Financial inclusion is an important driver for enabling both commercial and social benefits. As millions of people enter the formal economy and benefit from mobile financial services, it will give rise to employment opportunities and bring us a step closer to achieving Sustainable Development Goals (SDGs).
SDG target 8.3 calls for development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage formalization and growth of micro, small and medium sized enterprises (SMEs) including access to financial services. SDG Target 9.3 also calls for an increase in the access of small-scale industrial and other enterprises to financial services—including affordable credit—and better integration into value chains and market.
Limited financial infrastructure is a major obstacle for entrepreneurs. In regions where traditional financial service points such as bank branches and automated teller machines (ATMs) are lacking, the challenge of finding cost-effective ways to make financial services available to citizens is a significant barrier to inclusion and to the development of online businesses. Information and Communication Technology (ICT), and particularly mobile money, is helping to overcome these obstacles on the path to financial inclusion.
The link between ICT and e-commerce innovation is clear: ICT offers a cost-effective way to overcome the existing lack of banking infrastructure. It can be rapidly scaled, offers significant efficiency gains, and entails low barriers to entry for individual users.
Fostering small businesses through e-commerce
Financial inclusion through e-commerce is a growing ICT application that can have a positive impact on business. Global e-commerce is evolving fast, bringing new opportunities for SMEs and rural enterprise. Prohibitive service costs, high interest rates and too much of the profit going to brokers all currently discourage small entrepreneurs from approaching banks for capital to start and grow their businesses.
ICT can address these barriers by helping to reduce service costs. Where the share of producers in both the local and global value chain remains low, ICT can increase access to market information and new markets. Higher product prices and a greater share of the value chain will make businesses more profitable and increase income per capita, helping to reduce poverty.
Online marketplaces have created platforms for sellers, customer service, payment processing, and shipping, delivery and return processing. SMEs that are able to harness this technology can benefit from the opportunity to enter international markets, export their products and services and gain competitive advantage from reduced costs of production and service delivery.
In addition to the high cost of telecommunications, micro enterprises and SMEs often lack the capacity to use ICT-led financial services due to poor communication infrastructure and lack of regulatory support. They are hindered by the prevalence of obsolete technologies and prohibitive cost of installing new technology and suffer from a lack of qualified staffئ and low digital literacy skills. Skills improvement and capacity-building are therefore pre-conditions for these businesses to access ICT-financial services.
Agents of change
More than half of consumers in Africa are using mobile money services through an agent, and some 20% use mobile money themselves on a mobile phone. Banks, retailers and mobile operators play a key role in the e-commerce value chain and create whole new revenue streams. Getting all relevant parties to connect –creating a new type of ecosystem that is open for everyone to join to make mobile money transactions as easy as sending an SMS.
The next generation of mobile commerce development will be driven by connecting banks, operators, money transfer organizations, and payment and internet service providers. This industry-leading work by Ericsson is creating a more flexible, transparent and open financial ecosystem that helps key stakeholders expedite the launch of mobile financial services to drive financial inclusion.
In developing countries where unemployment or under-employment of youth and women is a growing problem, expansion of micro and small business can create vital employment opportunities needed to eradicate poverty. Although still in the early stages, a robust mobile financial ecosystem will help ensure services become more relevant and useful to entrepreneurs and small businesses, and sustainable over the long term.
At Ericsson, we believe that managing your financials should be as easy as sending a text, so we created a solution that can conveniently bring banking to billions across the globe. The Ericsson Wallet Platform allows users to store, transfer and withdraw money very easily and with high security.
For exploring Financial Services enabled by the Ericsson Wallet Platform, you can view our on-demand webinar, explaining the benefits of Ericsson Wallet Platform, its high security level and its many functions.
Murat Sahinoglu, Head of Business Support Systems (BSS) at Ericsson Middle East and Africa
