Broadening Financial Inclusion Through Informal Sector Innovation - Follow-up on 2 Nov

By providing the right technology-driven tools and platforms to empower small businesses and traders within the informal sector, we can undoubtedly accelerate and encourage financial inclusion in developing markets across the globe.

In developing markets around the world, it is the informal economies that serve as the quietly humming engines of growth. By way of example, the informal economy accounts for over 70% of total employment in sub-Saharan Africa – an economy that includes street vendors, traders in open-air markets, subsistence farmers and fishermen, personal drivers, roadside barbers, small-scale manufacturers and more. According to the International Monetary Fund (IMF), this sector is said to comprise up to 38% of the region’s GDP – more than double the figure for OECD countries.

“Street vending is a vibrant sector of the urban informal economy… Current official statistics indicate that it is most prevalent in sub-Saharan Africa, where in many cities it accounts for 12 to 24 per cent of total urban informal employment”, explains Sally Roever, WIEGO’s Urban Research Director and author of Informal Economy Monitoring Study Sector Report: Street Vendors.

Interestingly, however, when discussing the global issue of broadening financial inclusion, these street vendors – and indeed, the informal economy at large – do not receive much attention. Yet by providing the right technology-driven tools and platforms to empower small businesses and traders within the informal sector, we can undoubtedly accelerate and encourage financial inclusion in developing markets across the globe.

Establishing a Digital Footprint

To begin with, introducing elements of digitisation enables merchants to both automate and formalise certain parts of their business – allowing them to compete more effectively with their larger rivals. In addition, by creating more of a digital footprint, innovators can begin to better understand these businesses and the markets they serve. For example, a new form of credit scoring can emerge in a previously data-less retail environment, thereby allowing financial services players and other businesses to begin to offer loans and other products that meet the day-to-day needs of these informal merchants.

Without doubt, one of the key challenges within this sector is liquidity, and the provision of micro loans can ultimately boost and expand businesses in a short period of time. For example, Nomanini recently initiated a pilot project in partnership with the Bank of Ghana that extends small loans (between 10 - 400 Ghanian Cedi/roughly 2 - 90 US dollars) to 100 informal merchants in Accra. This transparent and real-time product offers 1 to 7 day loans, and has thus far seen a default rate of less than 1%. Importantly, the product is enabling Nomanini to gather key data and insights, which can ultimately lead to longer term and bigger loan products based on actual retail activity. Looking ahead, such loan products can position these smaller merchants to formalise various areas of their businesses, offer new products to customers and become more sustainable in the long term.

This is just the tip of the iceberg with regards to how innovation – and digital transformation in particular – can bolster informal economic activity, and in turn, global financial inclusion.


About Author

Vahid Monadjem is the Founder and CEO of Nomanini, a South African-based payments platform provider that enables transactions in the cash-based informal retail sector.

Vahid is passionate about working at the intersection of technology and design in informal markets, where Nomanini’s solutions can directly impact people's lives. His vision for Nomanini is to provide platforms for transactions in emerging markets by empowering local partners to create the tools that best suit their particular environment.

Vahid is a trained engineer with extensive innovation and product design experience. Before founding Nomanini, he was McKinsey & Company’s global fellow for Emerging Market Product Development. He has worked in Africa, South East Asia, North America and Europe, within a wide range of industries, including technical services, design, consumer goods, state-owned utilities, petrochemicals and telecommunications.

About Nomanini

As the pioneering fintech platform for the informal retail ecosystem, Nomanini connects merchants and distributors to each other and global service providers, integrating payments, working capital, and data analytics to unlock the latent potential of Africa’s economy.

Nomanini turns any mobile device into a retail point-of-sale solution for informal merchants that is connected to an interoperable merchant wallet. The interoperable merchant wallet allows merchants to offer a broad range of digital banking (including cash-in/cash-out), mobile, utility and entertainment services to their customers boosting competitiveness. In turn, digital service providers rapidly increase the scale and reach of their offerings. By generating real-time insights based on transaction data, distributors using the platform gain a single view of their merchant network, ensuring inventory is where it is needed most to improve sales. Distributors can also begin to accept payments for goods electronically, eliminating the risk and inefficiency of collecting cash. With data analytics, Nomanini helps extend working capital loans to merchants via distributors allowing them to invest in inventory to grow their businesses. The increased volume of goods and services set against reduced operational friction increases the profits for all platform participants.

Nomanini was founded in 2010 and is headquartered in South Africa.

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