The World Bank describes financial inclusion as a key enabler of 7 of the UN sustainable development goals. But what is financial inclusion?
Financial inclusion is the practice of creating accessible and affordable financial solutions for all. These solutions include payments, credit, insurance, savings, and investments. While many countries in the West have stable financial infrastructure to provide these solutions to their citizens, there is a large gap in African countries that needs to be addressed.
The rise of financial technology in the last two decades presents a promising solution to this gap, offering innovative ways to provide affordable and accessible financial services to underserved populations across the continent.
Mobile Money Revolution
Fintech companies are leveraging innovative technologies, such as mobile money platforms, to revolutionize banking in Africa. These platforms enable individuals to perform various financial transactions using their mobile phones, bridging the gap between traditional banking infrastructure and remote communities.
One of the most well known mobile money solutions is M-Pesa, a product launched in Kenya back in 2007 by Safaricom. M-Pesa is, simply put, a basic bank account attached to the Safaricom SIM card. With M-Pesa, users can add money to their SIM cards, send money, and save money. Better yet, M-Pesa leverages USSD technology, meaning even someone with the most basic feature phone can use it. As of today, M-Pesa has more than 50 million monthly users across East Africa.
Following M-Pesa’s success, similar services have been launched and gained traction in places like Zimbabwe and Ghana.
Benefits of Fintech Solutions
Fintech solutions in Africa have several benefits. First, people living in remote areas with no banks are able to easily transact due to the widespread connectivity of mobile phones. Second, these solutions have been instrumental in improving financial literacy. With services like Mpesa, users are able to save, borrow, and even invest much more easily than using traditional banking institutions.
Fintech platforms are also playing a key role in empowering entrepreneurs and small businesses by providing access to credit, payment solutions, and digital marketplaces. M-Pesa is used by thousands of SMEs. Other solutions like Nigeria’s Flutterwave have been instrumental in cross-border payments. By democratizing access to financial services, fintech is enabling small businesses to thrive, contribute to economic development, and create employment opportunities.
What Comes Next?
While fintech companies are making a big difference in Africa today, there are still gaps that need to be addressed. Cross-border payments across Africa are still a challenge. It is difficult for many people to access local stock exchange markets. Credit scores are difficult to track. Loans are still difficult to access. As fintech advances and incorporates nascent technologies like AI and blockchain, all these challenges are fodder for creative entrepreneurs to address.
8B Education Investments has already launched itself as an innovative player in this ecosystem by being the first company to exclusively provide African students with affordable financing to pursue higher education in the United States. Our loans are designed to eliminate the gap in financing that many ambitious African students face in their quest to obtain higher education in leading global universities. We have partnered Nelnet, a leading US bank to ensure that brilliant African students have ample access to the financial support to cover their education needs.
Apart from offering affordable education loans, 8B also offers a dedicated online community for African students, free scholarships and universities database, as well as a jobs board. While we are the first to provide these solutions specifically with the African students demography in mind, we welcome new partners to better serve African students.
The potential of fintech to drive financial inclusion and prosperity in Africa is immense. By leveraging innovative technologies, fostering collaboration between stakeholders, and addressing key challenges, we can work towards a future where everyone has access to the financial tools they need to thrive.
