It’s a continent that is heavily reliant on cash, where financial institutions often struggle to get a foothold, especially amongst the poorer, more rural regions and it’s now trying desperately to create financial inclusivity in whatever ways it can. As a result Africa is finding more and more innovative methods to solve its own financial problems. Alexander Atkins writes
The numerous mobile money networks that have been proliferating throughout Africa are key examples of these innovative methods. The first, MPESA, revolutionised the way Kenyans (and following their success, many other nationalities) do banking.
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What started off as a way for urban workers to send money home to their families soon formed the backbone of a financial system that brought millions into the fold, allowing them to turn their mobile into a bank account and use it to not only pay people, but pay bills and micro-loan to name just a few of its many applications.
Sierra Leone’s own version came around through a very different reason. Its new mobile money system was created to help pay the thousands of health workers operating around the country on hazard pay during the Ebola Crisis. The previous method of cash was leading to delayed and often incorrect payments which resulted in mass strikes.
After the crisis was officially declared over, the government adopted the scheme, which was initially developed by the United Nations Development Programme, resulting in the recent release of the mobile money regulations for Sierra Leone, a system that, in conjunction with the West African nation’s banks, is set to help drive and grow financial access throughout the country.
Now other parts of Africa are using technological innovation to solve their own financial problems. In the Democratic Republic of the Congo (DRC), the government is trying to widen the financial system in a country with a population of between 60 and 80 million people and a barely existing infrastructure. To kick start their new initiative, they are encouraging their employees across the country to open and use a bank account. It is still early days and the scheme is aimed, for now, only at civil servants who until recently were paid in cash.
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By GlobalDataThis is how it has worked until now. At the predestined time of the month, all civil servants in a particular area would head over to the local government office (sometimes this might be a police station, sometimes it might just be the local football pitch) where they await a government ‘accountant’ who had come all the way from the capital Kinshasa. These ‘accountants’, one of the most prized jobs in the civil service, are glorified runners who carry huge amounts of cash throughout the country to pay the multitude of civil servants who await them.
The system is rife with problems: a man working his way through the expansive jungle regions which have limited infrastructure makes an easy target for the multitude of wandering rebel groups and bandits that infest much of the DRC.
Similarly, it is always tempting for these ‘accountants’ to simply carry off the cash themselves. After all, the DRC is not a difficult country to disappear into.
But the most common result is slightly more cunning: these ‘accountants’ commonly create ghost employees who they then ‘pay’, and record the payments, all the while pocketing the money themselves.
Now the government is helping and encouraging its workers to open bank accounts which can then be used for paying wages, and, in doing so, is accelerating the spread of banking in an almost medieval style economy. The result is some three quarters of the 670,000 civil servants will now have access to a bank account.
More importantly, there will be no need for vulnerable and/or tempted runners and already, thousands of ghost employees have been rooted out and crossed off the payroll.
However, this means the banks have taken up the work, extending branches and moving the money to those branches themselves by truck, bike or canoe. The hope is that as these civil servants in far flung parts of the country open bank accounts, it will lead to two things: Firstly, it will mean the banks will start to expand, opening more and more branches and making it more accessible in response to the civil servants’ demand. Secondly, following this, the locals will be encouraged, by both the government workers action and by the banks’ action of stepping up their accessibility, to open their own bank account.
The end game? Not only will the banks grant access for the millions of unbanked to a formal financial system but they’ll be able to innovate, offer more products and propel the Congolese economy forward. It’s a hand in hand initiative that benefits everyone (except the rebels, unless they like those APRs the banks will be offering on their new loans).
Africa is way ahead of the west in innovations such as specific banking methods and mobile payments. This is completely true. And yet the conditions in more developed countries are so established that things like mobile payments may never be dominant. In the UK, there is barely anywhere where one cannot access the internet whereas, according to Internet World Statistics, some African countries have an internet penetration as low as 1% of the population.
At the same time, mobile access and coverage is booming. According to the Financial Times, over three quarters of Africans have access to a mobile phone, a fact that shows what direction this continent is going in. Perhaps one where the telco’s are the new financial institutions?
The greatest thing about these schemes, however, is that it is Africans solving African problems with innovative ideas suited to their unique situations. The lesson here is that the problems you read about every day in this war torn continent are also catalysts that create an environment which is ripe for new non-developed styles of innovation.
