Global development delegates from around the world gathered in Nairobi in late August 2016 for the Sixth Tokyo International Conference on African Development (TICAD VI). It was the first-ever summit to be held in Africa in the organization’s 20-year history. InterMedia attended to gain firsthand insight into the most pressing issues affecting Africa’s future development, particularly those around financial inclusion.
Financial inclusion across Africa, especially in COMESA[1] countries, is indeed one of those hot topics and one that is highly relevant for InterMedia’s Financial Inclusion Insights (FII) Program, currently in its fourth year (www.finclusion.org).
Recommendations for Advancing the Use of Financial Services
TICAD VI representatives presented four thematic areas that have to be addressed to bolster financial services. They are:
- Policy and Regulatory Framework
- Consumer Protection
- Innovations
- Capacity Building
The FII data also suggest the first two areas, policy and regulatory framework, and consumer protection, as related to transparency in financial services, are priorities and need immediate action.
And, there are various realities that become important to address within each of these thematic areas.
Lack of transparency impedes consumer protection and requires effective policy
The FII findings show that transparency is a barrier to opening an account, particularly in Uganda. Financial Inclusion Insights Uganda (2015)[2] found that one of the main reasons the unbanked do not have a bank account is due to perceived high fees, as well as lack of knowledge around the fees that they, as consumers, might incur. This is a key barrier to bringing up those at the bottom of the pyramid in Uganda and other African countries. The issue of transparency will continue to be a key factor in future consumer protection policy discussions as stakeholders develop regulatory environments conducive to advancing financial inclusion in Africa.
The last two areas, innovations and capacity building, speak more to service delivery and active use, which encounter their own challenges.
True financial inclusion is not just about getting people to register for a formal financial account. Instead, it is about facilitating a person’s regular and active engagement in financial activities, such as saving and borrowing, so that a consumer is better equipped to deal with day-to-day financial responsibilities, as well as emergencies. So, the first challenge is getting consumers their own accounts, and the second is getting them to use it.
Conference stakeholders acknowledged the same barriers to meeting both of these challenges that we see in our data: financial literacy and widespread poverty.
Financial literacy factors into innovations
Our research shows the lack of financial literacy, including not understanding the value in being included, hinders individuals from taking up formal financial services. Financial literacy training needs to convey the concept that having the ability to save money through a financial mechanism leads to the ability to borrow and, in turn, enables an individual to get ahead financially and is fundamental to improving one’s life. The big questions that need to be addressed include what type of financial literacy training is sufficient, can it be included in the primary education curriculum, as suggested by TICAD VI, and, long-term, what is the efficacy of the training. Essentially, what type of training will enable consumers to appreciate the benefits of inclusion and will the digital ecosystem support the propagation of financial inclusion? FII tracks literacy and numeracy across its countries for better visibility into what it will take to equip a portion of the population with financial services they can use.
Widespread poverty challenges capacity building
It is the continent’s technology revolution that will help empower stakeholders to achieve poverty reduction and sustainable growth. New technologies have made financial services faster, easier and more affordable to the masses. In Kenya, these innovations have helped increase the country’s financially included population and have gradually reduced poverty. The same needs to happen in other African countries. Conference stakeholders stressed just how imperative it is that financial and technology services providers foster partnerships that will begin to include more of those below the poverty line in the digital financial services ecosystem.
Next steps
Astutely, the TICAD VI forum for African financial inclusion acknowledged that many different stakeholders and market players have to come together and identify tailored approaches to fit each country’s needs, if the African region is to increase financial inclusion. FII tracking data suggest the same. In Uganda, for example, affordable access to mobile phones is a priority. In Kenya, mobile phone access is widespread and users understand the value of being financially included, but the digital ecosystem needs products that directly speak to their needs. The bottom line is that financial inclusion initiatives and partnerships will have to respond to each country’s different challenges if more financially excluded individuals are going to be included.
InterMedia began tracking and measuring financial inclusion across Africa and Asia in 2013 through the Financial Inclusion Program (FII), focusing on Kenya, Nigeria, Uganda and Tanzania as well as India, Indonesia, Bangladesh and Pakistan. Our ongoing financial inclusion work also takes us to Ghana, Rwanda, Zambia, Mozambique, Senegal, Benin and Cote d’Ivoire. Across all countries, our key research matrices are finely focused towards triggers and barriers of financial inclusion. Over time, the research is allowing us to identify gaps in the market and methods for closing those gaps.