Emerging technologies can change the African financial landscape

The ease and convenience of services backed with the emerging techs can dramatically improve the financial landscape in Africa.
Africa is the home to 1.2 billion people and what has been described as the world’s largest trade area — the African Continental Free Trade Area. Africa is forging a new path to driving development, and access to financial services will play a significant role in its economic growth. The need to provide improved systems for poverty reduction, if not alleviation, is further accentuated when one considers that 416 million Africans live in extreme poverty, and access to financial services is right at the heart of the solution.In a review of the impact of financial inclusion on economic growth, the World Bank argues that “such services must be provided responsibly and safely to the consumer, and sustainably to the provider.” Construed appropriately, financial inclusion has the potential to reduce poverty and inequality by helping disadvantaged groups to benefit from opportunities that otherwise would not have been available.Related: Financial inclusion, cryptocurrency and the developing worldInnovation in financial services through time has expanded access to and improved financial inclusion globally. Traditionally, these have been in the form of the proliferation of banks and other financial institutions, decongesting banking services, and the development of microfinance, microcredit, microsavings, microinsurance, among other such services. Despite this expansion, regions such as Africa lag behind in financial inclusion, with implications for financial intermediation, value creation and, ultimately, economic growth. Data from the 2017 global financial access database shows that the number of adults in Africa with bank accounts is way below the median mark of 50%.The brick-and-mortar model of banking and financial services provision will not change the dynamics for Africa within the foreseeable future; however, emerging technologies will. Fintech must be contextualized within the existing socio-economic constructs to determine factors that underlie their adoption and utilization, which, in turn, will bring to the forefront the most effective fintech solutions capable of supporting the growth and development agenda of the continent.Related: Unpacking the potential of blockchain and infrastructure in AfricaThe Chinese model for AfricaIn the last 20 years, China has been providing a template around which Africa could model its fintech solutions. By understanding the importance of credit and payment infrastructure and the creation of new types of financial service providers such as peer-to-peer lending, online microcredit and finance, and consumer finance, Chinese policymakers have recognized the need to expand financial services access to rural consumers. It is, therefore, unsurprising that new digital financial products have emerged largely due to the network effect: the use of online social media and e-commerce platforms. These network-based business models have integrated financial services into existing platforms that have ultimately led to millions of Chinese exiting the poverty trap. The Chinese approach has been successful due to its homogeneity — central management and policy planning, which, incidentally, also act as a headwind for further expansion to last-mile service consumers. There is room to explore big data and cross-subsidization opportunities to

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