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Assessing Financial Inclusion Advances in Sub-Saharan Africa

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Advancing inclusive access to and usage of affordable formal financial services within the context of robust consumer protection frameworks is a vital mechanism for achieving broader policy objectives, such as promoting financial health, economic empowerment, financial stability, and sustainable growth. Thus, ensuring that individuals are able to identify, access, and leverage financial tools that help them save for the future, protect themselves from economic shocks, support their entrepreneurial goals, and otherwise contribute to their well-being should be a key priority for public sector and non-government entities alike.

With about 350 million adults excluded from the formal financial ecosystem as of 2014, sub-Saharan Africa offers considerable opportunities to expand access to and usage of formal financial services. Given the region’s burgeoning mobile ecosystem, limited physical banking infrastructure, and substantial levels of poverty and financial exclusion, many countries in sub-Saharan Africa are particularly well-positioned to reap the benefits of digital financial services.

The Brookings Financial and Digital Inclusion Project (FDIP), begun in the summer of 2014, launched its second annual report in August 2016 examining the financial inclusion ecosystems of 26 economically, politically, and geographically diverse countries. The report assessed these countries’ financial inclusion landscapes based on four dimensions of financial and digital inclusion—country commitment, mobile capacity, regulatory environment, and adoption of selected traditional and digital financial services—and offered recommendations for accelerating progress toward financial inclusion.

Of the 26 countries featured in the report, 10 are located in Africa. In a recent post on Brookings’s TechTank blog, the FDIP team highlighted key findings for five of these countries: Egypt, Malawi, Tanzania, Uganda, and Zambia. In this post, we examine the remaining five countries, all located in sub-Saharan Africa: Ethiopia, Kenya, Nigeria, Rwanda, and South Africa.

Mobile money (defined here as mobile phone-based financial services that do not require a bank account) in particular has already played a key role in driving financial inclusion among underserved populations in many contexts within Africa. Indeed, of the 19 markets globally that had more mobile money accounts than bank accounts as of 2015, nearly all of them were located in sub-Saharan Africa. On the supply side, the region accounted for about 52 percent of live mobile money services as of 2015, according to the GSMA (a global association that represents the interests of mobile operators).

Yet opportunities for further progress toward financial inclusion remain. Below, we identify selected scoring highlights, financial inclusion developments, and recommendations for accelerating progress toward financial inclusion in Ethiopia, Kenya, Nigeria, Rwanda, and South Africa.

While Ethiopia has experienced rapid economic growth in recent years, participation in the formal economy remains uneven. As of 2014, about 22 percent of adults had an account with a formal financial institution or a mobile money provider, according to the World Bank’s Global Financial Inclusion (Global Findex) database—about 12 percentage points below the average in sub-Saharan Africa. As in the 2015 FDIP scorecard, low adoption rates of formal financial services and limited mobile capacity constrained Ethiopia’s overall score (53 percent) on the 2016 scorecard. Unlike many of the other FDIP countries in sub-Saharan Africa, mobile money has not served as a driving force for financial inclusion in Ethiopia to date. The limited number of service providers and offerings has been noted as a potential obstacle to the take up of mobile money, and while the mobile money ecosystem has diversified somewhat in recent years, further time is needed to assess the impact of these new services on Ethiopia’s financial inclusion landscape.

[www.brookings.edu/]


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