African markets

FinTechs drive digital finance in small African markets

In the technological transformation of payments, it is often the smallest economies that are the last to modernize. At the same time, international payment rails and currency infrastructure tend to focus on the most widely used currencies before moving on to smaller, more obscure markets.

In emerging economies across Africa, the lack of attention from international FinTechs puts smaller countries at risk of under-digitalisation and falling behind technological advances made elsewhere.

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Two of these countries, Madagascar and Mauritania, provide particularly interesting case studies because of the unique position of the Malagasy ariary and the Mauritanian ouguiya as the only non-decimal currencies in the world, both subdivided into five in the instead of 10.

Separated by an entire continent, the two countries nevertheless share similar problems in terms of financial exclusion. The World Bank’s Findex reports that in 2017, only 10% of Madagascar’s adult population and 17% of Mauritanians had an account with a financial institution, suggesting that economies with high liquidity have much to gain from digitization.

Microfinance goes digital in Madagascar

The good news for Madagascar is that significant gains have been made since 2017. As reported by the World Bank, mobile money adoption in the country has increased significantly between 2017 and 2020, from 277 accounts to 645 to 1 000 adults. During the same period, the value of transactions as a percentage of GDP increased from 12% to 47%.

Currently, Madagascar has three mobile money service providers: Orange Money, Airtel Money and Mvola de Telma.

Apart from telecom operators, other non-banks also provide digital financial services in Madagascar. Microfinance institutions that play a critical role in supporting the country’s agricultural sector and small businesses have expanded their payment channels to include digital lending via mobile money or wire transfer.

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For example, the Aga Khan Agency for Microfinance began disbursing loan payments digitally in 2016. In 2020, the lender reported that it issued over 611,000 digital loans, worth $19 million and representing more than 10% of its total portfolio.

Madagascar’s microfinance providers are also partnering with the country’s technology innovators to extend lending to otherwise underserved groups. Last month, microlender ACEP partnered with French-Malagasy startup EdTech SAYNA to provide student loans of $50 to $600.

SAYNA has created a mobile video game designed to teach digital skills and automatically connect learners to computing microtasks demanded by global companies. The latest collaboration with ACEP follows a $600,000 funding round to further develop the product and acquire new commercial customers.

Digital banking boosts financial inclusion in Mauritania

Like Madagascar, Mauritania’s FinTech ecosystem has been fertilized by the growth of mobile money and the expansion of electronic payments, a transition that was accelerated by the passing of the country’s eMoney law last year.

Read more: Mobile-First Software Solutions Can Help African Merchants Digitize Their Businesses

Since 2020, digital banking has also arrived in Mauritania, first with Bankily from the Banque Populaire de Mauritanie (BPM), then last year with the launch of Masrvi by the Mauritanian Bank for International Trade (BMCI).

A positive sign for the international attractiveness of the Mauritanian economy, BPN called on the Indian telecommunications company Comviva to help it build its digital banking solution, while BMCI turned to the French FinTech TagPay, which has since renamed itself Skaleet.

Related: Comviva and the Strands team to provide banks with a digital payment suite

Building on the BMCI partnership, Skaleet announced last week the launch of a new mobile payment project with the National Bank of Mauritania (BNM).

The project will see Skaleet partner with Moroccan software developer Mobiblanc Finance to build the Click mobile wallet, as part of BNM’s digitization strategy. With this new project, the BNM aims to “fight against the massive use of cash at the national level, support the financial inclusion strategy and facilitate the transition of the Mauritanian population from a cash solution to a new digital solution”, said Skaleet said in a press release. Release.

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New PYMNTS Study: How Consumers Use Digital Banks

A PYMNTS survey of 2,124 US consumers shows that while two-thirds of consumers have used FinTechs for some aspect of banking, only 9.3% call them their primary bank.

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