achieving universal financial inclusion for its adult population by 2020. Ghana has 58 percent of its adult population access to financial services, and it is also drafting its National Financial Inclusion Strategy, which will serve as a guiding document and reference for all-inclusive efforts, stakeholder roles, and responsibilities.
According to academics, Kenya has achieved global acclaim for topping the globe in mobile money account penetration, with twelve other Sub-Saharan African countries following closely behind. The rate at which African countries are adopting innovative technology in order to achieve digital financial inclusion is remarkable. The country has made significant progress toward achieving its financial inclusion goals, particularly under the Maya Declaration.
There has been a paradigm change in terms of the role of information and communication technology as a component in economic growth. ICT has the ability to deliver low-cost services, improve innovation, and provide infrastructure for quick and easy-to-use services. It can also provide a way to access a variety of supplementary financial services.
At the macro level, digital innovation has an impact on economic development and the effectiveness of economic policies.
The advantages of ICT-enabled financial services include the potential for job creation (mobile money vendors), increased government revenue, increased company productivity (both private and public), cost control and efficiencies, and the potential to contribute to rural development and governance: Governance and revenue mobilization activities, particularly at the local government level, can be aided by ICT, which aids in overall corporate governance reform. Importantly, Innovation Technology may aid in the deepening of financial inclusion by facilitating access, usage, risk reduction, and improved service quality, as defined by the Financial Inclusion (FI) formula: FI = (Unlocking Access + Unlocking Usage + Quality) - Risk.
Access to financial services can lead to economic activity, and sophisticated financial service utilization can open up even more economic and social opportunities for those who are included. In Mexico, a study by Bruhn and Love found that Banco Azteca's rapid branch openings in over a thousand Grupo Elektra retail stores had a significant impact on the economy, resulting in a 7% increase in all income levels (in the local community) when compared to other communities where branches were not opened. In addition, the local community's savings component fell by 6.6 percent, owing to the fact that households were able to rely less on savings as a cushion against income fluctuations after formal credit became available.
It is important to highlight that while saving is encouraged, the 6.6 percent fall in savings means that more cash can be diverted into investments in economically viable entities or services. They will need to save for further investments later as the cycle continues and they employ sophisticated financial services along the financial services value chain. When accessing and using modern technology, a similar or even stronger favorable link is discovered.
Humanitarian Services Using Digital Financial Inclusion Strategies
Financial exclusion is particularly acute among crisis-affected countries, despite the use and use of financial services in crisis conditions. 75 percent of people in nations experiencing humanitarian crises are unable to respond to shocks and emergencies, establish productive assets, or invest in health, education, and business because they are not part of the formal financial system.
Researchers continue to show that electronic payments are becoming more widely accepted, particularly through the usage of mobile phones. The evidence for digital financial inclusion is emerging. Between 2006 and 2016, the GSMA reported that there were 93 countries with 271 mobile money operating service providers who had registered over 400 million accounts globally. They provide evidence of increased acceptability of digital financial inclusion through the use of a phone in several nations that have received humanitarian aid.
In Rwanda, a large number of refugees utilized their phones for mobile money services, while some did so for profit. According to the survey, refugee communities in Uganda are known for using mobile money services. As a result, MNO Orange Uganda, a telecommunications company, has built a communication tower to boost access and usage of mobile money services in refugee communities. The government of Pakistan, which has one of the world's largest refugee populations—the third-largest—is using mobile money to send cash to refugees. The data is overwhelming, and this necessitates a rethinking and reconsideration of digital inclusive financial services beyond the existing levels. Those on humanitarian assistance in Lebanon (the country with the highest refugee population) utilize ATMs provided by aid organizations to access their financial transfers.
Sarah Bailey, on the other hand, noted that humanitarian locations receiving cash transfers via mobile money may enhance the use of specific services, but this does not always imply broad or long-term adoption. People may prefer to continue utilizing more familiar, accessible, and profitable informal finance systems. Her research found that even when combined with instruction, providing humanitarian e-transfers was insufficient to enable the great majority of participants to execute mobile money transactions autonomously.
