A business case for financial inclusion in Liberia.
Liberia’s National Financial Inclusion Strategy (NFIS) 2020-2024 has high ambitions. It strives to increase access to formal financial services for the population to 50% by 2024. This is a significant target of 40% increase from the current situation, which is at 35.7% of the total population.
Why we say that the targets are ambitious because of the current state and several external factors such as COVID19 which are proving to be a barrier in uplifting the population.
As per the latest data from 2017 only 21.6% of the population was recorded to have a bank account. However, with the latest government interventions and an increase in the penetration of mobile services, 20.80% of the population were recorded to have mobile money accounts. This is significant because the technology is relatively new and the country faced barriers in its implementation.
The Liberian Financial sector faces several challenges such as limited access points, lack of proper identification, expensive financial products, etc. but more technological interventions have the potential to lead the way ahead.
Such interventions would also directly support the country’s inclusion strategy (NFIS) framework, which is built on the following three pillars:
- Access to Financial Services and Credit
- Digital Financial Services
- Consumer Protection and Financial Capability
Some of the projects that have led to better inclusion in other parts of the world are listed below:
Digital ID has the potential to address systemic challenges, removing some of the barriers for those with limited access to the digital economy. A legally recognized, unique digital identity in place of physical documents, employing technology, such as verifying proof of address using GPS. Such an identity would provide financial institutions with reliable, unobscured data on customer activity.
Mobile Money Technology
Mobile money may be issued by a Mobile Network Operator (MNO), a financial institution or another licensed third-party provider. Low bank penetration and high mobile adoption make mobile money a viable alternative to the traditional banking system within the country. This will lead to social inclusion with products that facilitate access to basic services in health, agriculture, and education.
Mobile Application Based Money Transfer System
A system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features into one. Such a transaction system is fast, hassle-free and offers a cheaper way of money transfer, which can be done from anywhere.
National Identity Based Payment System
The country’s biometric identity database can be leveraged to enable peer-to-peer payments where the biometrics would be the authentication mode for these payments. This system will allow consumers to instantly settle funds with each other, and that too directly into their bank accounts.
The process of sending money through a blockchain-based system is significantly faster and at very low costs. Smart contracts can provide a strong sense of integrity between the peers in the system as any arrangement would be enforced impartially and automatically. Another benefit of a blockchain-based system is that it can help curb data breakings and other fraudulent operations from taking place.
We believe that such breakthrough technological projects have the potential to transform the financial landscape within the country as they have done in other parts of the world.