Digital Transformation Paves the Path for Inclusive Financial Systems in Middle East and Africa

Inclusive Financial Systems in Middle East and Africa: The Power of Digital Transformation

As financial inclusion has evolved alongside technological advancements, it is now recognized as a pivotal driver for economic growth and development. In this context, a recent roundtable convened by OMFIF’s Digital Monetary Institute together with the Mastercard Policy Center for the Digital Economy explored how digital financial inclusion offers unparalleled efficiency, scalability, and accessibility.

The event brought together leaders from Bank al-Maghrib, Central Bank of Egypt, Central Bank of Nigeria, Mastercard, and the World Bank to discuss strategies for fostering financial inclusion in Africa and the Middle East. The discussion centered on principles outlined in the World Economic Forum's report advocating for shared principles for an inclusive financial system.

One of the key arguments put forth was that digital financial inclusion is not merely a choice; it is the most efficient route forward. Mohamed Helmy, Head of Payment Systems at the Central Bank of Egypt highlighted that financial inclusion provide affordable access to services such as ling, saving, payments, and insurance. Digital solutions bring about cost reduction while improving service quality.

Paul Oluikpe, Head of Financial Inclusion Delivery Unit at the Central Bank of Nigeria emphasized that traditional financial products are becoming 'rigid' in a world where 'agility, flexibility, convenience, and proximity' define modern expectations. With widespread access to mobile phones, offer scalability and cost-effectiveness for reaching both urban and rural populations.

The potential transformative power of digital technology was another focal point, with Panellists noting that national-scale change can be rapidly achieved through digital platforms. Digital solutions are more convenient for users compared to traditional institutions, offering financial services at the click of a button. It is not merely an individual goal but also requires collaborative efforts from all stakeholders including central banks and other financial service providers.

Interoperability matters greatly

A key aspect emphasized by the panelists was the significance of interoperability in avoiding fragmentation within financial markets. Dorothee Delort, Senior Financial Sector Specialist at the World Bank, stressed that ensuring market openness for new participants through legal frameworks as well as focusing on technical infrastructure are paramount elements for global interoperability. Both areas require collaboration and standardization on issues such as consumer protection and resilience including cyber resilience.

Hakima El Alami, Director of Payment Systems and Instruments Oversight Financial Inclusion at Bank al-Maghrib underlined that a 'national ecosystem' requires that every financial institution first ensures its interoperability before offering services or payment means. Significant progress has been made in building resilient infrastructure specifically for retl transactions, interbank exchange clearing, settlements, and the mobile electronic payment system.

Cultivating trust in the payments ecosystem is critical

Addressing trust within digital financial systems was a crucial theme of discussion. Mohamed Helmy stressed that while access to services has improved significantly, fostering usage of these services must be the next step towards a more inclusive financial system. Interoperability and technological innovation are key drivers for this journey.

Steps toward improvement include collaborative efforts with governmental departments to create foundational structures for financial education, conducting information campgns and developing digital financial inclusion toolkits. To build upon this conversation, OMFIF in partnership with the Mastercard Policy Center for Digital Economy will host a seminar in Marrakech focusing on digital transformation strategies in the region.

The roundtable underscored that driving financial inclusion through digital payments is not just an goal but a necessity for Africa and the Middle East. Interoperability, technological advancements, and building trust in digital financial services are pivotal in this eavor. As these regions embrace the digital revolution, cooperation among central banks, financial institutions, technology providers, and governments serves as the catalyst for financial inclusion.

Arunima Sharan is Senior Research Analyst at OMFIF.

This revised version mntns the original message of importance while refining to improve and accessibility. It also includes a slightly updated format for naming sources for clarity.
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