Leveraging fintech to deepen financial inclusion in Eswatini
By Muzi Dlamini
The age of traditional financial service providers depending on cash-in and cash-out services via banks and ATMs is on a downward trend as financial technologies take over.
Financial technologies (fintech) are taking over the finance industry and have altered the financial services landscape. Financial deepening – which is about increasing the provision of financial services in an economy – can lead to a wider choice of services and better access to different socioeconomic groups.
So, can fintech deliver the necessary tools and financial products to provide services to hard-to-reach communities, the unemployed, and the underbanked?
Fintech development in Eswatini
According to Julia Kagan, fintech seeks to improve and automate the delivery and use of financial services. At its core, it is designed to help more consumers gain access to financial products and services. It is a concept that is accessible to everyone.
Banks and other developmental institutions have started using fintech as part of their service provision. The expansion of mobile money and the introduction of blockchain, super platforms, and artificial intelligence continue to change the face of financial services. The services offered through fintech enable the provision of financial products without discrimination of gender, employment status, and/or type of business the end-consumer runs, amongst other factors.
However, fintech programmes and applications in Eswatini leave a lot to be desired. The banking industry has begun to monopolise these technologies to improve its bottom line. Banks are using fintech to make existing financial products mobile and more accessible. They are simply transforming the physical structure of a bank into a mobile and flexible concept accessible through cell phones. As a result, these innovations are not really expanding the types of financial products available to the different sectors of the economy.
Yet fintech can offer so much more. Fintech is capable of deepening financial inclusion. It can benefit consumers by creating entirely new categories of products and services. Moreover, these products and services can be of high quality but at affordable rates. However, fintech as a concept in Eswatini is gradually being trapped in the ideologies of the conventional banking system, developing side by side with cellphone network operators.
As a result, the banking sector and cellphone network operators are gradually monopolising these technologies to further their own ends. There is nothing wrong with these companies making a buck and increasing their market share, but greater benefits can accrue to the economy if everyone is involved. When one thinks of fintech in Eswatini, a major part of the equation has to include either a bank or a mobile phone network operator or both.
The United States of America is slowly waking up to the idea that big tech – which includes companies such as Google, Amazon, Facebook, and Apple – is increasingly becoming the poster child for a significant increase in monopoly and oligopoly power across the American economy. For Eswatini to seize the full potential of the digital economy as it applies to fintech, the country needs to support strong pro-competition policies that open up opportunities for innovation and counter the forces that tend to lead to high concentrations in one sector with single winners.
So, what more can Eswatini do to harness the greater potential of fintech? Can Emaswati be innovative enough to develop financial technologies beyond the traditional, to diversify the types of financial products and services on offer?
Mobile Money: the fintech gold standard?
Mobile money is an example of the application of fintech. According to FinMark Trust (2018), about 453 981 adults (67.2%) are mobile money users in the country. This clearly demonstrates a huge appetite for fintech in the Kingdom. Moreover, the Central Bank of Eswatini (2018) reports that Eswatini MTN’s Mobile Money alone has deposits amounting to E2 billion.
Despite the increase in mobile money users, there are a number of factors that policymakers need to address for existing and future financial technologies to be fully effective in increasing access to financial services, as well as deepening financial inclusion in Eswatini.
The most prominent of these factors is pricing. For instance, even though mobile money provides convenience to its users, its service charges might substantially suffocate demand over time. According to the Mckinsey Report, in sub-Saharan Africa the average transaction cost is E20 for every E1 000 sent or received in 2018. In other words, mobile money comes with a 2% levy against every transaction. This makes mobile money elitist, considering that 58.9% of Eswatini’s population lives below the national poverty line (Eswatini Household Income and Expenditure Survey 2016/17).
However, mobile money in Eswatini can be better deployed to serve everyone. For instance, Kenya’s M-Pesa has moved from being not only a conduit to send and receive money but has evolved to a technology used for micro lending. Thus, based on the customer transactional behaviour and history on the platform, and the algorithms’ determination, an individual can access credit.
Worth noting though is that Eswatini’s mobile money platforms are making new strides into micro lending as well. The local mobile phone networks have initiated pilot loan services and users are now able to access credit between E50 and E800. However, is this it for fintech applications in Eswatini? Is mobile money the new gold standard for development and deployment of financial technologies in Eswatini’s developing economy?
Fintech needs to be opened up to uncover its true potential. Clearly, there is a huge appetite for fintech products and services in Eswatini. However, its use and application is skewed and limited to only a few products, which is further compounded by low levels of innovation and creativity to expand the scope of fintech.
Nonetheless, fintech possesses the potential to solve societal challenges like financial exclusion, inequality, and poverty, among other socioeconomic ills. Thus, science technology and innovation (STI) policy in Eswatini needs to create a conducive environment to encourage the applications of fintech for solving social and economic problems.
While it is encouraging to see that Eswatini is able to adopt and localise fintech developed in other economies, let us also see a lot more activity in expanding its application to serve the different needs of our economy alongside the financial needs of the different socioeconomic groups. Eswatini can achieve all of this if it approaches fintech with an open mind, allowing it to penetrate the other sectors of the economy and other spheres of emaSwati’s livelihoods.