According to our expertise, the findings are certainly acceptable in the short term. However, the benefits could be varied over time and with financial capability activities rather than just training. Financial competence activities are concerned with people's total financial health and well-being, not only training and education. And it should be done in a hierarchy, little by bit, rather than in a single leap. The United Nations appears to have mirrored this sentiment. We must redirect our focus to the people at the heart of these crises, moving beyond short-term, supply-driven response efforts toward demand-driven outcomes that diminish need and vulnerability, according to Ban Ki-moon, as mentioned in. Financial inclusion methods may not result in widespread adoption in a matter of days, but there is evidence that they can in the long run.
Just a few years ago, several of the thirteen countries in the world with the highest mobile money penetration were on humanitarian aid. Sustained access and the application of innovative technology for inclusion would have a greater impact on them now.
A case study on the employment of digital methods for humanitarian transfer will reveal that there may be a lack of interest or even rejection in the short term. Coupled with the legal and other constraints described, persons in a humanitarian crisis may be more concerned with surviving in the immediate term than with connecting to the economic system as a whole or how their help is provided (this is the business of policymakers on humanitarian service). The psychology of that time of need is centered on - What is needed is the urgency of support - money - actual cash in most situations to enable them to obtain the most liquid instrument to obtain the necessities of security and sustenance. Humanitarian communities, like all other communities in financial services, have requirements.
Indeed, data reveals that the use of digital transfers in humanitarian transfers has resulted in the widespread use of services only in a few cases around the world. In humanitarian assistance, digital transfers must be done in a systematic and time-bound manner. In this sense, digital strategies must be humanitarian, and they must include financial capabilities activities capable of two-way communication with practices on utilization and the long-term advantages they provide—and they must be organized in a hierarchy. Simple financial requirements should be completed before more complex requirements. Any departure will, unsurprisingly, lead to a lack of interest in the services.
"Financial technology still cuts swaths of people out, and this means missed potential for progress," Howard Thomas said. In some circumstances, he says, community structures may be too rigid or inflexible to allow new technology to spread. "Entrepreneurs who are successful aren't often from well-known institutions. Identifying specific leaders, networks, or avenues through which to promote new technologies can be difficult at times."
Although there have been some lessons learned about how to manage humanitarian remittances, the parameters are that financial inclusion is a continuous and sustained effort to provide access to and use of financial services in a sustainable and responsible manner that meets needs while minimizing risk - it is not a one-time project of implementing policies at breakneck speed, but rather a focus on meeting basic needs before moving on to more sophisticated needs. Within a humanitarian context, a complex array of issues, such as location and urgent needs, may act as roadblocks to using digital financial services; however, if these roadblocks are addressed over time and in conjunction with financial capability activities (the act of complete financial well-being), favorable results can be achieved.
The integration of behavioral change financial competence education, training, and practice into humanitarian communication on digital transfers might aid in long-term acceptability. Sub-Saharan African countries have made significant progress in terms of innovative technology adoption and the expansion of ICT services and infrastructure across the continent. According to its research, African countries generated earnings from telecommunication-related services totaling 5% of GDP, compared to 2.9 percent of GDP in European countries.
Sub-Africans Countries must reorient themselves and invest more in the "digital economy" in order to open up and benefit from full economic inclusion. Our focus here is on mobile technology and innovation, which is a vital pathway for Africa to achieve financial inclusion in the short to medium term.
Kenya is breaking new ground and setting the standard for digital innovation in mobile banking services around the world. Researchers have discovered that countries in Sub-Saharan Africa are at the forefront of technological innovation in the use of mobile banking services. Kenya and other Sub-Saharan African countries are making the most progress in terms of mobile money account penetration, and there are several chances to be had. Botswana, Cote d'Ivoire, Ghana, Mali, Kenya, Somalia, Rwanda, Namibia, Tanzania, South Africa, Uganda, Zambia, and Zimbabwe are among the thirteen African countries with a mobile account penetration rate of above 10%. (ranging from 10 percent to -58 percent for the 13 countries).
Kenya leads the way with 58 percent mobile money account penetration, with Somalia, Tanzania, and Uganda "close behind" with 35 percent each. Namibia has the lowest mobile money penetration of the 13 countries, at around 10%. (still higher than all others in the world except the other 12 African countries). More adults in East Africa (20% and 10% of adults have mobile money accounts and mobile money accounts solely, respectively) have mobile money accounts than in any other region.
The most significant and unique set of stakeholders that should be encouraged to take the lead in financial inclusion initiatives and implementations are firms that provide financial services, whether it is services or infrastructure. Financial services organizations are in a unique position to create access to and use of digital financial services by leveraging their existing infrastructure and leverage.
