Digital micro-savings, a catalyst for financial inclusion in Africa
Digital micro-savings offers a tailored solution to meet the needs of low-income individuals, often excluded from traditional financial institutions. It can also serve as a tool to mobilize resources at the community level to finance local development projects, such as infrastructure construction, small business creation, or funding for educational and healthcare programs. However, to achieve this, African governments and private sector actors must join forces to spur innovation and set up a conducive regulatory framework.
The development of new technologies has fostered the growth of digital financial services in Africa in recent decades. These digital financial services play a crucial role in the emergence of the African economy as they offer, according to many experts, immense potential to overcome current development challenges.
Indeed, millions of Africans who have been excluded or underserved are transitioning from cash transactions to formal financial services through the use of mobile phones and other digital technologies. This transition, driven by the emergence of African fintechs following the Covid-19 pandemic, has created an ecosystem aimed at boosting the expansion of digital financial services.
According to the Global Findex database 2021, travel restrictions related to COVID-19 and health concerns surrounding cash handling have significantly contributed to boosting the expansion of digital financial services in developing countries.
It is clear that mobile payment solutions serve as a gateway to innovative financial services that will increase financial inclusion in Africa. Hence, governments need to take more actions to foster this expansion of digital financial services, including digital micro-savings.
"Digital savings are crucial: they help individuals demonstrate their creditworthiness for loan applications, encourage increased consumption spending, and lead to investment. Customer deposits can be mobilized to expand credit to local businesses and invest in government securities, corporate bonds, or pension funds to support economic growth," explains Osamudiame Adams, Partner at Mazars.
To promote micro-savings, Osamudiame Adams believes that a combined effort from governments, regulators, fintechs, and traditional financial institutions is necessary to promote the adoption of digital savings, protect client deposits, and channel capital for national development.
"African youth, with a median age of 19, and the increasing penetration rate of mobile telephony (43% in 2022 and 50% in 2030 according to forecasts) offer fintechs a tremendous opportunity to digitize savings," he underscores, adding that digital savings can enable people living in remote or underserved areas to easily access savings accounts via mobile devices.
Also, many experts emphasize that digital savings pave the way for financial inclusion by allowing those who do not traditionally have access to banking services to start saving and accumulating assets, which could help reduce poverty by providing individuals with a financial safety net.
Digital savings represent an interesting tool to promote financial inclusion, stimulate investment and economic growth, and strengthen the financial security of individuals in Africa. In this regard and to foster progress that has been made, the private sector has a crucial role to play; fintechs can develop products that meet the expectations of the population through innovation.
"In Nigeria, for example, the fintech Sparkle has developed a collective digital savings feature, called Esusu, inspired by informal associations of the Yoruba people," illustrates Osamudiame Adams, adding that these products must first gain the trust of the population.
He even goes further to note that commercial banks and insurers also have a fundamental role to play in reassuring digital savers that their assets are protected against the volatility of local currencies. "Micro-investments on fintech platforms represent the next step in the evolution of savings. But again, governments must foster partnerships between the various players of the sector," concludes Osamudiame Adams.
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