Financial Inclusion - The Great Enabler For The Global South

Despite robust economic growth, Africa is grappling with a significant issue: its prosperity is not being evenly distributed.

Financial inclusion, which is the ability to access and utilise formal financial services effectively, can be a key enabler to this.

According to the latest World Bank Development Economics Data, Sub-Saharan Africa has 33% of adults owning mobile money accounts, compared to 10% globally, but only 55% of adults in the region have any form of non-cash remittance financial access. Though this rose by 12% in the past six years, nearly half the adult population (45%) still lacks access to any essential financial services. This is below the 71% average for other developing regions.

The gender gap is particularly striking

Only 49% of women have access to financial services compared to 61% of men. This disparity is often due to limited access to mobile phones and identification documents, which are crucial for setting up and using financial accounts.

When it comes to savings, the data reveals more

39% of mobile money users actively save using their accounts, but overall saving rates in the region is only 56%. Meaning a whopping 44% lack access to any sort of savings instrument. Moreover, only 14% of adults can access $50 in emergency funds in 30 days should their main income source get disrupted.

But it is not all bleak.

The rapid adoption of digital wallets and mobile money offers a promising pathway for broader financial inclusion. With easier and cheaper access to smartphone data plans, digital wallets are becoming a mainstream solution for financial transactions - think direct peer to peer exchange plus micro savings and loans.

The expansion of digital wallets, as seen with M-Pesa in Kenya, demonstrates the transformative impact these tools can have.

By 2026, digital wallets in Africa are projected to generate over $25 billion in revenue, growing at a compound annual growth rate exceeding 20% as smartphone penetration accelerates across the continent.

But addressing underlying barriers such as the gender gap, digital literacy, enabling affordable data plans, and connecting existing eco-systems and stakeholders on the ground is a must.

Drawing lessons from other developing regions, Brazil's experience with its Pix (Banco Central do Brasil) payment system helped increase financial account ownership from 56% in 2011 to 84% by 2024, demonstrating the transformative potential of well-executed digital payment infrastructure.

Developing an inclusive digital finance ecosystem, fostering a pro-competition environment, and deepening collaboration between incumbent financial institutions and fintech startups are crucial from our Latin American and Asian examples.

With inclusive financial practices, we can empower individuals and businesses across Africa to participate fully in their economic upside and drive sustainable resilient growth.

Financial Inclusion For The Global South