There is potential for micro, small, and medium-sized enterprises (MSMEs) to fill the gap between the growing workforce in Africa and opportunities for work.
Last year we shared the impact story so far on person-to-person payments and transfers (P2P). The latest update of the EGM has folded in three additional P2P studies.
New credit studies contribute to previous insights relating to the use of SMS for improved borrowing behavior and add new insights on longer-term outcomes where very few previously existed.
Gaps in our knowledge remain in product design and delivery, markets, and clients segments; by filling these gaps and improving how digital savings products are tested, the digital savings community will be able to develop better products and deliver them more effectively.
As impact evidence grows, so should our understanding of the impact of various digital finance products on low income users. We’ve launched the third addition of our EGM, revealing new insights with almost double the studies since 2017.
The world’s working-age population is growing – and nowhere more rapidly than in sub-Saharan Africa. To keep pace with this growing population, 600 million new jobs must be created globally over the next 15 years. That’s a tall order, but micro, small and medium-sized enterprises (MSMEs) are making this goal achievable. MSMEs are the backbone of most economies worldwide, and they play a key role in developing countries, according to the United Nations.
One of the most significant potential benefits digital platforms offer for financial inclusion is in redefining what it means to be an informal merchant or worker. Most Africans participate in the informal economy, sometimes beyond the purview of the state and tax authorities and often without secure contracts, benefits, or social protections.
Faced with a customer base that lacks bank accounts or who do not trust online payments, many e-commerce platforms have developed tools and processes that allow customers to pay in cash for most transactions. In this note, I argue that while this strategy is fueling growth in transaction volumes and active customers, issues with fraud, failed deliveries and late/uncollected receivables stemming from the use of cash are opening platforms up to substantial losses. Additionally, e-commerce platforms have not been as proactive as they could be in launching strategies to onboard and pay financially excluded merchants and workers. This misstep is probably limiting the number of merchants that would be selling on e-commerce platforms if mobile money or easier conversions to cash were implemented.
E-commerce and online labor platforms could be good business partners for African financial services providers. This is especially true for banks whose scale makes them prime partners for digital platforms. Similarly, banks and other financial institutions stand to benefit from the large numbers of consumers and producers on platforms’ growing networks.
There are several important challenges that digital platform businesses are facing when trying to integrate financial services into their business models, but we saw three themes emerge from our recent research highlighting areas where Africa platforms are struggling.