May 16, 2020

Empowering women in Africa through microfinancing

N’Gunu Tiny
Emerald Group
women
Finance FinTech
N’Gunu Tiny
5 min
N’Gunu Tiny, Chairman of Emerald Group discusses the use of technology in the African finance industry to empower women.

Technology is changing the w...

N’Gunu Tiny, Chairman of Emerald Group discusses the use of technology in the African finance industry to empower women.

Technology is changing the world of finance by encouraging innovation in the sector and creating new ways of thinking. In Africa, it is helping to tackle gender inequality by creating opportunities for equal and fair access to banking services and the development of regional and local communities. 

The banking sector is changing globally, and new regulations are creating fairer competition. African businesses are able to reflect on technologies and legislation used in the West to see how the sector may potentially develop, but then adopt these technologies with a greater focus on empowering the population. 

We are entering the advent of open banking, APIs, digitisation and clever partnerships with FinTech service providers has meant that Africans are leading the way with early adoption of new technologies. 

For example a recent partnership between Emerald Group and Makeba Inc., a US based financial services provider allows users to make peer to peer transactions and provides services for individuals and businesses in the African economy. 

With a variety of companies investing in the African economy, and the development of new technology and increased access to financial systems, you should rapidly see a positive difference to local and regional communities.

Banko Financial Group are also making inroads into the integration of finance and technology. Banko is a technology aggregator that focuses on banking solutions, not just a bank that has a technology focus. It provides secure platform solutions for banks that in turn can offer these solutions onto their customer base in order to offer services such as microfinancing. This long-term project expands over several African countries in order to empower its users and contribute to the socio-economic development. 

What is microfinancing? 

Microfinancing is the provision of financial services, targeted at individuals and business who lack the provision to access conventional banking services.  It increases access to finance in developing countries where a traditional banking institution would not extend credit to people if they have little or no assets. By using credit ratings, relationship banking, and microinsurance it helps families to take advantage of income-generating activities and enables users to better cope with the risks. 

How microfinancing empowers women

A disturbing statistic many may not know, is that 70% of the poorest people on the planet are women. Women have been traditionally disadvantaged when it comes to accessing credit and other financial services. Large financial institutions have historically focused on men and ignored the women who make up a large percentage of the informal economy. 

Women contribute to the economic growth and livelihoods of their families and communities with the top five countries with the highest female representation in the workforce all being in sub-Saharan Africa. Zimbabwe and Malawi have a 52% share in workforce, The Gambia has 50.8%, Liberia – 50.6% and Tanzania at 50.5%.  

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Microfinancing plays a hugely critical role in empowering women. It offers independence and empowerment and is especially beneficial in poorer households. By helping to promote sustainable livelihoods it offers a significant contribution to gender equality and better working conditions for women. 

It’s just good business 

By targeting women, microfinancing can have the widest impact and makes the most business sense. Data shows that women register the highest repayment rates. All the evidence leads to a strong business and public policy case for businesses to target female borrowers. Women feel more empowered and make a positive influence through decision making processes which enhances their socio-economic status. 

Small to medium-sized enterprises (SMEs) with female ownership represent up to 37 percent in emerging markets. These businesses have financial needs that are not being met by traditional ways of banking. Currently they have unmet financial needs of up to $320 billion per year. The lack of finance is a huge barrier to growth. 

The wider impact on communities 

Further benefits are shown to support local and regional hubs, there is a positive effect on communities through access to finance and increased education and training. 

Microfinance supports green jobs and has greater environmental impact. By reducing the barriers to financial services and promoting microfinance, it is extremely beneficial to women. 

According to the world bank, they also contribute a larger portion of their income to the household when compared to their male counterparts. The benefits subsequently flow down to everyone in the household, children of female microfinance borrowers are likely to see an increase in their fulltime school enrolment and lower drop-out rates.  

Studies show that by investing in their children education also benefits younger girls too. And households often have better health practices and nutrition.

Research has shown that in developing countries only twenty percent of women have an account at a formal finance institution and seventeen percent have borrowed formally. Women are less likely to have a bank account than men which can present a problem when trying to access financial credit. 

Giving women access to credit can open greater economic opportunities with access to bank accounts being one of the biggest gateways to accessing additional financial services. 

In summary, I would say that we still have a lot of ground to cover when it comes to servicing one of the most vital segments of the population. Not only does it make economical and business sense, but the social impact at a regional level will feed through for generations to come. 

