Digital Finance

New market entrants such as Mobile Network Operators (MNOs), FinTechs and other third-party agents are capitalizing on the proliferation of digital and mobile channels, which is reducing costs and making financial services more convenient and accessible to customers, while moving away from unsecured cash-based transactions. DFS as opposed to traditional banking services also provides customers the ability to transact in small amounts.


Despite these positive global trends, the landscape of digital financial services is quite diverse in Africa. While some countries are endowed with numerous DFS offered by a range of financial service providers (FSPs), other markets are characterized as very narrow with basic financial services provided by a limited number of FSPs or by informal financial services. In addition, the growth in mobile phone ownership does not always equate to an increase in day-to-day use of DFS by the population; In Nigeria for example, the high mobile penetration levels have not resulted in widespread adoption of mobile money and other DFS. In most SSA countries, the rise in mobile phone subscriptions has not necessarily translated into mobile money transactions. In fact, the highest shares of mobile transactions per GDP are observed in countries like Kenya, Tanzania and Uganda, which do not stand out particularly in terms of mobile phone penetration. Conversely, in countries like Botswana and Namibia where less than two thirds of adults have a bank account, there are already more mobile phone subscriptions than inhabitants and yet the volume of mobile money transactions is strikingly low. Mobile infrastructure is not the main bottleneck everywhere and digital financial inclusion has a high unrealised potential in many countries. In Mauritius, the extensive reach of both urban and rural banks explains the under-development of mobile-based accounts. In Tanzania and Cote d’Ivoire, mobile-based accounts have flourished due to the scarcity of rural banks.

The widespread deployment of mobile payment systems, has raised a number of oversight challenges, including legal uncertainties, customer protection, money laundering and financing of terrorism risks, as well as operational and liquidity risks among others. There are also fundamental issues around data protection to consider. The emergence of Fintech and other non-bank payment service providers implies that a broad range of financial and non-financial data is being held and shared across a number of parties. While enhanced data and analytical capability holds great promise for customers, providers and supervisors of financial services, this can only be properly harnessed if privacy and data protection risks are addressed.

The penetration and success of additional financial products, such as bill/merchant payments and bulk disbursements, has been mixed. Merchant payments have struggled to gain traction, and account for only 5% of the volume of transactions and 5% of the value of transactions in 2016. The value proposition for merchants to accept digital payments is still developing and needs to fit local market criteria such as banking infrastructure (card or wallet based), customer preferences and behavior around digital wallets (large or small balances), and norms around payments to suppliers (cash or other methods).


Building consumer trust is key for achieving sustainable uptake and active usage of digital financial services in Africa. The development of effective supervision and oversight frameworks can help maintain public trust and payment system stability, particularly in Africa where digital payments are a major tool for financial inclusion. Adopting a proportionate risk-based approach to both regulation and supervision can strike the right balance between “enabling” innovations to help broaden financial inclusion, while maintaining flexibility to preserve financial stability and system integrity.

Regulators in East Africa in particular have led the way in introducing regulation only after a need for it has been shown. This regulatory flexibility coupled with an environment marked by constant digital innovations have promoted the diversification of operators and distribution channels, as well as access to financial services for people who are usually excluded from the formal financial system.

The proliferation of technology-driven trends in the distribution of DFS, such as biometrics to enhance security and the use of digital footprints is a source of credit referencing for microfinance institutions. The use of alternative data to evaluate credit risk in particular, has received a lot of attention due to their success in some markets on the continent. Big data analytics presents an unprecedented opportunity to better understand and serve clients, especially those otherwise excluded from the financial system. Trends such as distributed ledger technology and blockchain have the potential to challenge and impact conventional ways of delivering financial services. However, very limited actual ‘use cases’ have been introduced to demonstrate how these technologies can help expedite financial inclusion. 

Highlights of our Activities

MFW4A supports the development of an enabling environment to allow digital finance to flourish and overcome barriers to financial inclusion. We also explore the potential for digital payment solutions to support the expansion of access to critical services, such as water, energy, education, health, etc. 


Jul 29, 2021 | Source : MFW4A

The Transaction Guarantee is the Bank’s new trade finance instrument that provides up to 100% cover to confirming banks for non-payment risk taken on trade transactions of African Issuing banks. …

Jun 17, 2021 | Source : MFW4A, AMENET

This article is the first joint collaboration between the AMENET university network and the initiative Making Finance Work for Africa (MFW4A). By way of introduction, this first article includes…

Strategic Partners


Sep 23, 2021 | Source: Nation - All Africa
Ethiopia and Kenya have finally sealed a deal for a free trade area projected to make cross-border business dealings easier. The signing of an operational guiding document, the Moyale One Stop…



Oct 05, 2021 - Oct 06, 2021
THE EIB WEST AND CENTRAL AFRICA SME BANKING AND MICROFINANCE ACADEMY 2021 Theme: Building a resilient MSME financial sector for inclusive growth in West and…


Oct 18, 2021 - Oct 22, 2021
Kigali, Rwanda
The African Microfinance Week (SAM -Semaine africaine de la microfinance in French) is a conference dedicated to the development of financial inclusion in…