Digitalization is helping African emerging countries to move directly into modernity with technological leaps – for example through mobile communications, which are easier to install than a landline in remote regions. Mobile technology allows African countries to skip a few intermediate technological steps, such as lending. It focuses more on larger companies, while small and medium-sized companies and private individuals often find it difficult to obtain loans.
But digitalization also gives the African economy new opportunities. Mobile technologies and digital platforms make loans quicker and easier to access. Kenya is a pioneer in this regard. This is mainly due to the mobile payment system M-Pesa attributed. It allows users to transfer money, pay bills and make purchases via mobile phone. The platform has over 40 million registered users.
Comprehensive alternative to traditional banks
Such payment systems are now being expanded by digital banks, for example Issue. Founded in 2018, the digital bank operates in Kenya and Nigeria and has evolved from a pure lender to a fully-fledged digital bank. In addition to loans, there are time deposit accounts, savings accounts and business savings accounts. This strategy aims to provide a comprehensive alternative to traditional banks. Currently, Umba has received $5 million in financing to expand its loan portfolio in Kenya.
The combination of a young, technology-savvy population and high mobile phone penetration offers enormous growth opportunities for digital financial services. With the right support from regulators and technological innovations, Kenya and Nigeria could continue to function as leading digital banking markets in Africa.
