Financial exclusion is one of the challenges that needs to be solved urgently in sub-saharan Africa. It is estimated that up to two-thirds of the adult population in Africa suffer from some form of financial exclusion. Marginalized communities, like rural communities are at greater risk of suffering from financial exclusion. Most of the adults in these communities do not have access to financial services that allow them to secure credit, have meaningful savings or have access to loan facilities which might be beneficial for their economic progress.
The financial systems that most adults in sub-saharan Africa use are unsustainable and require overhauling for the benefit of the continent as a whole. Financial inclusion means that more people can participate in the financial system of a country, and this is a vital factor in the development of the continent. So today, we will look at some startups that are working on improving financial access in Africa.
By Kudzai J Zawe
Paycode (South Africa)
The remote locations of many people in Africa make it difficult for them to access the financial services that they need and this is the challenge that Paycode has been developed to address. The application is designed to make financial services available to people regardless of how remote their location might be. Currently, Paycode has over 4 million users in different parts of Africa, and this number is projected to rise into the tens of millions over the next couple of years.
Paycode has a few distinct advantages that make it a financial solution that has the capability to revolutionize economic participation on the contine. Transactions on Paycode can be completed while one is offline which means that even people that live in areas with no connectivity are able to transact. The app can also be integrated with any existing financial system which makes adoption easier for all parties involved.
The system makes use of biometric identification for verification during transactions. The use of biometric identification provides ‘proof of life’ and this is an important feature as it can be used to ensure that there are no ghost workers that are on a payroll. The identity confirmation feature is linked to a digital wallet which is used to store an individual’s funds. This means that users can do away with needing cash for transactions which is common in remote areas.
There are other functions that can be executed using the biometric identification features of Paycode. It can be used to get citizens in remote areas to participate more in national processes such as elections and to enable the vulnerable in these areas to gain access to government benefits such as social service grants. When there is a database with real time information about these people and this information can be confirmed by providing ‘proof of life’, it makes it easier for inclusion.
Stitch (South Africa)
Stitch is another app that has the potential to play a role in fixing the financial exclusion gap in Africa. The app is already functional in South Africa, Kenya and Nigeria, with other territories being added soon. Stitch is an app that provides support for businesses that are looking to build financial solutions that are user friendly. Creating financial solutions that are user friendly makes it easier for potential clients to participate on e-commerce platforms. One of the challenges that online payment platforms face is that the process towards making a payment is long and complicated, and this leads to high drop off rates. Some payment solutions also come with high transaction costs which discourage would-be users.
What Stitch has done in a bid to overcome these challenges is that they have created a system that employs a one click system to facilitate payments. Users only need to sign in once and they do not have to repeatedly go through verification processes. Transaction costs on Stitch are also significantly lower which makes it cost effective to use. The application can be linked to most major banks and they are continuing to add more banks onto the system. This gives Stitch significantly broad coverage and anyone can use it regardless of which bank they are with.
For businesses, Stitch can be used to receive payments from clients or to facilitate outbound payments. The structure of the app allows users to have instant access to all the necessary KYC and KYC information, making it secure against fraud. Another feature that helps Stitch detect fraudulent activity is that it keeps track of the spending patterns of businesses and individuals with the purpose of flagging anything that is out of the ordinary. This system has the ability to significantly reduce cases of fraud and give its users confidence in digital financial solutions.
With financial solutions such as Stitch and Paycode in play, this continent the financial sector is taking the right steps towards solving the critical issue of financial exclusion. These solutions will enable several millions of people across Africa to participate in the greater economy and play a part in the development of the continent. Giving more people the opportunity to participate in economic activity is a pivotal block in the building of the future of Africa.
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