02
02
Participation in traditional payment and credit services relies on a number of core requirements: access to a bank account, the ability to confirm one’s identity, assets to use as collateral for lending, a credit history, and a permanent physical location of residence or business. Access to financial services in particular has long been recognised by the United Nations (UN) as a key barrier to economic development in emerging economies.
These barriers to entry hinder the growth and potential of MSMEs. According to the Organisation for Economic Co-operation and Development (OECD) and the G20, the share of credit to the private sector in relation to GDP is significantly lower in emerging countries than the average in high-income countries (see Figure 1 ).
of adults in advanced economies
have a bank account
compared to:
in South Sudan
in Pakistan
in Uganda
Figure 1
MSME loans also constitute a smaller portion of business credit in these nations. In Africa, 40% of MSMEs classify access to finance as their top constraining factor for growth.
Displacement is on the rise as a result of various factors
Pre-existing challenges around financial exclusion are compounded in crisis situations in these markets by disruptions to traditional financial services providers (FSPs), physical and financial infrastructure, and other legal barriers such as lack of documentation that make it difficult for MSMEs to access finance through traditional channels. Access to core services for businesses, such as payments processing or access to credit is likely to be limited or unreliable.
Furthermore, traditional banks in these markets typically respond to crises by tightening lending criteria or reducing their geographical reach, especially in times of economic uncertainty. This deepens financial exclusion for MSMEs, hindering their capacity to flourish and adjust to evolving market conditions. For example, the destruction caused by the 2010 Haiti earthquake rendered traditional banking infrastructure inoperable, making it nearly impossible for affected individuals and communities, including MSMEs, to access much-needed financial assistance. As a result, microfinance institutions had to collaborate with the US military to deliver financial assistance in cash by helicopter,
Established and widely used mobile and fintech solutions have begun to address many of the underlying financial exclusion and economic development challenges in EMDEs. The functionality of many of these, however, remains dependent on traditional banking rails that are susceptible to failure and disruption in crises. Further technological innovation has led to the emergence of new products and services that allow individuals and MSMEs greater access to the services they need to continue to provide economic growth and opportunity in their communities, even in crises. For instance, digital assets have proven helpful during the war in Ukraine, as discussed later in this report. These have enabled Ukrainians to access and transport their savings when traditional financial rails were inaccessible due to Russian attacks.
of MSMEs classify access to finance as their top constraining factor for growth in Africa
of adults living in countries with humanitarian crises remain outside of the formal financial system and struggle to cope with shocks and emergencies
Despite the growth of these solutions, challenges remain. Primary among these is the provision of sufficient and well-functioning digital infrastructure, which is a key enabler for the adoption of such technologies and solutions. A shortage of reliable internet connectivity and mobile network coverage can make it difficult for MSMEs to use mobile payment systems and cause transactions to be delayed or unreliable. According to a Future of Fintech in Africa report, only 40% of Africans have internet connectivity and over 600 million do not have access to reliable electricity, especially those in rural areas where power outages are a common occurrence.
Enhanced digital infrastructure and its further development should not be neglected. This is essential to the deployment of newer, innovative digital financial services across EMDE geographies.
of Africans have internet connectivity
Africans do not have access to reliable electricity, especially those in rural areas where power outages are a common occurrence
Participation in traditional payment and credit services relies on a number of core requirements: access to a bank account, the ability to confirm one’s identity, assets to use as collateral for lending, a credit history, and a permanent physical location of residence or business. Access to financial services in particular has long been recognised by the United Nations (UN) as a key barrier to economic development in emerging economies.
These barriers to entry hinder the growth and potential of MSMEs. According to the Organisation for Economic Co-operation and Development (OECD) and the G20, the share of credit to the private sector in relation to GDP is significantly lower in emerging countries than the average in high-income countries (see Figure 1 ).
of adults in advanced economies
have a bank account
compared to:
in South Sudan
in Pakistan
in Uganda
Figure 1
MSME loans also constitute a smaller portion of business credit in these nations. In Africa, 40% of MSMEs classify access to finance as their top constraining factor for growth.
Displacement is on the rise as a result of various factors
Pre-existing challenges around financial exclusion are compounded in crisis situations in these markets by disruptions to traditional financial services providers (FSPs), physical and financial infrastructure, and other legal barriers such as lack of documentation that make it difficult for MSMEs to access finance through traditional channels. Access to core services for businesses, such as payments processing or access to credit is likely to be limited or unreliable.
Furthermore, traditional banks in these markets typically respond to crises by tightening lending criteria or reducing their geographical reach, especially in times of economic uncertainty. This deepens financial exclusion for MSMEs, hindering their capacity to flourish and adjust to evolving market conditions. For example, the destruction caused by the 2010 Haiti earthquake rendered traditional banking infrastructure inoperable, making it nearly impossible for affected individuals and communities, including MSMEs, to access much-needed financial assistance. As a result, microfinance institutions had to collaborate with the US military to deliver financial assistance in cash by helicopter,
Established and widely used mobile and fintech solutions have begun to address many of the underlying financial exclusion and economic development challenges in EMDEs. The functionality of many of these, however, remains dependent on traditional banking rails that are susceptible to failure and disruption in crises. Further technological innovation has led to the emergence of new products and services that allow individuals and MSMEs greater access to the services they need to continue to provide economic growth and opportunity in their communities, even in crises. For instance, digital assets have proven helpful during the war in Ukraine, as discussed later in this report. These have enabled Ukrainians to access and transport their savings when traditional financial rails were inaccessible due to Russian attacks.
of MSMEs classify access to finance as their top constraining factor for growth in Africa
of adults living in countries with humanitarian crises remain outside of the formal financial system and struggle to cope with shocks and emergencies
Despite the growth of these solutions, challenges remain. Primary among these is the provision of sufficient and well-functioning digital infrastructure, which is a key enabler for the adoption of such technologies and solutions. A shortage of reliable internet connectivity and mobile network coverage can make it difficult for MSMEs to use mobile payment systems and cause transactions to be delayed or unreliable. According to a Future of Fintech in Africa report, only 40% of Africans have internet connectivity and over 600 million do not have access to reliable electricity, especially those in rural areas where power outages are a common occurrence.
Enhanced digital infrastructure and its further development should not be neglected. This is essential to the deployment of newer, innovative digital financial services across EMDE geographies.
of Africans have internet connectivity
Africans do not have access to reliable electricity, especially those in rural areas where power outages are a common occurrence