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Why African SMEs aren’t buying into digital banking services

Africa , 10 May 2022

Small and Medium Enterprises (SMEs) in Africa are not taking advantage of the digital banking services offered by the majority of banks on the continent, according The African Digital Banking Transformation Report 2022, released by African Banker magazine and banking platform Backbase.

Research showed that the percentage of African SMEs that use digital banking platforms is the lowest in the corporate banking segment.

Experts believe this is partly because many SMEs do not use official banking services tailored for businesses for fear of incurring more charges than those applied to normal individual bank accounts.

The report stated: “Most surprisingly, of the banks surveyed, 79 percent reported that less than half of the SMEs who did bank with them made no use of any digital banking services, whether because of a perception that bank charges were prohibitively high or because they consider such offering to be irrelevant.”

The figure for individual customers is 59%.

According to the report, the lack of adoption among SMEs and small businesses in Africa stems from the lack of institutional training in digital banking.

The requirement for formal documentation has also put SMEs off “since it offered a convoluted trail of opening corporate accounts as opposed to individual holders.”

It added that banks have a greater task to tailor-make SME-friendly digital products.

“SME customers can be attracted by ensuring all interactions are as straightforward as possible, including digital onboarding and use of services,” it recommended, along with value in assisting SMEs to negotiate legal requirements when onboarding.

Lack of skills

The lack of qualified and experienced digital skills in the banking sector is also slowing down development of SME friendly digital banking tools. The sector needs technical workforce to build, maintain and upgrade digital platform.

“Regarding challenges faced by the banking industry, the lack of a skilled workforce is viewed as the biggest threat and is cited by 46% of participants in the survey,” the report denoted.

A recent study by the IFC found that over 230 million jobs in Sub-Saharan Africa will require digital skills by 2030, resulting in almost 650 million training opportunities.

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