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April 6, 2021

Financial inclusion is an important driver for enabling both commercial and social benefits. As millions of people enter the formal economy and benefit from mobile financial services, it will give rise to employment opportunities and bring us a step closer to achieving Sustainable Development Goals (SDGs).

SDG target 8.3 calls for development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity, and innovation, and encourage formalization and growth of micro, small, and medium enterprises (SMEs) including access to financial services. SDG Target 9.3 also calls for an increase in the access of small-scale industrial and other enterprises to financial services—including affordable credit—and better integration into value chains and the market.

Limited financial infrastructure is a major obstacle for entrepreneurs. In regions where traditional financial service points such as bank branches and automated teller machines (ATMs) are lacking, the challenge of finding cost-effective ways to make financial services available to citizens is a significant barrier to inclusion and to the development of online businesses. Information and Communication Technology (ICT), and particularly mobile money, is helping to overcome these obstacles on the path to financial inclusion. 

The link between ICT and e-commerce innovation is clear; ICT offers a cost-effective way to overcome the existing lack of adequate banking infrastructure. It can be rapidly scaled, offers significant efficiency gains, and entails low barriers to entry for individual users.

Financial inclusion through e-commerce is a growing ICT application that can have a positive impact on the business landscape of an economy. Global e-commerce is evolving fast, bringing new opportunities for SMEs and rural enterprises. Prohibitive service costs, high interest rates and too much of profit going to brokers, all currently discourage small entrepreneurs from approaching banks for capital to start and grow their businesses. 

ICT can address these barriers by helping to reduce service costs. Where the share of producers in both the local and global value chain remains low, ICT can increase access to market information and new markets. Higher product prices and a greater share of the value chain will make businesses more profitable and increase income per capita, helping to reduce poverty.

Online marketplaces have created platforms for sellers, customer service, payment processing, and shipping, delivery, and return processing. SMEs that are able to harness this technology can benefit from the opportunity to enter international markets, export their products and services, and gain competitive advantage from reduced costs of production and service delivery.

In addition to the high cost of telecommunications, Micro-Enterprises, and SMEs often lack the capacity to use ICT-led financial services due to poor communication infrastructure and lack of regulatory support. They are hindered by the prevalence of obsolete technologies and the prohibitive cost of installing new technology. They also suffer from a lack of qualified staff and low digital literacy skills. Skills improvement and capacity-building are therefore pre-conditions for these businesses to access ICT-financial services.

More than half of consumers in Africa are using mobile money services through an agent, and some 20% use mobile money themselves on a mobile phone. Banks, retailers, and mobile operators play a key role in the e-commerce value chain and create whole new revenue streams. Getting all relevant parties to connect (creating a new type of ecosystem that is open for everyone to join) makes mobile money transactions as easy as sending an SMS.

The next generation of mobile commerce development will be driven by connecting banks, operators, money transfer organizations, and payment and internet service providers. This industry-leading work is creating a more flexible, transparent, and open financial ecosystem that helps key stakeholders expedite the launch of mobile financial services to drive financial inclusion.

In developing countries where unemployment or under-employment of youth and women is a growing problem, expansion of micro and small businesses can create vital employment opportunities needed to eradicate poverty. Although still in the early stages, a robust mobile financial ecosystem will help ensure services become more relevant and useful to entrepreneurs and small businesses, and sustainable over the long term.