The world of FinTech is not a homogenous one. It has become complex too quickly for such a relatively young sector. From the rapidly growing payments industry to nimble insurance operations that let consumers buy and tailor cover without ever seeing a human being and the variants of blockchain technologies, it has a vast and growing world. While technology remains the centre of it all, the co-founder of South Africa’s first peer-to-peer lending, Funderjet says it is a means to an end and that end should be improving financial inclusion. “A lot of people get caught up on the tech side of FinTech and not the fin side. There’s more focus on blockchains, machine learning, artificial intelligence, and algorithms. At the end of the day, if it doesn’t benefit the customer, if it doesn’t make someone’s life a little better, then it’s pointless,” says André Loot Jnr, the co-founder of Funderjet. You see, startups that have become flagship case studies of how to do FinTech right are largely those that have financial inclusion at their core. Think Kenya’s M-Pesa, Zimbabwe’s EcoCash, and Paycode which is designed to serve the hard-to-reach consumers in far-flung rural areas. The World Bank sees the role of FinTech being more than just advancing and adding more technologies for consumers residing inadequately served urban areas to use. The Bank and the IMF’s Bali FinTech Agenda Paper which was launched in 2018 identified increased and affordable access to financial services as one of the biggest strides that the FinTech industry can bring to the world, especially in low-income countries and the underserved communities.

“It must be about changing lives”

“We are all very proud of our technologies but at the end of the day it’s about how many lives we change,” says Loots.
In South Africa access to credit and SME finance remains the biggest drawback in the country’s financial inclusion journey, and so is the under-insurance of the majority of the population.
In a country where the gap between the different strata of the society is so wide, there is a fine line between developments that open more access for the underserved part of the population and those that only advance experiences of the adequately served consumers.
Thoriso Maloka, Management Consultant at SystemicLogic says as a point of departure, FinTech companies need to identify a relatable definition of financial inclusion, for the communities they are trying to serve so that they can design the technological solutions that will yield the desired impact.

The World Bank defines financial inclusion as the overall accessibility to financial products and services that enable individuals and businesses to meet their daily needs. But a small business operating a pop-up shop in Soweto would have very different needs to a granny in rural Limpopo who relies on monthly remittances or a farmer who wants market access but is not digitally banked. “The heart of inclusivity lies in identifying vulnerable communities and their needs thereof; in the context of South Africa and perhaps globally, poor communities, historically excluded groups, women, children, and people living with disabilities often fall under the category ‘vulnerable’, thus requiring aid from public and private sector,” says Maloka. South Africa has made great strides in availing bank products to far-flung rural areas. Still, much of the population remains under-served by the formal financial services sector. Retailers and mobile network operators are increasingly providing that last mile access to services like withdrawing cash and buying simple insurance products. But where the biggest challenge still lies for many communities is access to affordable credit facilities.

Providing access to affordable credit

Most households and small businesses need just enough credit to improve their homes, bridge the cash flow gap while waiting for receivables, or simply undertake an investment opportunity that might not come around again.
But most commercial banks’ cost of credit is too high to serve these microcredit needs and microlenders have not always had a good reputation in Africa, because of the exorbitant interest rates some players charge.
The gate is wide open for FinTech players to become a trusted partner to our communities in this space and peer-to-peer lending which Funderjet has introduced in South Africa has the potential to become the panacea to the country’s chronic shortage of affordable credit to most of the population.
South Africa has a long history of social lending through stokvels. But funding from stokvels is usually not accessible to those who fall outside that circle of friends or society scheme. There are thousands of ordinary consumers and businesses who have funds sitting idle and would like to put this into good use.
Through peer-to-peer lending, FinTech has the potential to connect those consumers in need of financial resources with these savers at a much wider and more affordable scale.
Maloka says that it is ultimately the collective responsibility of everyone – the state through conducive regulation, the different business sectors, and the FinTech industry – to develop products and services that will improve financial inclusion using available and upcoming technological tools.

Londiwe Buthelezi