30 Nov 2022

digital divide and financial inclusion

The digital divide and financial inclusion

Mobile technologies have significantly increased universal financial access, yet there are many rural households that are financially excluded. Behind the impressive efforts to avail financial services to rural communities, there’s a stark challenge of digital access in these communities. Many rural areas in Africa still lack the reliable mobile and internet connectivity that is often required to support the use of digital financial services. It becomes very difficult to ensure democratized access to financial services without convenient access to the internet and ownership of any form of digital identity.

How can tackling the digital divide boost financial inclusion?

When the lockdown kicked in during the Covid-19 pandemic, data shows that there was a significant increase in the number of online purchases and e-commerce grew rapidly. In a report by the United Nations, e-commerce jumped to $26.7 trillion.

According to the World Economic Forum, the pandemic worsened the digital divide for the estimated 55% of the world’s population that are unconnected. In a report by the IFC, Africa has the lowest number of internet connections with only 22 percent of the continent having access. The lowest access rate is in rural households as a result of high illiteracy levels, low income, lack of access to financial services and economic activity concentrated in urban areas. In our 2021 research project in Uganda, we discovered only 22% of our respondents that had access to the internet used it for digital financial services.

To boost financial inclusion in rural areas, there’s an urgent need to narrow the digital divide in order to enable rural communities access to digital finance that can improve their lives. When rural dwellers have mobile/ internet connectivity, digital identity and are able to access financial services (i.e own a mobile money account), it becomes easy for them to implement the basic financial knowledge they’ve obtained from.

The availability of broadband coverage in rural communities will encourage financial providers to consider establishing banking infrastructures in these communities. Also, mobile money agent networks in many of these communities have to rely on good connectivity as they use internet-enabled mobile devices to manage funds.

At Rural Inclusion, we understand how the digital divide also affects how financial literacy programmes are implemented in rural areas. Although the content available on our financial literacy platform, Ostrii is designed to be downloaded and used offline, users would depend on an internet-enabled device such as a smartphone for accessibility. By leveraging partnerships with organizations, we are able to deliver financial education through Ostrii to the digitised and non-digitised groups in rural communities and beyond.