Access to financial ser vices and the use of financial technology ( Fintech) was topic of discussion at the just concluded 2020 World Economic Forum in Davos as industry players expressed optimism in financial inclusion as a key to meeting the UN’S Sustainable Development Goals by 2030.
Highlighting the recent formation of the Digital Financing Task Force by the UN Secretary-general, as well as the need to ensure the financing of the SDGS – which has a $2.5 trillion annual financing gap – industry players said it was time to actively question how to catalyse the Fintech ecosystem globally, build coalitions, and strategic partnerships that can come up with practical solutions to ensure financial inclusion prosperity is widely shared on a local and international level.
According to Misha Rao, Haus of Fintech founder digital finance initiatives could add $ 3.7 trillion to the GDP of emerging economies and organisations including the United Nations, the World Bank, and the World Economic Forum have invested in Fintech, believing that it has the potential to create a better world.
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“We believe that core areas like the need for resilient financial market infrastructures, enhanced distribution of foreign aid, eradicating poverty, economic and individual rights, and remittances are areas where Fintech can contribute most meaningfully,” Rao said.
Delivering financial services through the use of technology has led to increase in financial inclusion for emerging economies. Fintech companies are innovating through new value propositions, including flexible products and better ways to address the financial challenges faced by low-income customers.
The decision by countries like Kenya and Ghana to adopt a Telco led financial inclusion model catalyzed inclusive access for their excluded population.
Kenya improved to 81.6 percent financial inclusion rate in 2017 from 74.7 percent in 2014, Ivory Coast also climbed to 41.3 percent from 34.3 percent and Ghana reported 58 percent in 2017, 17 percentage points increase from its 2014 figures.
The case is different in Nigeria which has an excluded population of 36.6 million, thanks to its bankled financial inclusion model.
Even though telecom operators and other Fintech companies indicated interests to operate in the market, the CBN policy would not allow them.
The regulator eventually shifted in October 2018 because of the increasing rate of financially excluded people in Nigeria and the lack of progress in getting banks to provide financial services to people living in areas that lack access.
Telecommunication operators’ push to offer mobile money services in Nigeria received the official nod of the regulator, the Central Bank with the issuance of guidelines for players to apply for the licence.
The CBN had in a circular on July 2018, lamented that Nigeria was not meeting any of the financial inclusion targets agreed and contained in the 2012 Financial Inclusion Strategy.
Not only was the country not meeting its targets, but it was also declining in growth. For instance, while Nigeria achieved 60.3 percent in 2012, it declined to 58.4 percent in 2016 against a target of 69.5 percent translating to financial exclusion of about 41.6 percent.
In a bid to grow the number of financially included people, the CBN released an exposure draft 14 months ago in which it proposed the PSB aimed at deepening financial inclusion in Nigeria.
The latest figures by EFIna put Nigeria’s financial inclusion rate at 63.2 percent, meaning as much as 36.8 percent of adults still lack access.
The digital identity verification, alternative lending platforms, data sharing, and new payment systems delivered by Fintech companies according to Rao has resulted in a set of new financial services.
Charlotte Crosswell, CEO of Innovate Finance and speaker at Davos 2020, said that the Fintech industry is only starting to realise the potential of ‘doing good’ and “we need to continue to help those who believe financial wellness and stability is an unattainable goal.”
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