“The dawn of the new decade has seen the world gripped by an unprecedented health crisis, with a pandemic never experienced before in our lifetimes affecting countless individuals, families and communities,” writes Joanne Dewar, CEO of payments processing company Global Processing Services, in an article for Nasdaq. The global economy is said to have contracted by 12% in Q1 alone, reports Dewar.
Dewar asks: “How does the Covid-19 pandemic pave the way for greater financial inclusion?” She notes that there are 1.7 billion unbanked adults globally, with a large proportion coming from the Asia-Pacific region. In Myanmar, 74% of the population don’t have access to financial services and in Indonesia, the figure stands at 66%, she reports.
Unemployment figures are expected to increase rapidly. Many are turning to financial support such as loans with high interest rates to keep themselves and their businesses afloat, while not earning, which Dewar describes as “incredibly worrying”. While there is government help available in some countries, such as Singapore’s S$600bn stimulus package, “governmental stimulus becomes redundant to individuals and families if there is no mechanism in which to receive that help,” Dewar writes. “This is especially the case in lower-income countries where a large proportion of the population remain unbanked.” Therefore, government-to-person (G2P) payments are regarded as “on-ramp to financial inclusion”.
“According to the World Bank Research Observer, besides financial aid being delivered almost instantaneously, G2P payments help lower disbursement costs, both for governments and recipients; counter the fungibility and transactional anonymity of cash by ensuring the traceability of payments; is more secure; and increases financial inclusion by expanding account ownership among those who are unbanked,” writes Dewar.
This small win comes in the form of financial empowerment for some of the most vulnerable people in the world
She gives an example of government support working well. In India, more than 80% of the people are banked, although many are still marginalised. This is “largely due to the introduction of an instant, real-time payments system developed by the National Payments Corporation of India called the United Payments Interface (UPI)”. UPI allows immediate money transfers through a mobile device with no settlement process or intermediary.
“It would be erroneous to assume that digital payments are financial inclusion’s panacea because there is no one-size-fits-all solution, but in light of the current pandemic, every small win is worth celebrating – and this small win comes in the form of financial empowerment for some of the most vulnerable people in the world,” says Dewar. “Every cloud has a silver lining and this could perhaps act as the catalyst to accelerate financial inclusion in a way that it has never been accelerated before.”
Nasdaq article
A catalyst for changeCould the Covid-19 pandemic be the accelerant that pushes Africa towards having a digital economy? asks Ken Njoroge, co-founder and co-CEO of fintech company Cellulant, in an article for
The Africa Report. “What pre-existing conditions have become the crucial building blocks that will foster this?”
According to Njoroge, the birth of Africa’s fintech revolution started with mobile money. “Its appeal and quick adoption, initially in Kenya and now in over 30 African countries, has largely been due to its democratisation of financial services,” he reports.
More than 66% of adults in Sub-Saharan Africa lack access to traditional bank accounts, therefore mobile money “has bridged the financial inclusion gap, bringing financial services closer to the rural majority who now do not need a bank account to transfer money, save, borrow or even pay for goods and services”. He reports that 46% of global mobile money accounts are in Africa, translating to “approximately 395.7 million accounts out of a global total of 866 million".
Njoroge believes that fintech is pushing sectors in Africa to transform. “With the ongoing crisis, we have an even bigger role to play now to help businesses and organisations as they move towards rapid digitisation in order to ensure business continuity during this crisis and spur economic growth thereafter … Now more than ever before, fintech is poised to become a crucial stepping stone that will propel Africa into becoming a truly digital economy.”
The Africa Report article
Arab Financial Inclusion Day
On 27 April 2020, the Council of Arab Central Banks and Monetary Authorities’ governors virtually celebrated Arab Financial Inclusion Day, according to Hossam Mounir for Daily News Egypt. The day highlights the opportunities for the regions that can be achieved by enhancing financial inclusion.
According to Mounir, a statement by the council acknowledges that Covid-19 has highlighted the importance of financial inclusion and the need to accelerate the use of digital financial services. “The council affirmed its support for the international community’s efforts to enhance financial inclusion, especially by the G20,” adds Mounir.
The council is calling upon partner institutions to support technology to help young people and micro, small and medium-sized enterprises access financial services, and is also calling upon the ministries of education, culture and higher education in Arab countries to increase awareness of fintech, Mounir writes.
The council notes that efforts made towards financial inclusion have been successful so far. Mounir writes: “The percentage of the adult population in Arab countries who have access to formal financial services has risen to 37% on average, 26% for women, and 28% for low-income groups.”
Daily News Egypt article
Will a push for financial inclusion through digitisation be a silver lining of the Covid-19 pandemic? Leave your comments below.
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