Financial Network in the World's Fastest Growing Continent
This session highlights the transformative potential of interoperable digital financial infrastructure in Africa. The focus was on enhancing financial inclusion, reducing transaction costs, improving financial efficiency, and enabling cheaper remittances. Panellists underscored the importance of balancing innovation with security, privacy, and regulatory frameworks to foster a sustainable digital financial ecosystem.
Key Themes and Insights:
1. The Importance of Mobile Penetration
- Access and Innovation: Two-thirds of Africa's adult population remains unbanked, but the continent’s high mobile phone penetration offers immense potential for digital financial services. Mobile money accounts in sub-Saharan Africa have doubled compared to other emerging markets, driving a digital financial revolution.
2. Experiences and Strategies from Different Countries
- Ghana: Governor Addison from the Bank of Ghana discussed Ghana’s proactive approach, which started in 2005 with the Ghana Interbank Payments and Settlement System. The country has embraced mobile money and created a supportive regulatory framework for fintechs, including a regulatory sandbox to encourage innovation.
- Rwanda: Governor Rwangombwa of the National Bank of Rwanda highlighted the government’s focus on connectivity, with 95% 4G coverage and support from Starlink for rural areas. Rwanda’s regulatory framework has evolved to support fintech innovation, with initiatives like a digital financial education campaign and a focus on cybersecurity.
- Kenya: Former Governor Njoroge of the Central Bank of Kenya shared Kenya’s experience as a pioneer in mobile payments. The focus has been on creating a robust regulatory framework to ensure fairness and sustainability. The government is pushing services online and investing in infrastructure to connect rural areas.
3. Private Sector Perspective
- Mastercard’s Approach: Dr. Dosis from Mastercard emphasised the need for interoperability, stability, and a level playing field. Mastercard has invested in on-ground technology in Africa, enabling real-time clearing and supporting financial inclusion initiatives. The company is also focused on leveraging AI to combat fraud.
4. Challenges and Solutions
- Digital Literacy and Cybersecurity: Rwanda highlighted the need for digital education and measures to counter cyber threats. Investments in national cybersecurity operations and public awareness campaigns are key.
- Connectivity and Affordability: Kenya stressed the challenge of expensive gadgets and the need for affordable smartphones, suggesting a $5 smartphone could revolutionise digital access.
- Regulatory Balance: There is a need to balance regulation and innovation. Ensuring fair competition and building trust through fraud prevention are vital.
5. Interoperability and Cross-Border Payments
- Current Obstacles: Cross-border remittance costs in Africa are as high as 10-20%, significantly above the UN’s target of 3% by 2030. Regulatory harmonisation and better infrastructure are needed.
- Ongoing Initiatives: Efforts like the Pan-African Payment and Settlement System aim to facilitate cross-border transactions. There is a commitment among African central banks to improve connectivity and create a unified payment system.
Closing Remarks:
The discussion emphasised that Africa’s digital financial future hinges on collaboration between governments, regulators, and the private sector. Interoperability, financial literacy, and affordable technology are essential for inclusive growth. Africa's youth and growing population present a significant opportunity for innovation and economic development. The session concluded with a call to action for continued investment in infrastructure and partnerships to realise Africa’s digital financial potential.
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Speakers:
- Dr. Dimitrios Dosis, President, Eastern Europe, Middle East and Africa, Mastercard
- Dr. Ernest Kwamina Yedu Addison, Governor, Bank of Ghana
- John Rwangombwa, Governor, National Bank of Rwanda
- Dr. Patrick Njoroge, Former Governor, Central Bank of Kenya
Moderator:
- Dr. Luca Antonio Ricci, Advisor & Mission Chief, International Monetary Fund