Technology can help more people access banking services
CAPE TOWN – The panel discussion on banking the unbanked at the World Economic Forum on Africa in Cape Town noted that technology could help more people access banking services. Already the number of unbanked has steadily reduced from 2.5 billion people globally to 1.7 billion people, although there are some 1.3 billion people who are “under-banked”, in that they use minimal banking services.
In response to a question from the audience on what progress has taken place over the past few years, Eraj Shirvani from Credit Suisse said that a Kenyan bank had signed up 24 million customers without any of them stepping into a bank branch, which would not have been possible ten years ago.
“Their Non-Performing Loan ratio is only 2%, which is far better than most traditional banks. Now we have insurance companies that did not exist five year ago offering coverage to farmers. What we need to do is build capacity, attract private capital and then take these fintech start-ups to market,” he said.
According to the last Survey of Employers and the Self-Employed (SESE) conducted by Statistics South Africa in 2017, more than 1.5 million people were running small, informal businesses in the country. In 2001, when the first SESE was undertaken, businesses that were 3 years or younger accounted for 58.0% of the total, but this dropped to only 40.9% by 2017. These informal businesses do not easily satisfy the requirements of the formal financial sector as they have no credit history.
To overcome this hurdle Shamina Singh from Mastercard said Mastercard had partnered with Unilever to allow small businesses in Kenya access to loans so that they could buy product from Unilever.
“We said to Unilever that you have a history of who buys what from you, so use that data to grant loans to those small businesses. These loans are for only a week, but what we found is that the small businesses could now buy 5 pound bags of soap powder rather than small sachets, as that is what their customers preferred and that obviously meant larger volumes for Unilever. We have gone from zero accounts to 16 000 accounts in less than a year,” she said.
In response to a question from the audience as to whether this step change in volume was being captured in the national accounts, Singh said time will tell.
“We are building momentum in digitising the economy and we will keep on innovating,” she added.
Natalie Jabangwe from Ecocash in Zimbabwe said there were four fundamentals that needed to be tackled in bringing the Fourth Industrial Revolution to the African continent.
“These four fundamentals are trust, regulation, innovation and economies of scale,” she said.
She noted that the use of mobile money in Zimbabwe had prevented hyperinflation this year, unlike 2008 when the use of the Zimbabwe dollar was abandoned because inflation had reached millions of percent.
Zimbabwe’s inflation has surged from 2.7% year-on-year (y/y) in May 2018 to 176% y/y in June 2019, but Zimbabwe’s Finance Minister Professor Mthuli Ncube said inflation was stabilising.
Singh said the African continent was breaking the mould of development and Mastercard was privileged to be a partner in this growth.
“The digital economy should be for Africans, not done to Africans,” she said.
Shirvani noted that regulators had a tough time as industry convergence in the payments space was taking place.
“Should the telecommunications regulator regulate mobile money or should it be the banking regulator? Our view is that the focus should be on activity rather than corporate structure, so if a telecommunications company offers banking services then that activity should be regulated by the banking regulator, and if a bank offers telecommunications services, then that should be subject to telecommunications regulations,” he said.