Digital transformation is expected to boost the economic growth of the East African community
Now that the Supreme Court of Kenya has upheld Guillaume Rutovictory in the country’s recent close presidential race and the new president comes taken office, the ball can be picked up again on important intra-African trade talks.
High on the agenda is the full integration of the 90 million-strong Democratic Republic of the Congo (DRC) into the East African Community (EAC), whether it joined end of March.
The DRC is the largest country in sub-Saharan Africa and has enormous mineral wealth, but its population remains among the poorest in the world. It is therefore hoped that the accession of the DRC to the EAC will not only establish new trade routes between the member countries of the East African bloc, but also open up opportunities for foreign investment and sustainable development in the DRC. and in the region.
To achieve these ambitions, Kenya and the DRC will need to deepen their already strong ties. A strong partnership between the DRC and Kenya could rapidly accelerate the digital revolution, which would boost economic growth in both countries and improve the quality of life of their citizens.
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The challenges of digital transformation
Kenya’s innovation in fintech, in particular, seems like a natural fit for the DRC, where a large unbanked population is holding back the economy. In fact, it is estimated that less than a quarter of the DRC’s population has a bank account – well below the regional average – partly due to the collapse of the formal banking sector in the mid-1980s and 1990s. of a period of profound political instability.
Although the DRC has experienced greater stability following its first peaceful transfer of power For President Felix Tshisekedi, the country’s relative scarcity of bank branches and underdeveloped transportation infrastructure continue to cut most citizens off from branch banking in a culture where over-the-counter transactions are the norm.
And with internet use languishing at around 17 percent of the country’s population, the barriers to digital transformation are significant.
More than two-thirds of Congolese live on less than $2 a day and most have no obvious incentive to open a bank account. Additionally, fintech disruptors face a high cost of entry into an ecosystem dominated by big players like Ecobank and UBA as well as established telecom operators like Vodacom Congo and Orange RDC.
Technology is driving change
Yet innovation changes established practices. Improving the image of telecommunications facilitates fintech developments that offer financial services closer to where people live and work.
For instance, International Flash has positioned itself as the country’s largest financial technology and payments aggregator by providing access to banking services to more than two million customers through its mobile platform, FlashApp.
Similarly, the Swedish startup Okapi financing began rolling out services in the DRC last year and aims to reach up to 25 million Congolese by the end of the decade. Okapi has particularly invested in integrating more women into the DRC’s financial services ecosystem, supporting the proliferation of women-led businesses.
These major investments were facilitated by the good governance reforms implemented by the administration of President Tshisekedi, which have boosted investor confidence.
Crucially, these reforms have led the World Bank to resume support for DRC budget financing after a 17-year hiatus, which includes a new $250 million operation to support government reforms in areas such as trade liberalization. market, public finance and sustainable forestry, as well as $500 million to develop transport and digital infrastructure that will be essential to boost the Congolese economy.
Kenyan investment accelerates digital progress
Capitalizing on the DRC’s growth opportunities requires significant investment: it is estimated that up to $100 billion will be needed to achieve universal and affordable access to good quality broadband in Africa by 2030.
The Congolese capital, Kinshasa, is already attracting investment from Nairobi financiers – a trend that should further catalyze digital innovation in the region. Kenya’s largest banks, including Equity Bank, have rapidly acquired financial interests in some of the DRC’s largest lenders, while dozens of Kenyan companies have already made commercial investments in the country to the tune of $1.6 billion. Moreover, the Kenyan group KCB will probably to acquire Trust Merchant Bank (TMB), which operates the largest bank branch network in the DRC.
The enhanced cooperation between the DRC and Kenya in recent years has paved the way for this investment boom. In April 2021, countries signed a series of chords to boost cooperation in a wide range of areas, including infrastructure development, SMEs and cybersecurity, which prompted Kenya to commit to expanding its diplomatic presence in the DRC to accelerate economic cooperation.
The recent $1.6 billion investment by a group of Kenyan companies in the DRC was facilitated by a trade mission organized by the governments of the DRC and Kenya.
Fintechs in Kenya are booming, making them an ideal partner to drive development in the DRC. Telecommunications giant Safaricom accounts for 5% of the country’s GDP, thanks to its M-Pesa money transfer service which runs on technology similar to text messaging, meaning it doesn’t rely on an internet connection.
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Equitel, another mobile virtual network operator/bank hybrid, also promotes financial inclusion through agents who venture into even the most remote areas to demonstrate their use. Equitel’s approach has helped the company capture a fifth of the mobile money market in Kenya in just five years.
It is hoped that fintech companies in Kenya can apply the strategies they have used to help increase financial inclusion in their country – namely expanding access to basic financial services from 26% to 83 % since 2006 – in the DRC, bringing the benefits of easier access to financial services to marginalized groups, such as women, the rural poor and people displaced by conflict.
The opportunity for digital disruption in the DRC is significant, especially given the country’s recent governance reforms and membership of the EAC, which have significantly improved its investment climate. Kenyan tech companies growing in the country may well be the catalyst the country’s tech space needs to propel it into a new digital era that will foster inclusive and green development at home and in the wider region.
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