How smarter use of data can improve financial inclusion

Africa has been experiencing significant economic growth in recent years, but this growth has not necessarily translated into improved living standards for all its citizens. One of the primary reasons for this is the continent's lag in terms of financial inclusion. To delve into how smarter use of data can help boost financial inclusion, Henny Bester, Lead at the Insight2Impact, shared insights in a recent interview with CNBC Africa. Bester highlighted the pivotal role data plays in enhancing financial inclusion. He pointed out that the widespread availability of digital devices in Africa has made economically active individuals, who were previously invisible in the financial ecosystem, visible. This increased visibility generates data, giving individuals with no collateral a transaction record, which can make them eligible for financial services such as credit that were previously out of reach. Additionally, the use of data allows for transactions over larger distances and the analysis of individuals' economic activities to tailor financial services to their specific needs. Bester emphasized that data is driving a significant shift in the traditional financial services landscape. Despite the enthusiasm among some African governments to promote financial inclusion through regulations and incentives, Bester noted that it ultimately comes down to making financial sense for private businesses to drive meaningful progress in this area. He highlighted the changing business models facilitated by data and digital technologies that are making financial inclusion more cost-effective, thereby spurring its growth. Looking ahead, Bester highlighted the impending challenge of data protection and privacy across the continent, with only a limited number of countries having implemented measures in this regard. There is a need for a collective effort from African governments to create a conducive environment for low-cost platforms that can support financial inclusion on a multinational scale. Under the ambitious Agenda 2063 aimed at advancing financial inclusion for marginalized populations in Africa, Bester acknowledged that while there is significant private sector activity in this space, more needs to be done at the public level. The fragmented regulatory landscape across the continent poses a challenge, with the need for regional and continent-wide cooperation to establish platforms that can cater to a broader audience. Bester shed light on the Innovation Competition organized by Insight2Impact, with finalists pitching innovative financial inclusion solutions in Kigali. The competition, aimed at fostering young talent and innovative ideas, has been instrumental in driving awareness and creating networking opportunities across different African countries. One of the standout innovations from the competition is a multilingual chatbot that enables digital transactions for marginalized individuals through voice commands and biometric authentication. Bester expressed optimism that such initiatives not only provide solutions but also raise awareness and encourage Pan-African collaboration in the financial services sector. Looking ahead, Bester predicted a substantial transformation in the use of data for improving financial inclusion over the next five to ten years. He highlighted a shift from being data evangelists to 'pastors,' indicating a growing acceptance and implementation of data-driven strategies by companies, including large financial institutions. The increasing value placed on data, fueled by the success of social media platforms in leveraging data for economic gains, is set to drive exponential change in the financial inclusion landscape. Bester emphasized the crucial need for startup funding and incubation support to sustain the momentum of innovative solutions in the financial inclusion sector. In conclusion, the road to enhanced financial inclusion in Africa lies in leveraging data effectively, fostering collaboration across borders, and providing essential support to budding innovators in the field.