Why is Digital Inclusion Slow for Africa?

There's been a lot of hype and hysteria around Africa's potential to skip the plastic and go straight to fintech-enabled financial services powered by mobile money and digital wallets. A lot of money has been poured into startups developing neo banks, money transfer services, and, yes, the most exciting one, digital payments. Everyone who can write two lines of Java seems to be developing a digital payment solution for Africa. When you look at the valuations of some of these companies, you wonder if you did the wrong MBA program or if valuation no longer follows the conventional norms of finance and accounting. It's not unusual to find a startup with 250k users valued at $50 per user. But all users are not born equal, and this is where the problem lies.

Our Fintechs in Africa and the rest of the world are trying to do the right thing, but are they doing the "thing" right? There are two critical words in "digital inclusion" and "financial inclusion." The words are "digital" and "financial." I recently read Rwanda's Payment System Strategy 2024 put out by the National Bank of Rwanda (BNR) and the Ministry of Finance and Economic Planning. Rwanda believes that for the general population to migrate to a digital economy, three things must work together in combination:

1. A large portion of the population owns and uses a digital store of value.
2. There is a widespread payment acceptance infrastructure.
3. Customers and merchants are incentivized to move to digital payment methods.

I agree here, and this is my concern with Africa's fintech that is receiving valuations of titanic proportions without much to show for driving digital and financial inclusion. Here are my thoughts.

Digital and financial inclusion start with the digitization of manual processes. Mobile money is an excellent phenomenon for Africa, and almost every African has a mobile money account. But most of our community financial transactions are taking place outside of the mobile money or bank infrastructure. Payments for casual laborers, cooperative unions members, out-growers, and farmers, to mention but a few, are all being done manually because their backends are not digitized. Digital inclusion is therefore not so much about banks providing mobile banking to clients who, in some cases, can't read or write, but about finding these clients right where they are and digitizing their manual processes on the local level. This is not as exciting a task as powering up Flutter to develop a new app. It's definitely not one to be understood by venture capitalists requiring a 10X return in less than five years. Think of Confinity (yep, that's Paypal's original name) paying users back in the days. Techpreneurs who are going to rip massive benefits are building for the long run, helping communities digitize their current manual processes. And the investors these entrepreneurs need are not those who are skimming the cream off the top, but those with patient capital, willing to transform the world more profoundly, one person at a time.

Digital finance starts with incentivizing communities to move away from their longstanding cash habits. I can't wait to do this formal research, but from my little experience in the remote parts of Africa and several of our fintech startups, incentives are everything. Yes, training is essential, but sometimes knowledge is better transferred experientially rather than pedagogically. To move communities away from their inefficient and archaic systems, we need to provide more than reason. We need to gamify the process, making it less college education and more practical living.

Finally, digital and financial inclusion cannot be done by small startups working on bootstrapped budgets and $50k awards from accelerator and incubator competitions. This giant game requires central banks, commercial banks, retail banks, telecoms, and regulators to play together like one lovely Manchester United soccer team (sorry Arsenal lovers et al.). I remember moving my phone number from one cellular provider to another in the United States, something I cannot do in most emerging markets. Interoperability is key to creating a system that works nationally and internationally. Interoperability is a fancy word to mean "systems freely exchanging information." NATO talks of Force Interoperability as the ability of the forces of two or more nations to train, exercise, and operate effectively together in the execution of assigned missions and tasks. That's what banks, telcos, and African governments need. We need to create this NATO-like framework of working together to make laws and regulations that take us out of our closets, each fighting their own battle and expecting a united victory. This is not going to happen. While a young tech entrepreneur in the United States has access to 300+ million people united by standard systems, our young entrepreneur in Burundi is limited to 11 million people. If he tries to cross over to Tanzania, well, digital regulations there don't match his Burundian solution.

Building digital and financial inclusion for Africa is not a task for those looking for quick wins and Silicon Valley-like valuations. This is a game for those who want to change the world and change it profoundly. And those are the people I want to meet. People who want to build a world they may never get to enjoy, but one that will change humanity forever. Which side are you on? If you are on the transformational side, let's talk.