OCTOBER 12,2018 —The International Finance Corporation (IFC) in partnership with the German Ministry for Economic Cooperation and Development (BMZ) and Making Finance Work for Africa have affirmed their commitment in strengthening digital finance investments in Africa.
This comes as IFC held its ninth annual Responsible Finance Forum (RFF) in Tanzania, funded by BMZ, and its first ever to be held in Africa.
A member of the World Bank Group, IFC is keen to support responsible digital finance investments in the continent with support from its partners, a move aimed at bridging the wide gap between the banked and unbanked population.
The meeting recently held in Dar-es Salaam saw signatories to the Guidelines for Investing in Responsible Digital Financial Services – an initiative launched jointly by IFC and leading investors and digital finance innovators in June 2018, grow to 80 organizations, proving a major boost for this strategically important initiative.
The RFF gathered together leading investors, policymakers and practitioners to assess critical challenges in financial services in Africa where a large number of women, rural poor and Micro, Small and Medium Enterprises remain financially excluded.
Over 140 participants from 30 countries in Africa, including representatives from central banks and insurance regulators took part in plenary and deep-dive sessions to explore the latest initiatives, business models and fintech innovations to advance responsible investments in digital financial services.
Speaking during the Forum, IFC’s manager for digital finance and microfinance Martin Holtmann said: “This Forum is happening at a critical juncture for Africa, to revisit how we provide finance for all, including for the persistently underserved using technology as a solution, along with responsible investments to help mitigate digital finance consumer risks.”
“We welcome the new signatories to the investor guidelines, which plays a key role in helping us to accelerate investments that create value-added benefits for digital finance customers, broader digital ecosystems and catalyze investments in responsible digital innovation,” Holtmann added.
According to financial experts, leveraging technology and digital innovation is key to improving access beyond traditional financial sector providers and newer entrants are rapidly disrupting the landscape, making it easier than before to expand access to financial services to hard-to-reach populations and small businesses.
While opportunities have increased, so have risks for digital financial services, particularly for the lower income customers in rural, nascent, fragile and conflict affected markets.
Making Finance Work for Africa Partnership (MFW4A) coordinator) David Ashiagbor said the institution will continue pushing for financial inclusion by promoting an enabling environment that protects consumers on one hand, and fosters innovation and competitive markets on the other.
“Both aspects are closely linked by the fundamental prerequisite of a well-functioning financial sector: ‘trust’. Building consumer trust is key for achieving sustainable uptake and active usage of digital financial services,” Ashiagbor said.
Industry deep dives relevant to Africa’s evolving digital landscape were led by the Consultative Group to Assist the Poor ( CGAP), German development agency-GIZ and the United Nations Capital Development Fund (UNCDF) alongside Better Than Cash Alliance (BTCA).
BTCA is a new global alliance that brings together private sector companies, governments, and development organizations – all dedicated to promoting the transition away from cash to electronic payments.
It is funded by the Bill and Melinda Gates Foundation, Citi, Ford Foundation, MasterCard, Omidyar Network, U.S. Agency for International Development and Visa Inc. UNCDF serves as its secretariat.
The three entities respectively cover value driven uses of digital financial services and the role of customer empowerment; data analytics and consumer data protection and regulation and industry standards evolving, such as the GSMA’s Mobile Money Certification Scheme.
The guidelines focus specifically on embedding consumer protection into digital financial services and incorporate IFC’s due diligence practices for digital users and customers into investments.
The goal of the signatories is to strive to catalyze investments in responsible digital innovation and work with industry and technology leaders as partners to fine-tune evolving solutions and share emerging evidence and business models for inclusive growth.
The guidelines cover investors, investees, innovators and the fintech and broader digital financial services industry; it looks at the risks digital consumers face, how this drives businesses and the development of digital economies.
Responsible finance has been an important topic since the 2008 financial crisis, and a cornerstone of the World Bank Group’s Universal Financial Access goals, contributes to the United Nations’ Sustainable Development Goals, and remains a high level priority of the G20 Global Partnership for Financial Inclusion (GPFI).
Representing GIZ, Judith Frickenstein stated: “It is a timely opportunity to have this year’s focus on Africa’s digital landscape, building on last year’s RFF in Berlin, which looked at the Opportunities and Risks in Digital Financial Services: Protecting Consumer Data and Privacy.”
“To gain new perspective, this year’s RFF provides a very welcome inclusion of the investor’s perspective to deepen our understanding of industry standards and solutions as well as the relationship between public and private sector roles and responsibilities,” Frickenstein added.
Lianne Houben, Deputy Ambassador at the Embassy of the Kingdom of the Netherlands in Dar es Salaam, on behalf of the Dutch Ministry of Foreign Affairs, supported the initiative while calling to action for investors, innovators and industry players to become a signatory to the guidelines for investing in responsible digital financial services.
IFC has helped to facilitate the RFF for over a decade, alongside IFC’s inaugural partners, BMZ and the Netherlands Ministry of Foreign Affairs as funders from the beginning, GIZ and CGAP.
IFC and Making Finance Work for Africa based at the African Development Bank co-led this year’s collaboration with CGAP, GIZ, UNCDF/BTCA and the World Bank.
IFC is a sister organization of the World Bank and member of the World Bank Group. It is the largest global development institution focused on the private sector in emerging markets.
Working with over 2,000 businesses worldwide where it uses its capital, expertise and influence to create markets and opportunities in the toughest areas of the world, It has delivered more that US $23 billion in long-term financing for developing countries in fiscal year 2018.
It leverages on the power of the private sector to end extreme poverty and boost shared prosperity.