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Big Data can help DFS providers drive financial inclusion in Africa

The impressive growth of financial inclusion in Africa over the last few years has obtained extraordinary results. In 2017, it is estimated 42.6% of adults in Sub-Saharan Africa had an account with a banking or financial institution. The World Bank further estimated that, in 2017, 45.7% of the population had requested a loan.

However, low-income and rural customers continue to be largely excluded from formal financial services. Financial inclusion plays a pivotal role in increasing resilience to economic shocks and helps grow small and medium-sized enterprises as it contributes to economic and social development. According to a report by IFC, in 2018, only about a quarter of adult Africans enjoyed access to financial tools required to grow small-scalable businesses, plan for future household expenses, make investments in schooling and health, and cope with emergencies.

More effort is required from the industry to reach the unbanked population, low-income earners, small-scale entrepreneurs, and the rural population. Big data is a key tool for innovation and growth and can help make financial services more accessible for the unbanked.  Digital Financial Service (DFS)  providers are well-positioned to take advantage of data to expand customer base and provide higher-quality services.

DFS providers can accelerate the growth of financial services through the use of big data and additionally improve both social and business outcomes. Big data can be used to customize financial products to suit different client segments who were previously excluded. It can also be an alternative method for credit scoring for those without a credit history. Access to alternative information such as utility bills or mobile phone bills can facilitate the creation of credit scores.

This builds more efficiency for the provider and better services for the consumers. As the continent matures, big data will be increasingly important, not only to gain a competitive edge but more importantly, to ensure that the product and services developed to meet the needs of the most vulnerable.