Beyond relief - using digital remittances technology for informal enterprises
THE QUESTION
Can digital remittance technology support informal businesses in Southern Africa?
LOCATION: Botswana, Zimbabwe, Zambia
SECTOR: Finance
TECH: Fintech
TIMELINE: September 2022 - Present
PARTNERS: FinMark Trust & Mukuru
The Challenge
Remittances are a vital source of support for many families in low-to-middle-income countries. For instance, there are 3.7million migrants from other Southern-African Development Community countries living in South Africa which remit 21.9 billion (ZAR) per annum to 6 million household members back home. Non-bank digital remittance providers have lowered the cost and improved the ease of sending money across borders by digitising both the sending and receiving or remittances. Currently, this technology is focused on consumptive use, with remittance receivers receiving and spending money for food, healthcare, household goods, etc.
Informal businesses are a vital source of livelihoods, accounting for roughly 70% of African employment, yet these businesses lack access to the finance they need to grow. Evidence suggests cash grants are very useful in filling this gap, but are difficult to use as there is very little information on these businesses and even if you are able to locate them, it is difficult to reach and pay them. Digital remittance service providers have the technology to support these businesses, yet their focus is on remittance receivers as consumers, not on business owners.
The Idea
This pilot will adapt digital remittance services technology to support informal enterprise growth through cash grants. This pilot will utilise existing data to identify remittance receivers with high-potential businesses, disburse grants and adjust targeting based on impact data. If successful, this initiative could provide a cost-effective, data-driven means to find and reach high-potential informal enterprises directly and over time learn how to best target support.
By his own admission, Matthew MacDevette began his career in the investment space thinking that finance was “a little bit evil”. Then he began working on how to get private investors into risky and impactful sectors in Africa. He began to warm to the topic.