- Europe's World
- By Joe Zammit-Lucia
How do you survive a sanitary crisis without access to social security or when your daily income relies on the informal economy? This thorny question has been playing on the minds of the tens of millions of informal sector workers in Africa – a continent with 437 million people living in extreme poverty.
African tech has actively tried to overcome this challenge by developing organic sustainable solutions to help the most vulnerable communities. Powered by digital technology, mobile money has been particularly useful to spread social aid as part of ‘universal income support’ programmes.
COVID-19 has made it difficult to provide traditional solutions to help the most impoverished populations. Some countries were able to set up direct assistance systems when the crisis first hit. In Lagos and Nairobi, local associations have been handing out food in working-class districts. However, the traditional methods of distribution appear inefficient since a lack of social distancing can result in severe health consequences and even violent altercations, as it was the case in Kenya and Malawi.
European solidarity measures, such as allocating social aid directly into people’s bank accounts is not feasible either, as African national population registers are not the most reliable. Figures from the World Bank show that only 1 million citizens in Togo have a national ID card – a country with 7.6 million inhabitants in 2016. Financial exclusion is also a major obstacle to this form of aid. According to the Central Bank of West African States, nearly 80% of households in the West African Economic and Monetary Union zone are excluded from traditional banking channels.
This growth has been essential in supporting informal workers and precarious households during the crisis
These realities added to the fact that informal employment represents up to 75% of the African economy, exacerbate the difficulty in reaching out to those impoverished populations. With such conditions, supporting the millions of informal workers in their daily needs has been a growing challenge.
The pandemic has, therefore, led to a new norm of digitising common social phenomena such as working, studying and healthcare. Preventative measures have not stopped there – they have also branched out to payment solutions. Service providers such as Orange Money in West Africa or M-Pesa in Kenya are different mobile money solutions that have been helping vulnerable and isolated populations emancipate themselves economically. Thanks to M-Pesa for example, financial inclusion in Kenya skyrocketed from 26.7% in 2006 to 82.9% in 2010. This growth has been essential in supporting informal workers and precarious households during the crisis.
Within a few weeks of the COVID-19 crisis, several African countries launched emergency experiments to accommodate transferring cash with unprecedented measures. This is the case in Togo, where more than €17.29 million have been released as monthly transfers of €15 to €20 via the “NOVISSI” programme. This is a significant contribution in a country where the minimum wage is €53 per month.
Other countries such as Burkina Faso or Egypt developed more restrictive mobile money transfer programmes which targeted specific trades such as vegetable retailers and construction workers. The process is relatively simple due to how intuitive and instantaneous mobile money operator applications are: government programmes payout to beneficiaries’ mobile accounts who then use the application to pay directly into shopkeepers’ mobile accounts.
The crisis has pushed Africa to start using digital payment systems much faster than planned
Selecting who can receive this sort of aid can also be difficult. In Togo and Morocco, people are asked to contact a dedicated service to answer a few questions. A text message is then sent to the telephone number they use for their mobile money account to confirm whether they are eligible for the aid or not. People who lack mobile wallets receive information about how to create one. One of the major advantages of this scheme is that access to a smartphone or an internet connection is not required, a simple text is enough to access the online service.
To prevent fraudulent and duplicate requests, and given that very few Africans have any sort of ID, authorities had to be innovative. For instance, Togo preferred voters’ cards over ID cards as more of those have been registered. Meanwhile, Ethiopia used health records which have been identifying ill people obliged to isolate them as recipients of income support. Other stakeholders have also suggested cross-checking household telecoms consumption data to identify families with the lowest income.
If the amount of financial aid and the number of applicants depend on each country’s resources, Africa can benefit from the support of the international arena. The continent has been receiving donations such as a $160 billion upfront grant from the World Bank. There have also been reductions of the countries’ debt services, an IMF initiative, to help respond to the crisis.
The crisis has pushed Africa to start using digital payment systems much faster than planned. This will not only contribute to the financial inclusion of the most vulnerable populations, but it will also make a real contribution to showcasing the first attempts at universal income support programmes using digital technology. These innovations are helping societies respond to the current emergency, but they will also participate in their post-COVID-19 reconstruction.
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