Covid-19 : Opportunity for Govt payment digitization and financial inclusion in Africa

Emmanuel Okoegwale

emmanuelok2007@gmail.com

Since the beginning of 2020, the World had been gripped by the unprecedented COVID-19 pandemic crisis affecting millions of people across all the continents including Africa with global Health institutions and National governments mandating partial or full closure of economic, transportation, social activities which then necessitated governments interventions to reduce impacts to the vulnerable segments of the society through different programs.

In different forms across Africa, citizens are getting cash from their  governments via diverse programs such as Public Works for unemployed persons, social pensions, child support, old age persons and disability grants, social relief, unemployment grants, cash transfer programs, disaster reliefs etc

Governments across Africa often lack the capacity and systems to deliver benefits digitally, to final recipients and cash is the de-facto standard to achieve the three Rs: Paying the RIGHT person, the RIGHT amount at the RIGHT Time whereas digital payment, can guarantee payment certainty with better outcomes.

Due to the contagion nature of the Covid-19, the World Health Organization is encouraging and advising citizens to switch to digital and contactless mode of payments to reduce the risk of face to face transactions. Physical cash had not been proven to transmit the virus, but the physical activities associated with cash, can be a risk.

In most parts of Africa, millions of people do not have access to basic financial services due to many factors such as low literacy, low mobile device ownership, lack of acceptable identification, limited  bank branches, low economic activities which presents a compelling opportunity for government interventions (emergence, short or long term) as a leverage for payment digitization and financial inclusion which can address all the issues militating against the access to formal financial services since governments can provide or waive some requirements and address the low economic activity of intended beneficiaries through the government grants payment.

Digitization will help governments to scale their coverage and reach, in an effective and efficient manner such that millions can be reached instantaneously and simultaneously.

It will save governments enormous cost, improve citizen’s trust, improve accountability, transparency of interventions, reduce physical barriers especially in many parts of Africa with significant infrastructural deficiencies across urban and rural areas.

Aside the scale that can be achieved by going digital, it will also improve economic empowerment of the beneficiaries by enabling access to other basic financial services such as saving, credit, insurance, remittances etc and improve overall economic participation of excluded groups.

Building a digital ecosystem is desirous  however care must be taken to ensure the right human and technology capacities are available to transition from cash to digital platforms with the right regulatory environment and support, required to implement such while putting the beneficiary as the central focus when designing the digital systems and processes in highly fragmented digital ecosystems in many parts of Africa.

Some positives already emerging across Africa with financial regulators reducing or removing transaction fees like in Ghana and Kenya while South Africa’s  Social Security Agency  recently tested registration via WhatsApp and USSD  for R350-per-month Covid-19  unemployment grants due to be paid to about six millions people over  the next six months and will displace physical food parcels delivered as part of normal relief-of-distress grants.

Malawi will soon launch an emergency cash transfer program targeting about 1 million people and small businesses affected by the coronavirus pandemic with eligible households receiving 35,000 Malawi kwacha ($40) monthly payment through mobile cash transfer starting in May while Namibia already paid the  first  batch of  147,000 grantees, digitally in April.

New approaches in making government to person payments require diverse approaches due to different segments of the community targeted however with proper community and beneficiary segmentation, National governments will be able develop and deplore appropriate payment mechanism that can replace the use of cash and foster financial inclusion which will enable millions to exit the poverty trap.

When governments move their social grants to digital platforms, it creates a platform for access to other basic financial services which are beneficial to the governments, businesses, and the beneficiaries.

Covid-19 is real, stay safe.