Africa is now considered as the world’s second fastest growing region after Asia, with an annual GDP growth rates in excess of 5% over the last decade. Despite this growth Africa has been lagging behind in the area of financial inclusion. Recent survey from the Global Findex database indicates that only 25% of the adult population in Africa have an account with a formal financial organization. The low purchasing power of the continent, as well as the underdeveloped formal banking penetration set ground for the MicroFinance Institution to thrive. Poverty reduction has become one of the major challenges the world is facing today. Access to services like deposits and credit facilities offered by financial institutions to the small and medium enterprises may be a crucial element to alleviate poverty.

According to the World Economic Forum’s findings, it has been stated that the African continent averages an annual GDP growth of 5.4% between 2000-2010. This growth continued at 3% from 2010. Africa has encountered a significant growth because of the recent entries of microfinance institutions providing loans to Farmers across the African continent. Farming is the primary source of food income for most of the Africans and provides up to 60% of all jobs on the continent. Thus, the agricultural sector has been given major attention in Africa. Microfinance institutions have tailored their lending to this fact and it has benefited both the farmers and firms themselves. The loans give African farmers the opportunity to improve their standard of living. Nonetheless, other types of financial products are also offered to address the financial needs for a variety of micro-projects, such as tourism, commerce, industrial and artisanal works. The products offered are both for personal and professional ventures.

As per the information obtained from Mix Market Microfinance Institution, the African continent has developed one of the fastest growing MFIs. According to research done, it has been claimed that microfinance institutions allow individuals and small enterprises to contribute to and benefit from economic development in a variety of ways.  The table below shows a market analysis which was conducted for some of the countries in Africa.

CountryPopulation [Mn]Unbanked Population [%]GDP [US$ B]Number of MFIsMicro-Finance [US$ Mn]
Senegal16.6581033.07234463
Morocco36.2713007.2413570
Algeria42574123.3930.877
Tunisia11.7633490.8344301
Egypt99.4672412.7372534

 

Even though Microfinance has proved to be an advantage for Africa, there are still some challenges which needs to be overcome. The main issue which needs to be resolved is the increasing access to financial services to the rural communities. 70% of people live in Sub Saharan Africa, where financial inclusion was up to 47% in 2017. In other words, though Africa is a formidable continent, access to financial services are scarce.

Collaborating with NanoBNK

NanoBNK partner’s with MFIs on the journey to Financial Inclusion by providing Micro Finance Solutions. Our business model is unique whereby we take care of the Technology, On-boarding and Engagement of the financially excluded and the local partner assists with regulatory issues, capital provision and marketing.