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4. Technology and Globalization

Regulatory Environment and Technological Innovation in Africa 1

  • DFS: digital financial services (DFS) are financial services that are delivered through digital channels.
  • Kenya’s M-Pesa a mobile phone-based banking product and later a technological platform, has pushed the frontier of innovation and financial inclusion without compromising financial stability.
  • M-Pesa 4 Stages:
    • Mobile phone platform was used for money transfers between users, later payments and settlements. In 2006, the government changed the law to recognize electronic money.
    • Expanded to include banks and other financial institutions.
    • Credit scores were introduced, and the platform was used for savings and loans.
    • Cross-border transactions were introduced.
  • M-Pesa technological platform has revolutionized financial inclusion in Kenya:
    • Reach over 75% of the population.
    • Increase financial access touchpoints: 76.7% of the population is within five kilometers of a touchpoint.
    • There are 161.9 touchpoints per 100,000 Kenyans compared to 63.1 in Uganda, 48.9 in Tanzania, and 11.4 in Nigeria.
  • Almost 82% of all Africans had a cell phone in 2015, but access to the internet is still very low.
  • The world average is 209 internet servers per person, but in Africa, the number is only 10 servers per person.
  • In OECD (Organization for Economic Cooperation and Development) countries, the number of servers per person is 1087.
  • Only 15% of the population in Africa has access to the internet.
  • Internet prices in sub-Saharan Africa vary wildly, from $3037 per megabits per second (Mbit/s) in Chad to $8 in Ghana, though the region’s average is $366 Mbit/s overall.
  • Tech hubs, defined by the World Bank as “spaces mainly focused on developing a digital entrepreneurship ecosystem, or a network of engagement between digital entrepreneurs, designers, and potential investors,” are popping up in Africa in different forms.
  • Rules and guidelines should encourage prudent behavior by both the financial institutions and market participants.
  • Good regulatory environment:
    • Policies must enable the successful adoption and adaptation of innovations.
    • Policies must improve financial inclusion.
    • Policies must open and even encourage and incentivize the consumer base to take up the new technology.
  • Achievements of this new technology:
    • Digital finance has the potential to provide access to financial services for 1.6 billion people (more than half of whom are women) in emerging and developing economies.
    • It can increase the volume of loans extended to individuals and businesses by $2.1 trillion and allow governments to save $110 billion per year by reducing leakage in spending and tax revenues.
    • Financial service providers can benefit by serving $400 billion annually in direct costs while sustainably increasing their balance sheets by as much as $4.2 trillion.
    • The overall boost to GDP in these economies can be $2.7 trillion by 2025, a 6 percent increase. The contribution would come from the raised productivity of financial and non-financial businesses and governments with DFS.

The Digital Divide 2

  • The digital divide is the lack of infrastructure in the remote parts of the world that prohibits access to the internet.
  • Connecting everyone to the internet is a challenge because of the cost of infrastructure.
  • Too many satellites are being launched into space, which is not sustainable.
  • Plastic coffee cups are an issue; companies started to use biodegradable cups; but it would be best if the industry was regulated before it became a problem.
  • Historically, satellites were launched into the geostationary orbit, which is 36,000 km above the Earth. This is a problem because it is too far away, and the signal takes too long to travel back and forth (500 ms delay).
  • The solution was to bring satellites closer to the Earth, which is called the low Earth orbit (LEO); this means that satellites cover a smaller area, so more satellites are needed.

References

  1. Ndung’u, N. (2017). Regulatory environment and technological innovation in Africa: Any tension? (Chapter 3). Foresight Africa 2017 Report. Brookings Institute. https://my.uopeople.edu/pluginfile.php/1874618/mod_book/chapter/519554/Regulatory%20environment%20and%20technological%20innovation%20in%20Africa%20Any%20tension%3F.pdf ↩

  2. Lindsay, M. (2019, May). How do we bridge the digital divide sustainably? [Video]. TEDxThessaloniki. https://www.ted.com/talks/mike_lindsay_how_do_we_bridge_the_digital_divide_sustainably ↩