Technological Solutions Uplifting the African Financial Arena
The growth of mobile money services by actors such as M-Pesa, Bharti Airtel, Orange, MTN, and other GSM service providers across Sub-Saharan Africa has enabled economic agents with access to receipts, payment, and credit that were previously unavailable through mainstream banks.
FREMONT, CA: Africa is home to 1.2 billion people and the African Continental Free Trade Area, which has been regarded as the world's largest trade area. Africa is charting a new course for development, and access to financial services will be critical to its economic success. The necessity for improved poverty reduction, if not alleviation, systems is emphasized further when one realizes that 416 million Africans live in dire poverty, and access to financial services is key to the solution.
Globally, financial services innovation has increased access to and enhanced financial inclusion over time. These have traditionally taken the shape of raised bank and other financial institution numbers, decongestion of banking services, and the development of micro-savings, microfinance, microcredit, and microinsurance, among other services. Despite this expansion, Africa lags in terms of financial inclusion, which has ramifications for financial intermediation, value creation, and, eventually, economic growth. According to the 2017 global financial access statistics, the number of adults in Africa with bank accounts is significantly lower than the global median of 50 percent.
Soon, the brick-and-mortar banking and financial services offering model will not change Africa's dynamics; but, emerging technologies will. Fintech should be contextualized within existing socioeconomic constructs to uncover elements that underpin their uptake and utilization, which will, in turn, bring to the forefront the most effective fintech solutions capable of sustaining the continent's growth and development agenda.
New Technological Solutions
This is where alternative technologies, like telecommunication service providers' usage of Unstructured Supplementary Service Data (USSD), and distributed ledger systems, as seen in various blockchain applications, come into effect. The growth of mobile money services by actors such as M-Pesa, Bharti Airtel, MTN, Orange, and other GSM service providers across Sub-Saharan Africa has enabled economic agents with access to receipts, payment, and credit that were previously unavailable through mainstream banks.
This unique service provider allows mobile phone owners to receive and send payments utilizing USSD-based mobile network operator systems at its most basic level. Interoperability of the service among network operators in Nigeria, Ghana, and Kenya, for example, has enhanced the speed and volume of cross-border transactions much beyond what major financial institutions can supply. The capacity to operate without access to the internet is rapidly growing the use of mobile money services, allowing the provision of derivative services like loans, credit, and insurance.