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Africa Is Going Through Its Digital Revolution

Studies have underscored the importance of SMEs in contributing to growth and job creation, putting SME sector development among the key topics on the global development agenda. However, the ability of SMEs to spur growth and foster job creation is limited by their ability to find adequate finance. Recent data from the IFC indicates that the size of the financing shortfall is in excess of $2 trillion. This financing constraint appears to be more pronounced for women-owned enterprises.

Financial Inclusion Is Not End In Itself, But An Means To An End

Saving and borrowing are universal tendencies. People save for future expenses – a large purchase, investments in an education or a business, their needs in old age or in possible emergencies. Or, facing more immediate expenses, they may choose to borrow instead. Financial inclusion is not an end in itself but a means to an end – when people have a safe place to save money as well as access to credit when needed, they are better able to manage risks.

Africa Is Going Through Its Digital Revolution

More than half a billion people across Africa now subscribe to mobile services, with the number expected to grow above 700 million by 2020. Lower smartphone prices are driving a digital revolution. As the African population becomes increasingly connected, the power of mobile is being used to create a new generation of rich and convenient digital services related to health, agriculture, education, energy and water management.

Mobile Money Addresses Many Of African Challenges

Millions of Africans lack access to financial services that could help them safely transfer and store their money, protect themselves from economic shocks, and take advantage of income-generating opportunities. Those who do have access often face large transaction costs in terms of the time required to travel to a bank location, and traditional means of transferring money to family members located elsewhere are insecure, unreliable, and often expensive.

Mobile money addresses many of these challenges, thereby improving well being and reducing economic inequality. It has the ability to reach a very large share of the population in Africa, becoming therefore the ideal partner to traditional banks

Moving Cash Payments Into Accounts

One promising opportunity to expand financial inclusion among the unbanked is to digitize payments by moving cash payments into accounts. Shifting to digital payments has many potential benefits, for both senders and receivers. It can enhance the security of payments and thus lower the incidence of associated crime. It can also provide an important first entry point into the formal financial system, which can lead to significant increases in saving and the substitution of formal for informal saving. In short, the benefits of digital payments go well beyond convenience, since it can transform the financial lives of those who use them.