They are able to do so more successfully and at a lower cost than government agencies since they can do it through existing departments such as marketing and customer service. Financial services companies are driving digital finance innovation all around the world. GCAP, for example, has been investing in financial inclusion solutions. Financial Technology (Fintech) firms submitted (56 percent), Financial Services Providers (18 percent), Non-Governmental Organizations (NGOs) (13 percent), and Technology Services Providers (13 percent) in response to its call for proposals on innovative digital technology with huge potential to advance the financial inclusion drive in Sub-Saharan Africa (9 percent ).
Growing evidence from other similar calls suggests that there is a trend, that the journey of using innovative technology and financial inclusion in Sub-Saharan Africa is not only picking up but also showing a rather promising future outlook; the opportunities for countries in the region in advancing financial inclusion are enormous.
Now is the time for countries to position themselves at the policy level, armed with legislation and government commitment to support and partner with the private sector to push financial inclusion operations. However, improving financial and economic performance for greater benefit is a continuous process that takes more than a few days. Without collaborations between public and private roles in decision-making and assistance, it will take us much too long. As a result, collaboration is critical for financial inclusion initiatives and actions.
Governments and the public sector must work together to create the necessary enabling framework and rules for the industry. In this industry, regulations and an atmosphere that encourages innovation and growth while protecting customer rights are critical. Government policies must strike a balance in providing support and assisting in the creation of an environment for financial inclusion operations to have the desired impact. By doing so, any government strategy on financial inclusion that does not take into account the views of other major stakeholders can be implemented at long last, but not without difficulty and, in some cases, unjustified delay.
This can be attributable to a number of factors, the most notable of which is that regulations may be finalized, but if financial services providers are not ready or able to apply them, problems with "distressed" policies emerge. The effectiveness of financial inclusion initiatives is largely dependent on public-private sector partnerships for improvement.
Opportunities for African Economies in Sub-Saharan Africa
Opportunities exist for groups of people who require access to and use of financial services but are unable to do so due to the hurdles they face. Governments and business stakeholders in Sub-Saharan Africa can work together to address legislative limitations and tap into technological innovation to create solutions that will expand access to and use of financial services.
The "Savings Groups," a significant segment of organized groups that are typically outside of the formal financial economy, have common values and beliefs that are often deeply rooted in cultural and social entrenchment, which must be considered when targeting financial inclusion products and designs.
Typically found in Asia, Sub-Saharan Africa, and Latin America, these communities band together for social and economic gain. They have a variety of specialized goals, but the most popular ones are group savings, group insurance, good trading, and various types of group support networks. If the top is successfully accepted, only a consultation approach, occasionally customized or tailor-made services (most appropriate when available), and winning the true interest of the groups can be used to build the best product and services for "savings groups."
Over 14 million people in 75 countries in Sub-Saharan Africa, Asia, and Latin America are members of "Savings Groups," a promising platform for financial inclusion in underserved areas. Savings Groups provide a way for financial service providers to reach out to isolated communities; they are well-organized, experienced, and disciplined; they pool demand from a large number of low-income consumers, and they have identified requirements that financial service providers can meet. These groups are also very goal-oriented and purposeful, but they lack some financial services, including some basic necessities such as accounts and payments, as well as more advanced needs such as saving platforms. Tailoring solutions to fit the needs of these segments who do not have access to certain financial services but require them would increase financial inclusion.
Prioritizing digital payments, whether in the commercial or public sector, is one strategy to reduce corruption in expenditures. Digitizing payments allows for better tracking of payment data along the spending and transfer value chain. In the agriculture sector, this means that if the government pays 1 million dollars ($1.000.000.00) in "mobile money to its citizens for goods and services, farmers will most likely receive their payments intact and the same, subject to transaction costs. The vulnerable citizen would then get good value for money when interacting with the government, as well as the benefits that come with having an account and using it. When tangible cash is exchanged in payments, this is not the case.
Sub-Saharan Africans have a high level of adoption of digital financial inclusion through mobile money. Stakeholders in the public sector in the region can take advantage of the region's solid foundation and application of mobile money services to expand the usage of digital payments, but they must also provide the supporting infrastructure. Except in Africa, where mobile money accounts propelled the expansion in account ownership from 24 percent to 34 percent in 2011 and 2014, account ownership has mostly increased through financial institutions.
