Ghana ranks among a few countries in Africa which are leading the continent’s financial technology revolution required to grow the gamut of businesses that will drive inclusive growth, create jobs and develop pathways to better livelihoods for the African people, a report by the United Nations Economic Commission for Africa reveals.
According to the report, the role of the private sector stands out among the widely advocated options that could scale up the continent’s economic progress, especially regards achieving the Sustainable Development Goals and the African Union’s Agenda 2063.
Instead of overly relying on governments and the donor communities for investments in this respect, which have already proven to be very low throughout the years, focus must therefore be turned towards the private sector. For this to happen, governments must invest in systems and strategies that could provide an enabling environment for the private sector to play this role efficiently and effectively, the report hints.
Besides, having suffered an unprecedented threat from the economic fallout of the COVID-19 pandemic, the costs associated with achieving the SDGs and the AU’s Agenda 2063 have overly increased. Projections are that the cost involved in achieving the SDGs by 2030 in Africa is about $1.3 trillion a year and this is set to increase dramatically due to a projected increase in the continent’s population at 45 percent over 2020-2030.
Africa’s infrastructure financing should come from capital markets, pension funds, and other sources of funding, adding, against the COVID-19 backdrop, this was the best time to adopt robust policy frameworks for Africa, said Adelaide Matlanyane, Governor of Central Bank of Lesotho in a launch of the report. “We have to look for adaptable solutions to the unique circumstances of Africa. Governments should be moving to the provision of e-services and adopting technology to enhance financial inclusion,” she added.
Fintech developments in Africa has gained momentum and countries such as Ghana, Kenya, Rwanda, South Africa and the United Republic of Tanzania are among the leading countries to have rapidly opted for them. Extant data also reveals that the global fintech revolution is expected to triple access to financial services in Africa, creating a new market of 350 million customers. Current and forecast fintech transactions also suggest that the global fintech market will double 2017 transaction values by 2023, according to Statista.
Africa’s financing gap has provided a unique opportunity for fintech development to furnish alternative finance sources and investment mechanisms, particularly for start-ups and micro, small and medium entreprises.
Two key fintech activities, crowdfunding and crowdinvesting have also experienced growth over the years. These are also contributing largely to providing finance opportunities for businesses. According to the report, these two fintech activities are projected to grow at 13.6 percent a year from 2020 to 2023. Thus, growth projections and forecasts for alternative financing and crowd sourcing instruments are very promising. However, this type of market faces a major challenge: controlling fraudulent activities.
“Crowd-based financing for business activities benefit markets only if borrowers and investors trust one another. Establishing binding rules and guidelines is essential to securing that trust.”
According to the report, other innovative solutions for private financing include raising funds from the private investment market. Again, private equity investment deals are concentrated mainly in West Africa and North Africa, with the top receivers being Egypt, Ghana, Kenya, Nigeria and South Africa. Long term financing opportunities can also be explored such as raising funds from the green bond market to aid in infrastructure financing.
Key recommendations from the report include regulating the banking and financial services sector; creating financial stability through effective policies; amending and updating financial sector legislation and regulatory policies; and promoting innovative private sector financing.
