Digital and financial inclusion in Eastern and Southern Africa post-Covid

“Never let a good crisis go to waste,” an inspiring quotation by Churchill, blends well with the business strategy lessons the world should draw from the COVID-19 pandemic. Most governments and the private sector reacted swiftly to studies on COVID-19 treatment and prevention. Yes, human life was saved, but their sources of livelihood were at stake! Due to the pandemic, government-imposed lockdowns and shutdowns affected the smooth running of brick-and-mortar businesses. Essentially, only agile companies that embraced e-business systems remained viable.

The lack of agility in e-business systems during the pandemic wiped out 4 million jobs in Africa. The situation was even worse for the micro, small and medium enterprises (MSMEs) in the COMESA region (COMESA is the Common Market for Eastern and Southern Africa). So, our team embarked on a research study aimed at assessing digital financial inclusion in the COMESA region through e-business adoption by MSMEs.

We collected data from SMEs in five COMESA countries: Eswatini, Kenya, Rwanda, Zambia, and Zimbabwe. The study revealed interesting statistics about the COMESA region that reflected an increase in the usage of digital platforms for business. The dynamic trend of e-business adoption among MSMEs of the COMESA region showed a positive trend towards the adoption of e-business tools/platforms and technologies. This has been shown by the increasing number of MSMEs using e-platforms, electronic devices, and e-business platforms among countries.

Nuggets we bring to the world
The largest proportion of e-business users was found in Kenya, Rwanda, and Zambia. Countries in Southern Africa (Zimbabwe and Eswatini) had a slightly lower adoption rate compared to countries in East Africa (Kenya and Rwanda).The main platforms of e-business in use, in all countries targeted, were websites, social media, mobile money applications, and the Internet, in that order. However, the more respondents became educated ,the more they moved away from over-dependency on social media toward websites.Social media was the most used e-business platform by newer MSMEs, with operating experience of less than one year, then the use of social media declined gradually as businesses gained more years of operating experience. Conversely, the use of websites grew gradually as businesses gained more operating experience.

In Zambia, Rwanda, and Kenya, at least 70% of the MSMEs had access to Internet banking; the rate was about 60% in Eswatini. Zimbabwe was the only country where the majority of MSMEs did not have access to Internet banking. Money market accounts were commonly used in the business activities of MSMEs in Rwanda, Kenya, and Eswatini. Wire transfers were mainly used in Zambia and Zimbabwe. Mobile money transfer was the single dominant mobile money application and service across all MSMEs in the region. Mobile payments and mobile banking did not constitute any significant proportion.

Our study further showed that the key determinants of e-business adoption in the COMESA region are not fully explained by the theoretical factors of technology adoption. There was no statistical evidence to support the idea that e-business is driven by the simplicity of e-platforms, value of e-business, social support, e-business infrastructure, or intrinsic factors. The study, however, found that years in business, years using e-business platforms, and country-based differences have an impact on the decisions to adopt e-business. By contrast, the results also showed that e-business adoption does not have a significant association with digital financial inclusion in the region.

How to bridge the chasm between e-business and digital financial inclusion in COMESA
In light of our discovery, we noted that for the COMESA region to fully embrace the digital benefits of e-business and digital finance, there is a need for the support of the establishment and development of e-business models which align with the country-based needs of MSMEs at the base of the economy. A blanket approach in COMESA may not yield positive results due to differences in enabling environments among COMESA member states. We also note the need for the transition from cash towards digital mechanisms for e-business platforms and to drive demand and support for the transformation of micro-merchants onto formal e-business platforms. As the cost of data and device acquisition were highlighted to be major deterrents of e-business adoption, we feel that the reduction in the cost of devices and internet data will give MSMEs the ability to acquire and use the different digital platforms.