How Financial Inclusion Can Help Achieve Sustainable Development Goals in Africa
Ugo Aliogo in this report examines financial inclusion and SDGs
The Sustainable Development Goals (SDGs) unequivocally address some of the world’s most pressing challenges – from eliminating poverty, creating jobs, and deepening economic growth, to improving gender equality – for the purpose of creating a better and more sustainable future. With the advancement of digital payments and services today, it is important to consider the possibilities of utilizing financial inclusion to achieve some of these goals. This is because access to financing and being a part of a banking system is a giant step toward economic development.
At its core, financial inclusion implies that people should have easy and local access to adequate financial services to improve their livelihoods. Financial inclusion offers people within various social classes an opportunity to access financial services such as payments, savings, loans, and investments. For MSMEs, financial inclusion can aid development by encouraging financial stability in businesses. If this is achieved, there could be more opportunities for job creation. This in turn could potentially promote sustained and inclusive economic growth in response to the 1st and 8th SDG, which are No Poverty and access to Decent Work and Economic Growth.
However, despite increasing policies to advance financial inclusion in Africa, gaps remain in areas where there is little to no access to digital technologies, with the businesses in these areas facing challenges such as a lack of access to a bank account to receive payments or access credit. Research by the Center for Strategic & International studies (CSIS) in 2021 highlights the two major financing challenges facing SMEs – access to working capital and being able to afford the cost of the capital. This is a cause for concern because these businesses hold the potential for economic development and job creation. Without the right education, integration, or ability to pay through a formal system, business owners cannot adequately keep track of their expenditures, or, for example, make money transfers to customers or vendors on an on-demand basis. This hampers the abilities of these businesses to thrive and bring forth some of the radical innovations that may lie within their confines, which are significant for export, economic growth, and development.
In an era where SMEs are beginning to use digital financial services to shift from local to global transactions as a means to grow their businesses, many potential businesses that have no basic access to the right financial services are left out of this growth. It is therefore paramount for governments, fintech companies, and policy drivers to intensify efforts towards accelerating formal financial adoption in regions where there is low inclusion. This can be achieved through an investment in sensitizing the public through education programs together with continued access to cheap and affordable finance to encourage the adoption of these services. This intervention is crucial in helping these businesses advance in financing their operations and for the day-to-day management of their affairs, which aids growth. These businesses would then be able to receive payments for goods and services rendered from customers outside their local communities, through a bank account, which can further help with creditworthiness for loans or even access to investments.
With more financial inclusion policies in place, MSMEs can begin to explore the potentialities of cross-border transactions to scale up by reaching a wider audience. Therefore, payment solutions providers must be ready for these upcoming payment needs so that these small businesses can seamlessly transact across the world through multiple unique currencies and payment methods. Payment companies like Unlimint are already at the fore of this innovation, having entered several emerging markets globally and helped to blur the lines between traditional banking and alternative payment methods. This has enabled people to receive thousands of alternative payments directly into their bank accounts. It is not difficult to see how much impact the company will make in delivering innovative solutions that encourage effortless digital payments adoption by small businesses in Africa, enabling them to connect with a global customer base.
The success of individuals and businesses in establishing good formal financial standing will create a ripple effect in reducing poverty and hunger, improving well-being, providing access to decent work, and ultimately, impact economic growth. It is important to note that prioritizing financial inclusion for MSMEs in Africa through digitization will catalyze a more inclusive financial market for these businesses and help to expand outreach to their customers.
