Promoting financial inclusion through digital innovation

Banking & Finance
| The European | 21 July 2021

Getting financial services and products to low-income communities in Mozambique is a real challenge – one that the FSDMoç is meeting head-on with fintech solutions 

Financial inclusion is now regarded globally as a key component in achieving the UN’s Sustainable Development Goals (SDGs). A significant part of the progress is the uptake of digital tools, which expand the reach of financial services and address real economic needs through better financial solutions. 

With the introduction of “financial deepening” programmes in Africa, the Financial Sector Deepening Moçambique (FSDMoç) was established in 2014 with the support of the Foreign, Commonwealth & Development Office (formerly the Department for International Development) and the Swedish International Development Cooperation Agency (Sida). 

FSDMoç is a market facilitator that supports key financial sector stakeholders. It uses a market system development (MSD) approach to focus on reducing poverty by expanding access to financial services for lower income households and smaller scale enterprises. Over the years FSDMoç has been advocating the use of digital innovation to accelerate financial inclusion in Mozambique, contributing to substantial changes at micro, meso and macro level. To respond to pressing financial needs, FSDMoç has piloted various interventions that addressed the many challenges faced by the low-income demographic. This includes the following:

e-tickets on public transport  

Supporting the integration of digital financial services and public transport has been among the FSDMoç’s key initiatives. The lack of access to decent public transport systems and digital ID is a real problem for low-income communities in Mozambique. FSDMoç has partnered with Maputo Metropolitan Transports Agency (AMT) to introduce the first public transport electronic ticketing (e-ticketing) system for the low and middle-income population in the peri-urban areas of Maputo Metropolitan Area. The e-ticketing system has registered 196,940 passengers, issued 98,837 cards and created 188 jobs as of 31 March 2021.

FSDMoç embraced the e-ticket project with the main vision that a digital payment system would reduce the use of cash, create new delivery channels and possibilities for the delivery of financial services through data, and ultimately reduce vulnerability and exclusion of some social groups. 

Digital: Providing long-term solutions 

With the aim to advance digital payment ecosystems in rural areas FSDMoç was part of a joined initiative that included government, private enterprises and development partners. The intervention showcased how data of beneficiaries is important to deliver assistance to those in need. An electronic data collection and payment technology (EDAPT) promoted by Paycode was tested in Gaza province, in southern Mozambique. This changes the way the National Institute of Social Action (INAS) delivers subsidies to its beneficiaries, therefore promoting the development of a flexible and efficient delivery channel for financial services that have the potential to contribute to long-term financial inclusion. In this sense, beneficiaries can receive their social benefits using a card instead of cash and, as it’s a new system, they also receive financial literacy on the benefits.

This collaboration has contributed to the adoption of digital financial services across villages, particularly among 18,000 low-income households who are beneficiaries of a social grant. By incorporating biometric verification into the solution, financial and biometric data is available for individuals at the bottom of the pyramid, who would otherwise have had no digital footprint.

Solutions such as this promote financial inclusion among low income and displaced communities. The potential is there to expand to other humanitarian crises, as the data generated can be used to profile beneficiaries into different categories according to their needs.

Supporting fintech innovation 

FSDMoç has become a catalyst in establishing a fintech ecosystem in Mozambique. By mapping the technology market across the country, FSDMoç was able to ascertain how many startups were developing financial products. 

This was followed with the launch of the Innovation Challenge Fund to support companies in piloting digital and financial solutions that improve access to finance. The challenge resulted in seven startups benefiting from FSDMoç’s technical assistance. It culminated in the establishment of the first ever regulatory sandbox in Mozambique, launched jointly with the Mozambique Central Bank in May 2018. 

The regulatory sandbox allows fintechs to rapidly build and test their solutions in a controlled environment close to the regulator. It therefore allows the regulator to work closely with the fintechs, creating a vision of how to regulate and develop frameworks for these startups to operate. This contributes to the regulatory process within the innovation space. In the regulatory sandbox there is an innovation hub, which is a platform to bring together various actors to promote innovation, discuss of ideas, and access experts inputs across the technology spectrum. 

The role of partnerships in achieving inclusive finance 

The FSDMoç is looking beyond financial inclusion to inclusive finance, which means individuals and businesses have access to useful and affordable financial products and services. These include payment facilities, savings, credit, and insurance, which are delivered in a responsible and sustainable way. This is another example of how digital services are empowering the people of Mozambique. The UN is keen to see such initiatives gain traction, because it helps solve real economic challenges by addressing end-user barriers. By supporting digital financial services, FSDMoç is fully playing its part in achieving  the UN’s Sustainable Development Goals.  

Further information  

www.fsdmoc.org.mz 

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