Three Ways Financial Technology is Transforming Africa
In recent years, Africa has been described as the startup hub. With an average of one thousand start ups registered in each African country annually, this description does not hit too far from the mark. Despite the exponential growth in startups, a large number of Africans still remain unbanked. According to Fintechtimes.com about 57% of the population in Africa, around 95 million people, do not own a traditional bank account. Most citizens are not fully participating in formal financial systems; they would instead transact in cash and access credit from informal lenders. This heavy reliance on cash has had a cascading effect on the credit worthiness of individuals and created room for fraud.
The emergence of Financial Technology in Africa is helping to dramatically reduce this reliance on cash. With payment channels like mobile money, USSD and mobile app options, financial solutions are now easily accessible. Consequently, there has been in increase in economic activities as more people opt to use fintech services. To fully grasp how fintech is helping transform economies in Africa, we have curated the top three benefits of fintech in Africa below.
1. Fintech is improving Gross Domestic Product (GDP)
One critical importance of fintech solutions is the provision of credit facilities for businesses and individuals. With dynamic financial products and services, people have increased their aggregate expenditure, which boosts the Gross Domestic Product levels. With the integration of fintech services into other sectors of the economy, like healthcare, transportation, e-commerce, energy, and agriculture, the need for fintech integration and services have skyrocketed. This doubled edged benefit is equally empowering African Governments with an increase in tax revenues from the constant volume of financial transactions.
2. Fintech has reduced Payment Cost
For some businesses, having access to affordable financial products and services is what they need to thrive. With fintech, this is possible. Digital payment tools have a broader reach, faster transaction times and do not cost an arm and a leg. With this possibility, start ups and SME’s are expanding. This, in turn, is having a domino effect on the economy. For instance, about 548 million people are registered mobile money users (inclusive of merchant accounts for businesses) in Africa. This implies that people are getting access to money and digital payment options at a reduced cost, unlike traditional banks. Digitisation of financial services, according to the UN, has lifted 30 million people out of poverty.
3. Reduced Inequality in compliance with SDG 10
One of the under reported benefits of digital financial solutions is the address of gender inequality. With fintech services, women have more control over their finances with little or no interference from men. Also, the under representation of women in tech has greatly improved, with more African women on the continent being employed in the fintech space.
The positive waterfall effect of fintech on the continent cannot be overlooked. Fintech is transforming African governments, businesses and women everyday.