Unleashing efficiency: Why fintech is the secret weapon for African supply chains

INTRODUCTION

In my view, the evolution of financial technology, or fintech, has had a transformative impact on numerous industries across the globe, with the supply chain sector standing out as a key beneficiary. This is especially evident in Africa, where countries like Nigeria are witnessing remarkable changes. Fintech innovations are revolutionising supply chain operations, enhancing efficiency, promoting transparency, and increasing accessibility. It’s fascinating to delve into how these technological advancements are reshaping supply chains in Africa, using Nigeria as a compelling example of this dynamic shift.

The Evolution of Fintech in Nigeria:

Forget the days of clunky bank branches and limited financial options. Nigeria’s fintech scene is exploding, and it’s not just a fad. The perfect storm is brewing: a tech-savvy young population glued to their smartphones, a government creating a welcome mat for innovation, and a desperate need for financial inclusion. The World Bank can’t be wrong—digital finance is the hero Nigeria needs, giving millions a shot at financial services they could only dream of before.

The Central Bank’s 2021 magic touch with mobile payments was a game-changer. This supportive environment is the rocket fuel propelling a wave of groundbreaking fintech solutions in mobile payments, lending, and even blockchain technology. Nigeria is on the cusp of a financial revolution, and it’s young people with their smartphones who hold the key.

Read also: Fintechs can bridge Nigeria’s financial inclusion gap with mobile money — World Bank

Understanding Fintech and the Supply Chain

Fintech: Fintech encompasses a wide range of technological innovations aimed at improving and automating the delivery and use of financial services. These include mobile payments, blockchain technology, digital lending, and insurance technology (insurtech).

Supply Chain: The supply chain refers to the entire process of producing and delivering a product or service, from the sourcing of raw materials to the final delivery to the consumer. Key components include procurement, production, distribution, and logistics.

Impact of Fintech on Supply Chains

Fintech has profoundly impacted supply chains by enhancing payment solutions, improving access to financing, increasing transparency and traceability, and boosting operational efficiency.

In regions with limited banking infrastructure, mobile payment solutions like M-Pesa in Kenya and Paga in Nigeria facilitate timely transactions, reducing theft risks and promoting financial inclusion.

Cryptocurrencies and blockchain provide secure, transparent payment methods, reducing fraud and ensuring transaction authenticity. Fintech platforms like Paystack and Flutterwave offer alternative lending options, enabling SMEs to access crucial working capital, while services like Lidya offer supply chain financing to maintain cash flow.

Blockchain technology enhances transparency and traceability, allowing real-time tracking of goods and reducing delays and losses, while smart contracts automate and enforce agreements, minimising disputes.

Furthermore, fintech solutions optimise inventory management through real-time data analytics, leading to better demand forecasting, and facilitate efficient logistics management, such as quick delivery of debit cards by Moneypoint. By minimising the need for intermediaries, fintech innovations reduce transaction costs and streamline operations, ultimately leading to more efficient supply chain management.

Case Study: Nigeria

Mobile Payments

Nigeria’s rapid adoption of mobile payments has revolutionised business transactions. Services like Moniepoint and Quickteller have enabled farmers in remote areas to receive payments swiftly and securely, eliminating the need for travel to urban centres. This transformation has not only facilitated quicker transactions but also reduced the risks associated with handling cash, thereby promoting financial inclusion and economic stability in rural regions.

Digital Lending

Digital lending platforms such as Renmoney and Carbon offer quick loan access, which is crucial for SMEs within the supply chain. This financial support allows businesses to manage cash flow, procure inventory, and expand without significant delays. According to McKinsey & Company (2023), digital lending in Nigeria has provided SMEs with essential capital, enabling smoother operations and growth. These fintech-driven lending platforms leverage data analytics to evaluate creditworthiness, ensuring faster loan disbursements than traditional banks, thereby fostering a more dynamic and resilient business environment.

Blockchain Implementation

Nigeria is exploring blockchain technology to enhance supply chain transparency, particularly in the pharmaceutical sector. As noted by NAFDAC (2022), blockchain can significantly improve the traceability and authenticity of pharmaceutical products, reducing counterfeiting risks and ensuring supply chain integrity. Beyond consumer banking and debit cards, fintech innovations in Nigeria encompass a range of services that enhance supply chain efficiency, demonstrating the transformative power of digital financial solutions in improving transparency and operational effectiveness across various industries.

Challenges:

Regulatory hurdles: Regulatory frameworks in Nigeria are still adapting to the rapid pace of fintech innovation. Ensuring compliance and creating conducive policies remain significant challenges.

Infrastructure limitations: Despite advancements, infrastructure deficits such as unreliable power supply and limited internet penetration hinder the full potential of fintech solutions.

Opportunities:

Growing digital adoption: With increasing smartphone use and internet penetration, fintech has immense potential to further transform the supply chain industry in Nigeria.

Government support: Initiatives like the Central Bank of Nigeria’s regulatory sandbox for fintech innovations indicate growing governmental support for the industry.

The implications of fintech innovations for Nigeria’s supply chain are nothing short of transformative. By enhancing financial inclusion, reducing transaction costs, and improving the speed and transparency of financial operations, fintech is revolutionising supply chain efficiency and reliability. The ability for businesses, especially those in remote areas, to conduct transactions swiftly and securely is a game-changer, ensuring smooth operations and greater economic stability.

Looking ahead, the future prospects are incredibly promising. As fintech continues to evolve, the integration of advanced technologies such as artificial intelligence (AI) and machine learning (ML) into financial services is inevitable. These technologies will provide deeper insights into supply chain operations, enabling predictive analytics and more responsive management. This evolution promises not only to enhance efficiency further but also to empower businesses with the tools needed to anticipate and adapt to market demands swiftly.

In essence, the ongoing advancements in fintech hold the potential to drive unprecedented improvements in Nigeria’s supply chain landscape. By leveraging AI and ML, businesses can expect a future where supply chain management is more proactive, data-driven, and resilient, ultimately fostering a more robust and competitive economic environment.

Obianuju Philip is a seasoned digital technology executive with ten years of experience in the e-commerce technology space, specialising in customer/user experience and supply chain management.