Digital Transformation of Microfinance and Digitization of Microfinance Services to Deepen Financial Inclusion in Africa

Digital financial services (DFS) are spearheading greater financial inclusion in Sub-Saharan Africa, with 338 million registered accounts in 2017 and a significant boost in penetration from 12 percent to 21 percent between 2014 and 2017. Over the past decade of market development, DFS has diversified from basic money transfer and bill payments to credit, cross-border remittances, savings, insurance, merchant payments, bulk disbursements and other value-added services like pay-as-you-go (PAYG) energy, crowdfunding, savings group and value chain digitization. Digital credit offers are growing rapidly in mature DFS markets in Africa, such as Kenya, Tanzania, Uganda and parts of West Africa. With the rapid evolution of technology in the provision of financial services, regulators need to enhance their capacity and knowledge to keep pace with developments in technology, DFS and the microfinance sector. This understanding will enable them to develop and adapt proportionate regulatory and supervisory frameworks that enhance financial inclusion while mitigating the risks associated with DFS expansion.