Mobile money account penetration is one area where Africa is making huge advances. When the Global Findex Database issued its initial statistics on similar metrics among countries on financial inclusion three years ago, account ownership and definitions had changed dramatically. It deemed mobile money accounts to be recognized accounts in their own right in 2014, but this was not the case in 2011. The polar opposite was widely assumed, and rightfully so. Digital disruptions in the banking, telecommunications, and economic sectors are having an effect right now.
For policymakers and private sector stakeholders, the fact that five of the thirteen countries in Sub-Saharan Africa (the only five in the world) - Somalia, Uganda, Côte d'Ivoire, Tanzania, and Zimbabwe - have an adult population with more mobile accounts than they do from a formal traditional financial institution is more important. This means that a regular person on the street in those five countries is more likely to have, utilize, trust, and save in a mobile money account or wallet than in a standard formal bank account. This opens up a world of possibilities and breakthroughs. Digital payments are more convenient, faster, and less expensive than traditional cash payments.
Tailoring solutions to fit the needs of these segments who do not have access to certain financial services but require them would increase financial inclusion. Prioritizing digital payments, whether in the commercial or public sector, is one strategy to reduce corruption in expenditures. Digitizing payments allows for better tracking of payment data along the spending and transfer value chain. In the agriculture sector, this means that if the government pays 1 million dollars ($1.000.000.00) in "mobile money to its citizens for goods and services, farmers will most likely receive their payments intact and the same, subject to transaction costs. The vulnerable citizen would then get good value for money when interacting with the government, as well as the benefits that come with having an account and using it. When tangible cash is exchanged in payments, this is not the case.
Sub-Saharan Africans have a high level of adoption of digital financial inclusion through mobile money. Stakeholders in the public sector in the region can take advantage of the region's solid foundation and application of mobile money services to expand the usage of digital payments, but they must also provide the supporting infrastructure. Except in Africa, where mobile money accounts propelled the expansion in account ownership from 24 percent to 34 percent in 2011 and 2014, account ownership has mostly increased through financial institutions.
Mobile money account penetration is one area where Africa is making huge advances. When the Global Findex Database issued its initial statistics on similar metrics among countries on financial inclusion three years ago, account ownership and definitions had changed dramatically. It deemed mobile money accounts to be recognized accounts in their own right in 2014, but this was not the case in 2011. The polar opposite was widely assumed, and rightfully so.
Digital disruptions in the banking, telecommunications, and economic sectors are having an effect right now. For policymakers and private sector stakeholders, the fact that five of the thirteen countries in Sub-Saharan Africa (the only five in the world) - Somalia, Uganda, Côte d'Ivoire, Tanzania, and Zimbabwe - have an adult population with more mobile accounts than they do from a formal traditional financial institution is more important. This means that a regular person on the street in those five countries is more likely to have, utilize, trust, and save in a mobile money account or wallet than in a standard formal bank account. This opens up a world of possibilities and breakthroughs. Digital payments are more convenient, quick, and cost-effective than cash payments.
Recommendations
1) Sub-Saharan African regional and sub-regional organizations should make financial inclusion a priority and ensure peer-to-peer commitments from their members depending on particular nation's socio-economic factors.
2) To guide their efforts, each government in Sub-Saharan Africa should develop a National Financial Inclusion Strategy in a highly consultative manner at the country level.
3) Governments in Sub-Saharan Africa should continue to fund continuing literature and research on financial and economic inclusion in order to produce credible statistics that will guide policymakers' developmental objectives and economic policies. As a result, as part of their National Financial Inclusion Strategy, governments should establish a Financial Inclusion Study Fund to fund ongoing research on financial inclusion challenges in their jurisdiction.
4) Sub-Saharan African countries should set aside a percentage of their annual GDP (at least 1%) for innovative technologies in order to assist the digital economy and stimulate sectors such as financial services and other industries.
5) Efforts should be made at the national and regional levels to reduce the cost of using electronic financial services; the best practice in China is the usage of Wechat and AliPay payment solutions. WeChat, in particular, has no fees associated with using its platform to pay for goods and services, hence encouraging the usage of mobile phones. Users can transfer money and make digital transactions for items as low as half a dollar. It is practically conceivable to pay for an item purchased for less than $1 with no additional fees other than the item's cost. These are only a few of the tangible advantages of Innovation Technology in the banking industry.
6) The African government established support investment funds and partner companies that can develop novel technology in the field.
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