For more information on all topics for FinTech, please take a look at the latest edition of FinTech magazine.

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Jun 10, 2021

FIVE things fintechs must do to keep investors onboard

Fintech
Investment
venturecapital
AI
Brandon Rembe, CPO, Envestnet...
4 min
Fintech innovations drew in first-time investors who reshaped the markets. What new advancements will help them continue their rise?

New investors flocked to the stock market during the COVID-19 pandemic. Thirty-eight percent of investors said they had never had a brokerage or similar account before opening one in 2020.

Low or no-fee trading options have helped accelerate the trend – nearly half of new investors said they accessed their account primarily through a mobile app. As FinTechs, how do we create the trust needed to keep new investors in the market and create a fruitful customer experience for them?

The financial industry does a disservice to individual investors if we merely offer tools that focus on making money quickly, an approach that usually backfires. Instead, the surge of interest presents an enormous opportunity for those who want to help more consumers use financial technology to educate them on responsible spending, saving, and investing in order to achieve financial wellness current fintech tools have welcomed individual investors in the door.

Now, it’s time to focus on education and improving their experience going forward. There are several ways those of us in fintech can step up to shape the future of retail investing so that it works better for everyone, starting with the following areas.

Equal access to financial wellness education

Financial health should be available to everyone — but today, not everyone has the educational resources to achieve it. One study shows that only 3.9% of students from low-income schools were required to take a personal finance class. What they aren’t learning in school or from family members, fintech companies can provide on their platforms.

The companies should move from solely offering financial services to a more responsible model of education, advice, and prescriptive choices to help consumers develop better habits and make wiser financial decisions. Not only can they empower consumers and bridge historical wealth divides, but they can also stimulate growth by opening up new consumer segments.

More personalisation

Just as we’ve come to expect that our fitness routines are tailored to our individual bodies, we’re also ready for finance tools that go beyond one-size-fits-all solutions. But only six percent of financial institutions say they’re using the kind of technology that allows them to deliver a deeply personalized experience. Fintech tools need to reflect that financial success looks different for each of us.

For one consumer, it may mean providing guidance on how to pay off student loans early; for another, it may mean prescriptive actions that enable them to stick to a budget for the first time; for a third, it could look like prioritizing environmental, social and governance (ESG) investments, so that her portfolio aligns with her political beliefs.

Now, we are seeing financial technology beginning to meet the demands of personalized finance in a substantial and meaningful way.

The rise of AI-Powered Advice

Big-picture advice and predictive guidance used to be a feature of high-end financial advisory firms — a perk only available to those who could afford it. But thanks to rapid advancements in data analytics and artificial intelligence (AI), that kind of holistic advice is now more accessible than ever. AI-driven robo-advisors can parse many different streams of financial information, delivering customized answers to key questions: Is it time to buy a home, or is it smarter to keep renting? Can I afford to take out another student loan?

Intelligent connectivity powered by AI can anticipate consumers’ needs and next steps, making proactive suggestions that guide them along the path to financial wellbeing. Fintech companies can also help consumers identify when their financial picture becomes too complex for a robo-advisor, and help them find a human financial advisor to meet their needs. 

Focus on financial mental health

New investors are quickly finding that the market can be overwhelming. That’s not surprising, financial anxiety is common and studies show that financial stress can have an impact on mental health for some.

It’s not enough for fintech companies to give retail investors access; they also must provide the guidance and support that help consumers manage their financial well-being. Educational tools can ensure that consumers are well informed about their options.

Predictive analytics can anticipate consumers’ questions, serving them key information and insights before they ask. Features that emphasize a comprehensive notion of financial well-being, rather than short-term wins and losses, can also help ensure that consumers are keeping their eyes on the bigger picture.

Gamification for good

The surge of gamification apps has done an impressive job making investing as engaging as playing a video game or joining a social media platform.

Much of the current use of gamification emphasizes short-term thinking, but there’s also an opportunity to help consumers think more broadly about their overall financial picture. One example is peer benchmarking, a feature that enables help consumers to see how their financial habits compare to those of friends and fellow consumers.

Gamification can also be used to incentivize making smaller, smarter choices — for example, rewarding saving over making an impulse buy.

The future of fintech is about more than just broadening access to the markets. It’s about making sure more individuals have access to the tools that can help improve their financial well-being—in the ways that suit their own circumstances and needs. The potential to act within their own set of individual priorities, with their long-term financial wellness in mind is much more empowering to a consumer than simply relying on short-term, high-risk investments.

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