Africa is home to 1.2 billion people and is what is considered the largest trade zone in the world – the continental free trade zone of the African continent. Africa is charting a new path for development, and access to financial services will play an important role in economic growth. The need for improved systems for poverty reduction, if not poverty reduction, is growing when an estimated 416 million Africans live in extreme poverty and that access to financial services is at the heart of the solution.

In a review of the impact of economic integration on economic growth, the World Bank believes that “these services should be delivered to the consumer in a responsible and safe manner and to the service provider in a sustainable manner.” When properly interpreted, economic integration can reduce poverty and inequality by helping disadvantaged groups seize opportunities that would not otherwise exist.

Related Topics: Financial Inclusion, Cryptocurrencies, and Emerging Countries

Financial services innovations have expanded and improved access to economic integration around the world over time. Traditionally, they were expressed in the form of diversification of banks and other financial institutions, assistance in the provision of banking services, the development of microfinance, microcredit, microsaving and microinsurance, and other services. Despite this expansion, regions such as Africa are lagging behind in access to financial services, with implications for financial intermediation, value creation and, ultimately, economic growth. Data from the Global Financial Access database for 2017 shows that the number of adults in Africa with bank accounts is well below the 50% average.

The actual model for the supply of banking and financial services will not change Africa’s dynamics for the foreseeable future; However, there will be new technologies. Fintech needs to be placed in the context of existing socio-economic structures to identify the drivers of adoption and use, which in turn will be at the forefront of the most effective fintech solutions that can support the continent’s growth and development.

On the subject: Unlocking the potential of blockchain and infrastructure in Africa

Chinese model for Africa
Over the past 20 years, China has shown an example of how Africa can create its fintech solutions. Realizing the importance of credit and payment infrastructure and creating new types of financial service providers such as peer-to-peer lending, microlending, online lending and consumer finance, Chinese policymakers have recognized the need to expand access to financial services in rural areas. Consumers.

It is therefore not surprising that new digital financial products have emerged in large part from the influence of the web: the use of social media and e-commerce platforms. Web-based business models have integrated financial services into existing platforms, ultimately helping millions of Chinese people escape the poverty trap.

The Chinese approach has been successful because of its homogeneity – central management and policy planning, which also serves as an obstacle to further expanding last-mile consumer coverage. There is room for exploring big data and mutual support opportunities to ensure that the ultimate goal of universal economic access is achieved.

Identity management systems and Internet penetration are important components of the game in the Chinese experience. Africa lags behind in this regard with Internet penetration rates below the global average (currently 39%) and has fragmented policy planning and governance due to heterogeneous political systems.

The cost of mobile data plans is the highest on the continent compared to other regions in the world, with some rates reaching almost 9% of people’s income. In Zimbabwe, for example, at the end of 2017, the cost of a gigabyte of data was 289 times that of India.

The high rates of illiteracy and the difficulty associated with the use of smartphones also affect the use and ultimately the use of Internet applications. The World Bank estimates that access to electricity is about 43% on the continent, and this has serious implications for modern economic activity, limiting the adoption of technology and the use of the Internet.

New technical solutions
This is where alternative technologies emerge, such as the use of unstructured value-added data or USSD by telecommunications service providers and distributed ledger systems, as demonstrated by various blockchain technology applications.

Source: CoinTelegraph