Successful financial inclusion tool model to expand with digital KYC checks

A digital cash flow lending tool meant to facilitate access to loans for rural women in Nigeria is said to have “yielded promising results,” and there are now plans to expand the innovative financial inclusion technology.

According to an article on the World Bank’s blog, the digital tool was developed by the Bretton Woods institution in collaboration with Women Entrepreneurs Finance Initiative (We-Fi) and two commercial banks.

Designed specifically to respond to credit needs of women-led small and medium-sized enterprises (WSMEs), the digital cash platform enables users to avoid the hurdles that often face women applying for loans.

Per the article, the tool “revolutionizes credit assessment by shifting the focus from collateral to cash flow, broadening loan opportunities to previously disadvantaged entrepreneurs, and ushering in a much-needed era of transparency in the lending process.”

Thanks to the success recorded during the trial, promoters of the system say they plan to extend it to other countries and also upgrade it to include more features and services, such as biometric identification for Know Your Customer (KYC) checks.

The article’s authors say chances of success in expanding the model to countries like Ghana and Sierra Leone, where the credit market reality is not different from  Nigeria’s, appear “highly promising,” and that it could prove equally beneficial for users outside of the WSME sector.

They believe these two other West African countries could “serve as launchpads for a broader expansion of similar products across the African continent,” but also advise that it is important to take cognizance of the realities of each country so as to introduce digital lending technology that best works for them.

Digital ID provides springboard for financial inclusion

The introduction of this digital cash lending tool is part of broader efforts to drive financial inclusion in Nigeria. A few months ago, an IMF report noted that the financial inclusion push in Nigeria remained weak despite a strong uptake of digital ID across the country.

Digital ID is widely considered as an enabler of financial inclusion. A blog article by Finextra describes how  “by simplifying the account opening process, digital identity allows financial institutions to reach unbanked individuals and expand their customer base. Additionally, it reduces the costs associated with customer onboarding, making it economically viable for financial service providers to serve low-income individuals.”

The piece highlights how digital ID can drive financial inclusion not only because of its trust and security enhancing capabilities, but also thanks to its innovation potential, pointing specifically to digital wallets and mobile money platforms like the Nigerian tool.

In the meantime, as countries advance with different projects and innovations in their digital reformation journeys, the need to build robust cybersecurity and data protection systems is also paramount.

This is the case made by the academic, researcher and policy analyst Nanjira Sambuli in a write up published by the Carnegie Endowment for International Peace, a development think tank.

Sambuli uses the case of Kenya as an example of a country that is making significant strides in its digital transformation drive, but is beset by major cybersecurity concerns.

She alludes to a number of cybersecurity attacks which hit the country’s digital government services platform in July, and says a lot must be done to regain citizens’ trust in the way their data is handled.

Article Topics

Africa  |  biometrics  |  digital identity  |  financial inclusion  |  KYC  |  Nigeria  |  World Bank