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Digitizing financial services key to Africa's post-pandemic growth, experts say

By
Jack Kelly, Medill News Service
A woman selling tuber waits for customers at a market in Nigeria's commercial capital Lagos, on Monday. Experts say African countries would benefit from digitized financial services during the pandemic. Photo by Akintunde Akinleye/EPA-EFE
A woman selling tuber waits for customers at a market in Nigeria's commercial capital Lagos, on Monday. Experts say African countries would benefit from digitized financial services during the pandemic. Photo by Akintunde Akinleye/EPA-EFE

The COVID-19 pandemic highlights Africa's need to digitize, especially in the financial services sector, to protect the continent's primarily cash-based societies from the spread of the disease, leaders from public and private African institutions said Thursday.

Speaking at an event hosted by the Woodrow Wilson International Center for Scholars, these leaders said a robust and inclusive African financial services sector also will help prepare the world's second-most populous continent to leapfrog into the post-pandemic era.

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"It's clear that the coronavirus pandemic is changing the way we work, changing the way we do business [and] changing the way we live," said Tim Kelly, the World Bank's lead information and communications technology policy specialist.

Kelly, who is based in Kenya, said that while the COVID-19 pandemic has yet to fully take root in Africa, the continent's myriad informal marketplaces would make it impossible to implement public safety practices like social distancing and physical isolation in many African cities.

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"I think a digital response to the coronavirus epidemic is so important for Africa," Kelly said. "It's an area where Africa can learn from the rest of the world, and an area where Africa has ... the chance to leapfrog through its digital transformation."

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Musa Jimoh, director of the payment system management department at the Central Bank of Nigeria, agreed that transforming digital financial services is imperative to keep Africans safe in pandemics.

Markets across the continent currently work on primarily cash-based systems, and many Africans do not have formal bank accounts. Accordingly, most Africans rely on cash-based, in-person transactions to conduct their shopping.

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"When you think about what's happened recently, we've seen that digitization has become a major compelling imperative for all Nigerians," Jimoh said. "With social distancing, a lot of Nigerians do not want to touch physical devices. ... Everybody wants to do transactions without having physical interaction with bank branches and other financial touchpoints."

Maximizing electronic transactions through mobile money and other digital technologies would allow for safer shopping during the pandemic, Kelly and Jimoh said.

Improving and digitizing financial services in Africa would also benefit the region's economy overall, according to Kennedy Mubita, who leads Standard Chartered Bank's African ventures division.

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Mubita said the supply chains of many African manufacturers and companies are tied to Europe, when, in reality, they could be tied to other African nations.

"Digitization enables us to create new marketplaces and give new access to markets for people who are within the continent and [would] be able to find a product within the locality," Mubita said. "And in so doing increase the volume of sales and optimize the fixed cost that they put in their ventures."

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Mubita added that before the arrival of digital financial services, many Africans and companies could not access credit from formal financial institutions. Now, digital platforms allow these individuals to have financial histories and help them access the financial services they need to run and grow businesses.

Viola Llewellyn, co-founder and president of Ovamba Solutions, a company that provides short-term capital to businesses via mobile phone payments, echoed the sentiment that financial inclusion will be key to Africa's post-pandemic development. However, she also highlighted the need for a uniform response to digitization from regulators and lawmakers.

Llewellyn said some regulators don't accept PDFs and digital signatures as official documents, slowing down business. She also said some laws need to be rewritten to eliminate roadblocks to digital commerce.

"We have an issue with the way the legal frameworks operate within a contractual basis," Llewellyn said. "It would be very difficult to continue to digitize trade when entire regions don't accept" some documents in digital forms.

She called the pandemic an "important opportunity" to push innovation in Africa and empower the continent to emerge stronger in the post-coronavirus world.

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