Unlocking Entrepreneurship: How Digital Credit Empowers Africa's Rising Middle Class

Africa is experiencing a wave of change that is affecting both official and informal industries.

As payment procedures become more computerized and credit becomes more accessible, people are being empowered to realize their ambitions.

In nations that are adopting these market-driven solutions, the advent of payment terminals, more widely used smartphone apps, and the latent analytical power of the data they give are unleashing the bottled-up hopes of people throughout Africa.

Personal accounts of hope leading to achievement and tenacity delivering hard-earned success are starting to emerge, demonstrating that change in Africa is real, palpable, and moving forward. However, change can occur more quickly, which will benefit the masses more quickly.

Every government can do more to support its citizens' prosperity and increase economic involvement. It doesn't have to cost the country hundreds of millions of dollars. Instead, as laws restricting the potential of digitalization are repealed, participants of all income levels and statuses can self-fund the improvements.

The greatest way to do this is to have meaningful conversations on a regular basis with business owners who are currently producing profitable goods and services. The dynamic, rapidly expanding start-up industry in Africa demonstrates the willingness of businesspeople to open up new markets or expand current ones, leading to exciting economic growth.

Significant development gaps can be closed and new business opportunities can be generated by providing a route for tech start-ups to propose new solutions and gain access to clients.

Access to financing, agricultural productivity, supply chains and logistics, clean energy, health, and education are some of these gaps.

I have personally witnessed the changes in Nigeria, the most populous country in Africa. About 40 million MSMEs, nearly 90% of which are in the informal sector, operate in Nigeria and account for more than 50% of the country's GDP.

There is no denying the informal market's size and the resourcefulness of its leaders. They are your family members, friends, and neighbors who are using side jobs to augment their salaries. However, until recently, there were few bank accounts, bad record keeping, and virtually no data, which limited the prospects for expansion and growth. The financial system is now more widely accessible because to POS, bank transfers, and smartphone payments.
 

It is liberating to be able to store the worth of money without carrying or carrying large amounts of currency. Similar to this, digital payments make it simpler for business owners to get finance for expansion by giving them access to trustworthy data demonstrating transaction volumes and regularity. Although the demand for credit has always existed, traditional banking systems have frequently had difficulty meeting or supplying it.

When a stall turns into a successful business, having access to financing enables single proprietors to hire support workers to grow, buy more product to sell, lease transportation to distribute items, and rent other spaces.

As a concrete illustration, the "yield gap" in farming, which is the discrepancy between average farmer yields and yield potential, is 90% in Africa. Therefore, if farmers could invest in raising their production, Africa could (i) feed itself and (ii) export produce with ease. Accessing credit lines has never been simpler or more commonplace than it is now, thanks to mobile money technologies. This closes the yield gap by changing the investment alternatives available to farmers.

In Africa, the trend toward cashless transactions is already established. Mobile money accounts increased from 30 million to 560 million between 2012 and 2021; this growth rate will further quicken as systems get faster, more dependable, and more adaptable.

Though Africa is not a single, homogenous continent, transformative shifts are visible throughout the continent. Every nation is different, with small local traders and entrepreneurs aiming to provide the greatest life for their family at the center of their communities. Their lives will change if the obstacles to change are removed.

Every government and official should back this endeavor, which is promoting the change that is best for everyone.