The potential of digital platforms as distributors and enablers of financial services in Africa
The potential of digital platforms as distributors and enablers of financial services in AfricaNovember 4, 2020 •
The past decade has seen the emergence of digital platforms, which connect buyers and sellers of goods and services and allow them to seamlessly transact with one another online.
The platform economy is expected to grow to USD405 billion by 2030, more than double from USD204 billion in 2018, with most of this growth coming from emerging markets. insight2impact’s scan of eight sub-Saharan African countries found 277 unique platforms, which employ an estimated 4.8 million individuals. Africa’s digital platforms are developing innovative, tech-driven ways to transform business models and are providing new ways for workers and micro-, small and medium-sized enterprises (MSMEs) traditionally operating in the informal sector to participate in the formal economy.
The unique insights that platforms hold on the needs and behaviour of their workers give them the potential to serve as enablers of financial services.
With an established client base, brand and communication and payments channel, digital platforms hold unique insights into the financial needs of their users and hold the potential to provide innovative solutions to overcome barriers to low formal financial service usage in African markets. Of the 277 platforms, 15% already offered one or more insurance, digital wallet, savings or credit products. These financial services can offer additional value to platform participants, through insurance for risk transfer, consumption smoothing, convenience in making payments and access to productive credit.
The RRI programme is partnering with platforms to better understand the needs of platform workers, to identify whether potential exists for these platforms to offer financial services.
Building on our work with insight2impact on the role of insurance in e-hailing platforms, we’re conducting further thematic research on African digital platforms to better understand the needs of their workers. This will enable us to understand whether, and which, financial services are an appropriate mechanism for these workers to improve their resilience and welfare and will enable providers to design products that meet their workers’ needs.
In Rwanda, we collaborated with AFR and partnered with Yego Innovision Ltd, an ICT company focused on bringing relevant smart mobility and payment solutions that will generate employment and boost m-commerce in Africa. Yego currently has two smart mobility solutions: YegoCabs connects taxi-cab drivers with passengers, and YegoMoto connects motorcycle taxi drivers with passengers. We conducted research with the taxicab/motorcycle drivers to better understand the risks they face and facilitate the development of an insurance product that speaks to the driver’s needs and offers value.
In Kenya, we are collaborated with FSD Kenya and have partnered with iBUILD, a mobile platform that offers a secure method to connect people who want to build/renovate with contractors, workers and construction suppliers and that facilitates open access to housing support services that guide individuals through the housing (re)construction process. We conducted research with each of the user groups to better understand the financial needs of the individuals using the platform.
If you’re interested in finding out more about this work, please contact Kate Rinehart-Smit.