Digital financial inclusion in Africa : an analytical assessment of Kenya & Nigeria
Financial inclusion aims to ensure access to and usage of financial services by all. This model plays an increasingly important role in economic development. The digital financial services (DFS) trend promises to provide access to the majority of Africans. However, inclusion in DFS schemes varies by region and country. East Africa, especially Kenya, leads. Other regions on the continent are playing catch-up. In West Africa, Nigeria is in front. Nigeria recently approved guidelines that allow payment service banks (PSBs) to provide mobile money-type services. However, the Nigerian initiative did not allow PSBs to provide loans. Kenya’s relatively advanced digital mobile lending sector confronts serious issues with predatory lending practices. The many barriers to universal financial inclusion, including access, cost and complexity, are high. A traditional retail bank spends hundreds of dollars to obtain each new customer, and does not view the unbanked poor as a viable demographic. The advent of mobile financial services (MFS) promises to overcome these barriers. The ubiquitous, relatively cheap and easy to use mobile phone provides a platform for the delivery of financial services. MFS has a powerful potential to enable financial inclusion. This article takes a critical look at developments in two key regional economies: Nigeria and Kenya. The former recently enacted a new policy on payments, while the latter faces several serious issues arising from weak governance of digital credit.