Dambisa Moyo in her book Dead Aid advocates for the importance of domestic savings (among other mechanics) to stimulate African economic growth. A call that has been echoed through the Davos sessions during World Economic Forums. One voice coming from world leaders and most African leaders that Africa needs to promote a saving and investment culture through banking the unbanked and financial inclusion.
We are yet to see governments implementing the necessary actions and regulations required to make this idea a reality. In this 21st century, vast majority of the continent remains unbanked. Obviously, Africa is not a country and one blanket approach would never yield fruitful results. A clear example is the success of mobile money in Kenya but failed to take off in South Africa. There are probably MBA cases written to decipher and understand why mobile money was a failure in the latter but a world class innovation in the former hence for this article we will not drill much into intricacies that influence geographic adoption or rejection of financial products.
However, it is evident that there is a need for Africa centric financial products that will stimulate the savings and investment that the continent needs. The approaches can differ from country to country.
There is a growing middle class of Africans. What we know about this generation is that they are more technological advanced, look for convenience from products. They also want to be drivers of their futures and are willing to do things for themselves in realizing their goals. We see this in the growth of the stokvel market (an informal savings groups) in South Africa (estimated to be worth R25 billion annually) but only few if none of the SA banks can confidently claim that they adequately serve this market. Whereas, according to the Financial Times guides on Banking, South Africa is a country that has a significant advanced financial sector in Africa. This then begs the question that are the current financial service providers have the capacity or even willingness to stimulate a savings and investment culture. More importantly capacity to ensure that the informal savings are formalized and injected back into the economy to yield more fruits.
This is where other forms of financial providers like microfinance, fintech etc. come into the mix. Service providers with different business models that solely cater to promote savings and investments through the products they offer. Most importantly we need Africans that will rise to this task and understand that change is in their hands. We have seen a rise of fintechs started by African entrepreneurs playing a significant role in easing of payments whether B2B, C2B or even C2C. Perhaps this stems from a realization that maybe government leaders don’t have the will power to effect change and current big financial organizations are big and thus not flexible in order to offer consumer centric products. Therefore, we will need entrepreneurs that will successfully marry the agility, innovation of technology with acumen/shrewdness of financial services to promote savings and investment. The best that government can do is to support these entrepreneurs with funding and other necessary resources. We will also need an integrated approach from regulators of financial services to ensure that not only are the consumers protected but also innovation is not stifled by regulations. The established big organizations also have a role to play and it starts with adopting a culture that is collaborative towards entrepreneurs rather than perceiving them as competitors.
