FinTechs spur financial inclusion in Sierra Leone
In Sierra Leone, three financial technology start-ups are setting out to test new ideas on contributing to the SDGs through greater financial inclusion
In Sierra Leone, three financial technology start-ups are setting out to test new ideas on contributing to the SDGs through greater financial inclusion. In Sierra Leone, less than 13% have access to savings and credit, while over 80% of the population uses mobile phones.
The three start-ups were selected from 20 applicants for the Sierra Leone FinTech Challenge 2017, a unique initiative by the UN Capital Development Fund’s (UNCDF) Mobile Money for the Poor (MM4P) in partnership with the Bank of Sierra Leone and Financial Sector Deepening Africa (FSDA). Announced by the Governor of the Bank of Sierra Leone on 16 November 2017, the finalist start-ups will receive investment capital and be granted license to operate through the Region’s first Sandbox Framework for Financial Inclusion.
Financial Inclusion and the SDGs
Providing access to financial services to underserved populations is a key enabler for at least 12 of the SDGs. Because nearly two thirds of the world’s 7.5 billion people have a mobile phone, digital financial services (DFS) are becoming a gateway for those who have been historically excluded not only financially but also economically, politically and socially. Today, FinTech is exploring digital and mobile channels to enhance existing financial services. However, currently such innovations are being tested primarily in more developed markets. That’s why UNCDF’s unique mandate as the UN’s capital investment agency for the world’s 48 least developed countries (LDCs), many of whom are fragile states, is becoming increasingly critical for the 2030 Agenda and relevant to the Addis Ababa Action Agenda (AAAA) on Financing for Development (FfD). UNCDF can issue loans, grants and guarantees directly to the private sector. Through initiatives like the Sierra Leone FinTech Challenge, UNCDF is addressing failures in “last mile” finance to build more dynamic local economies, “crowd in” domestic and international investors, and work on the frontier of connecting new technologies with local innovations in finance.
Three innovative digital finance ideas
As the three FinTech finalists proceed to the next stage of the Sierra Leone FinTech Challenge, they will receive grants to help test designs, bring in expert support, clarify the business case and develop their product for live market testing. FSD Africa and UNCDF MM4P will then provide a US$100,000 grant/debt mix to up to two winning finalists as judged by two panels – a consumer group panel, as well as other private sector venture funds interested in investing beyond the initial market-making support from UNCDF.
Let’s take a closer look at the three finalists:
Check-up by Data Pool, a Sierra Leonean FinTech, will develop digital data credit reference services to non-bank providers of credit. This service would be highly relevant for poor clients with less access to formal loans, and could open up new credit opportunities for those with solid performance.
Ca$hr by ACE Sierra Leone, another Sierra Leonean FinTech, would be a mobile app that tracks micro and small and medium enterprises’ (MSMEs) finances. The app also functions as a point of sales and bookkeeping tool for business, while aggregating users’ digital data to track trends and give insight on the market.
InvestED, a Ghana-based social enterprise in partnership with Salone Microfinance, aims to improve financial inclusion and financial literacy using mobile-based technology.
Such ideas can unlock the vital role that DFS can play towards achieving the SDGs. Through this Challenge, the Sierra Leone FinTech industry will become an integral plan of the financial system’s national development plans, as recommended by the 2016 report by the UN Environment Programme to align financing with sustainable development outcomes. For example, innovations in digital payments mechanisms for energy allow companies to venture into regions where cash-based business models are not viable by utilizing smart meters, mini-grids or solar home systems.
Reducing the vulnerability of the poorest
The Sierra Leone FinTech Challenge 2017 has the potential to reduce the vulnerability of the poorest at scale and drive inclusive economic growth. As well as supporting the best and brightest ideas and partnerships with finance, it is hoped that the competition mechanism will start a conversation in the country that disrupts the status quo and builds the confidence of change-makers within Sierra Leone’s financial sector. With the support of the Bank of Sierra Leone’s new Sandbox framework, the innovators of today and in the future will benefit from a greater level of assurance and support from their regulator.