Plans to help African economies recover from Covid must involve the poorest communities
Last week, Foreign Minister Liz Truss announced the launch of British International Investment, an organization that works to mobilize private capital to invest in countries in Asia, Africa and the Caribbean. To “build back better” and help recover from the disastrous economic consequences of the global Covid-19 pandemic. Now is the right time to recognize the capacity gaps of emerging economies on the African continent and mobilize our efforts to address these imbalances.
At the end of 2020, the World Bank noted that between 26 million and 40 million more people could be pushed into extreme poverty. It is clear that for most of Africa’s ambitious nations, economic development and growth requires continued investments that must be prioritized and geared towards all citizens. Specifically, we should focus on financial inclusion: the ability of people to be part of the national economic infrastructure.
There are financially excluded families in the UK. The foreclosure measures and the widespread closure of bank branches have disproportionately affected the most economically vulnerable who depend more on these services, to cash checks, transfer money internationally, negotiate a loan or extend an overdraft. But of course, the issue is more pressing in the developing world, nowhere more than in Africa.
Africa has an unprecedented opportunity to ensure that the potential of outward investment impacts large numbers of Africans, and especially marginalized communities. Coordinated economic inclusion programs can help increase the incomes, assets, and access to capital and finances of the world’s poorest individuals and households – the very populations who have suffered most from the economic downturn of the pandemic .
Financial inclusion programs are not just about showing support, they are about putting in place strong frameworks to withstand future disasters.
In Africa, this problem, amplified by the pandemic, requires urgent political responses. More than 80% of public measures taken on the continent since the start of the pandemic have been in the form of cash assistance, according to a 2020 IMF study.
Digital systems have made it easier to process and pay unprecedented amounts of relief grants to the most disadvantaged groups and small businesses to mitigate the impact of the pandemic as much as possible. Banks and technology have an important role to play.
Although it is not the only one, Togo is an excellent example of an African country which is reaping the fruits of its financial inclusion program; in 2019, the West African Monetary Union designated Togo as the country with the highest bank rate in the region, at 78%.
This is in large part thanks to the mobile and digital banking services supported by the government, which allow the dedicated Ministry of Financial Inclusion to access reliable data and to rapidly deploy its support measures. In recent years, this infrastructure has been used to distribute microcredit to entrepreneurs, specifically targeting women, so that they can make the transition to the formal economy. And more recently, this infrastructure and the associated remittance platforms have, through mobile banking, enabled the nascent social protection system to rapidly disburse cash payments to a growing number of its population, especially marginalized groups and to low income, often living in rural areas.
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To try to emerge from this crisis which is disproportionately affecting the world’s least structured economies, financial inclusion is essential. If people are disconnected from the financial system, then the money rarely reaches them and they are doomed to a life of subsistence. Without a serious, technology-aligned financial inclusion effort, communities risk getting stuck in the informal economy, where no financial mechanism can exist to provide capital for investment and job creation, and where no financial mechanism can exist. tax base cannot be facilitated to provide public services.
Many countries have understood the need to mainstream financial inclusion into broader policy considerations to counterbalance some of Africa’s challenges by enabling more direct access to transparent and open financial services.
It is essential that the external investments that flow to Africa are directed towards programs that understand the importance of financial inclusion and seize the opportunity to accelerate economic development and progress for the greatest benefit of the many. people in Africa.
Former Conservative MP Mark Simmonds was Africa Minister from 2012 to 2014