Updated: May 20, 2020
The launch of digital financial services has led to an unprecedented increase in the number of people enjoying access to financial services in Africa, without making use of the formal banking sector. Digital financial services have been popularly referred to as FinTech, a term that is used to refer to technology enabled financial solutions that include cryptocurrencies, mobile money or online lending platforms.
According to Brummer & Gorfine, some of the features that distinguish FinTech from traditional financial services include; the services are technology based in nature, the speed of innovation, there is convergence of various industries, the relatively low costs and barriers to entry and borderless operation of the services and finally, the ability to cross national boundaries with ease. As a result of FinTech’s disruption of the traditional forms of financial services, it has enabled financial inclusion and become a central part of national development discourse in most African countries.
This is because insufficient innovation in business models and inadequate use of existing and potential channels to reach the majority of citizens, continue to undermine attempts to build inclusive financial systems in Africa. According to the World Bank, up to 95 million unbanked adults in Africa receive cash payments for agricultural products, and an estimated 65 million save their money using semi-formal methods. FinTech has become technology’s response to the lack of access to financial services in Africa problem by navigating the various barriers that are faced by Africans.
In Malawi, for example, Angle Dimension, a local tech startup, launched Khusa, a peer-to-peer savings mobile app platform, which is the personification of African solutions for African people. Khusa’s target market is the semi-formal savings groups such as the Malawian Village Savings and Loan Association, which is a group of people who save together and take small loans from those savings. Angle Dimension, however, realized there was a challenge with traction with the mobile app since its launch. This was as a result o