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Treasury

Financial inclusion: Sandbox set up to help fintechs fix finance in rural Africa

A new generation of digital products has slashed the cost of remittances and helped the unbanked meet short-term household or business liquidity needs, but there has been a downside.

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Fintechs have helped make financial services available to people that banks have long struggled to reach, but this has come at a price.

Default rates among digital borrowers in Tanzania, for example, have reached 31% and in Kenya 12%, according to a survey by the Consultative Group to Assist the Poor (CGAP), a global partnership of more than 30 development organizations housed within the World Bank.

This is making a bad situation in Africa considerably worse.

Loans that are not repaid get the borrower blacklisted, blocking people from taking loans on more manageable terms. Instead of being a stepping stone into the formal banking system, digital credit has become another obstacle blocking the path into it.




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