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- Convenor:
-
Munacinga Simatele
(University of Fort Hare)
Send message to Convenor
- Stream:
- Economy and Development
- Location:
- 50 George Square, G.04
- Sessions:
- Thursday 13 June, -
Time zone: Europe/London
Short Abstract:
This panel explores the different ways in which finance and financial markets have changed to account for the needs of low income households in the African context. It explores how the new financial instruments both in the formal and informal markets have disrupted the financial landscape.
Long Abstract:
The proposed panel explores different ways in which financial markets are changing in the African context. Although policy makers continue to focus on formal markets, mainstream financial institutions such as banks are recognizing the key role played by informal markets. Many of these have developed new products such as accounts for rotating credit and savings groups which create an important link between formal and final informal financial markets. Technology has in particular disrupted the way both formal and informal markets coexist and how this interaction is affecting financial inclusion. Mobile finance has led to an explosion in mobile-based financial services. Moreover, measures of financial inclusion are no longer exclusively related to formal financial institutions. Access to financial markets through electronic means has been instrumental in increasing the global level of financial inclusion. However, other services such as micro-insurance remain underdeveloped. Related, the understanding of the existence and operation of such markets in African remain underexplored.
We welcome papers that address the question of finance for the poor and in particular those that address how innovations in the financial market have changed both the concept and practice of finance in the African context. Key focal points revolve around strategic rethinking of best practice and repositioning of disruptive financial models especially as they relate to economically active poor individuals. Papers may include studies on micro credit, mobile banking and other related services. Papers that address the coexistence of formal and informal financial, markets microinsurance and microsavings are particularly welcome.
Accepted papers:
Session 1 Thursday 13 June, 2019, -Szabolcs Pasztor (University of Public Service)
Paper short abstract:
Commercial banks have always played an enormous role in financial development but currently they are likely to be disrupted by the FinTech companies. Africa may develop its own model for financial development built on mobile money and mobile banking so understanding the potential is vital.
Paper long abstract:
In the financial development and banking of the Western world the commercial banks have always played an enormous role. Currently they have many clients and branches but they are less innovative and struggle with organizational inertia. No wonder that they are very likely to be disrupted in the coming decades by mobile money and banking provided by FinTech companies.
Partly because of the lower overall penetration and availablity of commercial banking in Africa, many people are still outside of the financial markets and have no availability of credit at all. In this light, it is quite clear that the role of commercial banks has remained limited in the development of the financial markets in the continent. As an alternative, mobile banking has been booming and - as it seems - the countries may not need to follow that financial development path of the Western World where commercial banks played an enormous role. Based on the young and vibrant population of Sub-Saharan Africa where already one fifth of adults have a mobile money account, the continent may take and alternative path in broadening the financial markets. According to this development model the role of commercial banks would remain largely the same and mobile money would be the main driver of the creation of a larger financial market. May the African model be successful in the long run and is there a need for increased penetration of the commercial banks at all? The paper tries to answer these key questions.
Munacinga Simatele (University of Fort Hare)
Paper short abstract:
The paper investigates the dynamics of a contemporary cashless society and its effect on financial inclusion. Data from Zimbabwe shows that transactions costs are higher than in a traditional cash payments system due to perceived risks associated with the multi payments and multicurrency system.
Paper long abstract:
Innovations in information and communication technologies have changed the way financial markets operate in many developing economies. Mobile telephony and Internet networks have grown rapidly leading to developments in systems like M-Pesa in Kenya, SMARTmoney in the Philippines and MTN Mobile money South Africa. These platforms have disrupted financial markets and significantly increased access to financial services for low-income individuals. Of special interest is the changes that have taken place in payments systems. This paper uses data from a survey conducted in Zimbabwe to investigate dynamics of a contemporary cashless society and how they affect financial inclusion. Zimbabwe presents a special case. By May 2018, official figures showed that 96 % of all local transactions were conducted electronically, making it the most cashless society in the world. Different forms of e-payment are found to be associated with a variety of costs. These costs are linked to the perceived risk of each payment form. Moreover, the multicurrency system further complicates payments which vary across different currencies. This has led to higher transactions costs for low-income households than in a traditional cash payments system. We conclude that e-payments can only benefit low-income households when care is taken in the design of the system to ensure that platform providers in their quest for profit do not take advantage of vulnerable individuals and households. The benefits of electronic payments as a source of financial inclusion can therefore not be taken for granted.