Theme 1: Government’s Role in Supporting and Stimulating Financial Inclusion. According to CGAP, governments have three roles to play in developing financial systems: (i) building the infrastructure – both front- and back-end; (ii) making the rules to facilitate development; and (iii) driving transaction volumes by linking government initiatives to financial services. This theme explores these roles that financial sector regulators and policymakers are taking to improve the reach, safety and convenience of formal financial systems. In doing so, regulators and policymakers are moving towards facilitating innovation by understanding the markets they work in and the risks associated with these markets. These markets are growing – both in size of consumers as well as market actors – and the government will have a large role in supporting and stimulating the growing financial sector eco-system going forward.
Theme 2: Reaching the “Next Level” of Financial Services for the Poor – How More Sophisticated and Tailored Products are Meeting the Financial Services Demands of the Poor. This theme looks at how the understanding of the needs and risks of low-income households are changing. Whereas the initial focus for financial service providers reaching the low-income market was on a set of micro-credit instruments, recent development have expanded upon this to meet a more diverse set of financial needs. Researchers are leading the way by understanding there are various segmentations of low-income and/or rural households with different needs, desires and resources. This in-turn is being absorbed by financial service providers who are thinking and acting more innovatively on how to meet them. Likewise the growing consumer market in Africa is demanding protection for their new goods and services – with various insurance schemes leading the way to meet the new demand. The result is financial service providers that are beginning to grasp these different needs and tailor a set of financial products to these market segments.
Theme 3: Agriculture as the Key to African Macroeconomic Success. African agriculture is on course to create 8 million wage paying jobs between now and 2020 – but still there remains greater potential with 60% of the world's unused cropland in Africa. This theme explores the idea that, despite challenges to recognize this potential, there is also an opportunity to harness that potential to tackle both poverty and global food insecurity issues. In most African countries, agricultural activities employ the majority of the labour force, but the sector represents a small fraction of GDP despite agricultural growth being 3.2 times more effective in reducing poverty than growth in other sectors. The African Green Revolution in September 2012 brought together disparate partners working together to tackle global food insecurity, primarily by jumpstarting Africa’s agricultural sector. The time is now for Africa’s agricultural sector to go beyond its current boom driven by China and India, bringing in the key voices – such as women who produce more than 90% of food on the African continent – and have its own green revolution.
Theme 4: Cutting out the Cash – How Mobile Technology and other Developments are Diminishing the Role of Cash and Increasing Financial Opportunity. There are 700 million mobile subscribers in Africa with 120 mobile operators offering mobile money – and another 90 set to join them. The government is now following suit – finding cashless systems to be more cost effective – and are leveraging mobile technology for government-to-person (G2P) payments. This theme explores the advantages of the diminishing role of cash from increasing safety and value for customers, making business as a whole more efficient, and creating a financial history for service providers to understand the risks and needs of its client base.
Enjoyed reading about the emerging themes in this edition of Finance Forward? Check out some of the earlier editions below.