Kenya leads Africa in financial inclusion innovation

Kenya leads Africa in financial inclusion innovation

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Kenya is leading the way when it comes to digital innovation for financial inclusion in Africa, according to research by the Consultative Group to Assist the Poor (CGAP).

Earlier this year, CGAP says it invited firms and organisations to submit proposals for digital innovations they believe have the most potential to advance financial inclusion in Africa.

The results have now been released and it received nearly 200 proposals, with ideas ranging from blockchain ecosystems to new uses of satellite images and GPS functionalities. CGAP acknowledges that it does not paint a full picture, but believes it is an interesting sample that is worth sharing. We’d agree.

Drive

Fintech firms, including many start-ups, “seem to be driving innovation in Sub-Saharan Africa” as they submitted most of the proposals (56%), followed by financial services providers (18%), NGOs (13%) and technology services providers (9%).

CGAP says while most people are served by traditional financial services providers, fintech companies are making the biggest push in innovations. However, “this is not to say that banks and microfinance institutions (MFIs) are not involved”. A large portion of fintech firms have business-to-business models and are partnering with banks and MFIs to bring new services to market.

The highest number of proposals came from Kenya. CGAP says this is not surprising since Kenya’s mature mobile money ecosystem is a big enabler of innovations that use digital payments platforms.

Other countries with developed mobile money markets, including Uganda, Nigeria, Ghana and Tanzania, followed Kenya. Beyond these, 25 other countries were represented, showing that innovations are spreading beyond the most active start-up hubs.

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A large portion of fintech firms have business-to-business models and are partnering with banks and MFIs to bring new services to market
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What are the innovations?

About half of the applicants were looking to enhance or develop a general retail financial product for low-income people, without a more specific target user.

The other half focused on tailoring products for a specific sector – micro, small and medium enterprises (19%) and farmers (18%) being the most popular. A smaller number of proposals linked financial products to health, energy, education and housing (12% combined).

As for the type of product, credit was the most popular. According to CGAP, access to credit to meet liquidity gaps for irregular earners, to address financial shocks like a death in the family, or to increase future income through investments are some of the main financial challenges that poor people face.

Payment solutions were also popular, as they are a necessary building block for other digital financial services like savings, credit and insurance.

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