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Financial identities for unbanked in SSA could rake in US$43-billion

By , ITWeb
Africa , 11 Dec 2019

Financial identities for unbanked in SSA could rake in US$43-billion

Establishing financial identities for Sub-Saharan Africa's 'unbanked' population could attract an additional US$43-billion to annual GDP for the region. This figure equates to an average increase in GDP of US$41 per person and factors in a 17% rise in total household savings (US$31-billion).

This is according to a study by independent global advisory firm Oxford Economics, The YES Economy: Giving the world financial identity, which identified Nigeria (US$7-bn GDP uplift), Cote d'Ivoire and Madagascar (both US$3bn uplift), as the stand-out markets for this growth.

The global report was authored by Oxford Economics, on behalf of Juvo, which claims to be the pioneer of Financial Identity as a Service (FiDaaS) technology.

FiDaaS technology analyses alternative data using machine learning to build financial identities, allowing billions of unbanked and underbanked consumers to qualify for financial services, often for the first time.

Oxford Economics said it devised a FiDaaS-enabled scenario to reflect a world in which mobile telecom operators have created a unique financial identity and credit score for their unbanked customers, allowing the provision of financial services to those that lack a credit history.

"Mobile operators extend low-cost, low risk offers to their customers, such as airtime loans. Based on payback behaviour, consumers gradually build up to larger transactions: and then access other financial services, via partnerships between operators, financial service providers and merchants," reads an excerpt from the statement.

The analysis found that resolving the financial identity problem in Africa would deliver the following estimated results:

• A USD $43bn increase in regional GDP

• A USD $22bn increase in credit availability to households

• A USD $31bn increase in household savings

• A USD $41 average increase in GDP per person

Steve Polsky, chief executive officer and founder of Juvo, said,"Establishing financial identities through mobile network operators could have profound implications for governments, financial institutions, and for the millions of unbanked (and underbanked) individuals around the world. For governments, it represents a massive boost to economic development and progress. For financial institutions and the mobile telecom operators they partner with, it represents a multi-billion-dollar revenue opportunity. And for the unbanked, it opens up fair and equal access to useful financial services that wouldn't otherwise be available to them."

Anubhav Mohanty, Lead Econometrician at Oxford Economics added, "Sub-Saharan Africa is the region that would experience the strongest relative growth in both savings and GDP based on the FiDaaS model, with a 17% and 2.4% increase respectively.

"According to World Bank data, 374 million people in sub-Saharan Africa (63% of the adult population) are locked out of the formal economy. Of this total, 101 million can't join the formal economy because they lack a financial ID. What's notable is that of this number, 22 million adults may have the funds to engage with financial service providers."

Lack of financial identity

The statement references World Bank data which states that 3.9 billion people around the world (68% of adults worldwide) are locked out of the formal economy due to a lack of credit history. These adults are unable to provide the necessary information that would make up their "financial identity", such as a formally recognised credit history.

"There's a huge crossover between the unbanked and the world's mobile phone users. With a financial profile in place, unbanked mobile users can tap into consumer financial services that wouldn't have otherwise been available to them," explained Steve Polsky, chief executive officer of Juvo. "Once people are more active financially, they can incrementally improve their credit profiles, and access new services as well."

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