Tech for Impact: Digital Finance Can Add Trillions of Dollars to Emerging Economies

Two-thirds of people in Sub-Saharan Africa – a region of more than 1 billion – do not have a bank account. That holds back economic opportunity as hundreds of millions of people are blocked from access to financing that might help them start a business, obtain better housing or progress in education.

Innovative mobile solutions are unleashing profound change in African life and business – in everything from obtaining loans to accessing pricing data for crop transactions

But there are entrepreneurs at work on the continent to address those issues. Kenya-based digital payments platform Cellulant reaches 40 million people across Africa. Its mobile-enabled solutions are helping to drive a tech transformation that promises to improve the prospects of the world’s poorest yet second-fastest growing region – underscoring why technology has become one of the most powerful themes of impact investing. Cellulant fosters growth in ways that go beyond mobile payments, finding imaginative solutions to the continent’s numerous unmet needs. One way Cellulant, The Rise Fund’s first African investment, changes lives is by providing means for farmers to directly access government fertilizer subsidies. That cuts out middlemen, reduces costs and increases fertilizer use – leading to better yields and income. “We have an impact on everything from how quickly farmers receive market input to the price they receive for their output,” says Cellulant co-founder and co-CEO Ken Njoroge. “And this is transformational.”

Innovative mobile solutions are unleashing profound change in African life and business – in everything from obtaining loans to accessing pricing data for crop transactions. “The transformation in certain segments and services, how people access financial and banking services, how people make payments for different things like agriculture will be completely rewired by technology,” says Bolaji Akinboro, co-CEO of Cellulant.

Globally, innovations like Cellulant offers are a critical part of the solution to the challenges of achieving inclusive economic growth and environmental sustainability. Impact investing can maximise the impact of every dollar invested by supporting mobile, artificial intelligence, IoT and data analytics platforms geared toward positive change. And tech will play a growing role in meeting the UN Sustainable Development Goals. “The increasing capability and use of machine learning, the rising creation of augmented reality content, and the changing capabilities and uses of smartphones have broad potential to contribute towards the SDGs,” Deloitte says in a recent report. “That opportunity to contribute grows as technology becomes ‘smarter’ and more efficient with impacts across each of the 17 goals.”

For example, digital transformation, will advance the objective of eliminating hunger – SDG 2, as big data and machine learning allow development of better crop breeds and growing conditions in controlled environments. Progress toward SDG 16, achieving peace, justice, and strong institutions is supported by digital monitoring, IoT and blockchain, which enable transparency – for example, allowing people to better track food and medical supply chains, reducing everything from corruption to physical tampering.

In particular, the proliferation of mobile phones – with more than 7 billion users through 2017 – has opened multiple channels for economic inclusion by democratising access to technology. The impact on economic development is profound. A 10 per cent rise in mobile penetration boosts total factor productivity by 4.2 percentage points, according to a Deloitte/GSMA study. Doubling mobile data yields a 0.5 percentage point increase in per capita GDP, the study found. The effects are compounded as cloud computing and enterprise tools become widely available at relatively low cost, bringing more power to mobile computing.

Digital innovation has the power to bring people into the formal financial system and promote financial health, for instance through mobile apps such as U.S.-based Acorns that nudge customers toward saving. And tech-driven business models enable scale and economic efficiency by lowering transaction costs and streamlining delivery of goods and services – a boost to both developed and developing economies.

We have impact on everything from how quickly farmers receive market input to the price they receive for their output. And this is transformational

Ken Njoroge
Cellulant CEO

Fintech is one of the key areas in which digital innovation is opening opportunity in the emerging world. New peer-to-peer lending models in Latin America, where banks lend primarily to big businesses and not everyday consumers, are catalysing startup activity and boosting small and medium-sized enterprises. By disrupting the status quo, such tech business models release tremendous energies in emerging nations: “Widespread adoption and use of digital finance could increase the GDPs of all emerging economies by 6 per cent, or a total of $3.7 trillion, by 2025,” according to McKinsey. “This is the equivalent of adding to the world an economy the size of Germany, or one that’s larger than all the economies of Africa.”

The digital revolution is a “highly disruptive extinction event,” the McKinsey Quarterly said recently. “Many new and unanticipated enterprises will emerge. New business models will be created. Enterprises will be transformed, and those that fail to transform will cease to exist.” The extinction carries opportunity to rebuild a world of unlimited possibility, where innovation opens a path to inclusive, sustainable growth. Judicious allocations of impact capital can channel the digital transformation to make tech one of the principal forces of positive change.