Exploiting Digital Financial Services (DFS) Key in Ending Poverty.

Exploiting Digital Financial Services (DFS) Key in Ending Poverty.

Last week I read a joke by Gerry Loughran in the Sunday Nation and I loved it a lot. It read, “Tell me, Daddy, what is the difference between confidential and confidence? Well, for instance, you are my son. I’m confident of that. Your friend Bobby is also my son, that is confidential.” This approach can help me define DFS and traditional financial services. For instance, sending money from your Mpesa to the bank, that is DFS. Buying a money order at the postal office is a traditional financial service.

DFS is the broad range of financial services accessed and delivered through digital channels including payments, credit, savings, remittances and insurance. This includes mobile financial services (MFS). Talking of mobile financial services and Mpesa comes to mind.

Most countries that have aspired to grow rapidly have empowered their people to have bank accounts. Having a bank account is very important because we wake up to new financial lessons of saving and conscious spending. Having a well-managed bank account is a secret to wealth creation because it encourages people to save and then invest. Narendra Modi is one global leader who has embarked on a massive call for his people to have bank accounts.

The Chinese are not to be left behind with their age-old culture of saving. The Jews too (Israel has a majority of them) have a very simple model of handling cash and saving is very critical to them as is oxygen to life.

The advantages of having a bank account are enormous. One is that we are able to discipline ourselves in terms of financial management. We become very critical with planning – changed mindset – and often we think of the future. This is the beginning of wealth creation.

Secondly, whenever an opportunity for investment arises, we are able to have startup capital for initial investment. Now when you start to think of growth and expansion, you are able to get direct access to credit services due to proper past banking discipline and history with your bank.

Back to DFS. How critical are they in all these scenarios? How can we leverage on it for maximum wealth creation? Let us explore the avenues for wealth creation and empowerment provided by DFS as a complimentary arm to banking.

Today, opening and operating a bank account is very easy. Digital platforms offer opportunity for people to operate and transact their accounts at their convenience even if it means transacting at the middle of the night.

A farmer in the village today has an equal opportunity to access credit services as a person in the urban areas. Mpesa became a flagship project that helped open up the digital financial sector in East Africa. Innovation around this area has slowly catapulted to South and Central Africa as well as other parts of the world.

In a paper, Breaking the Pattern; Getting Digital Financial Services Enterprises to Scale in India and East Africa, I noted that for instance Farmdrive is using data analytics to help small holder farmers in E. Africa to gain (easy) access to credit while Esoko provides farmers with an opportunity to lay away and borrow money to purchase the right inputs in time. Tala, M-shwari, KCB Mpesa are among other platforms offering digital financial services for enterprises in Kenya.

Within the week, I also attended a forum at the Strathmore Business School where I also discovered that Safaricom has a Safaricom Spark Fund that offers digital credit and capital financing for business start ups. Then there is Telkom’s latest T-Kash. The digital financial services platform is changing rapidly and the future looks even brighter.

To have an account on those platforms, one only needs to have a mobile phone. For instance, having an active Mpesa account becomes a pathway for being an Mswari and KCB Mpesa member once activation is over. From there, one can bank successfully, deposit, pay, remit, and withdraw cash easily. It also offers very simplified credit access in a digital way which is convenient and time saving.

This area remains largely unexplored though since only a few major players are in control of them. If we can increase availability of financial capital and at the same time mitigate risks DFS companies face on a path to scale, Africa could be on the way to empowering and creating wealth for all of her people.

Let us wake up and exploit the Digital Financial Services (DFS) so that irrespective of our location or economic status, we can have an equal opportunity to grow and create wealth so that poverty begins to decline and be a thing of the past.

Copyright @ 2018.

 

Geoffrey Ndege

Geoffrey Ndege

Geoffrey Ndege is the Editor and topical contributor for the Daily Focus. He writes in the areas of Science, Politics, Policy, Technology, Current Affairs, Opinion, Agriculture, Energy, Education, Entrepreneurship, Governance, International Emerging Issues, Society, and culture. For featuring, promotions or support write to us at ndegegeoffrey@gmail.com

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