[Column] Oluwatobi Amusan: Financial inclusion in Africa with embedded trade finance

There can be no talk of financial inclusion in Africa without trade finance. Trade promotes economic growth, reduces poverty, fosters economic and cultural links between regions and countries, and facilitates capital movement.

All these are possible when medium and small-size enterprises (MSMEs) can access affordable financial products and services that enable them to exchange goods and services in regional or global marketplaces.There is proof that financial inclusion models can spur overall economic growth and support broader development goals in emerging economies.

In fact, financial inclusion features as a target in eight of the seventeen 2030 Sustainable Development Goals (SDGs). Some of these are SDG1, on eradicating poverty; SDG2 on ending hunger, achieving food security, and promoting sustainable agriculture; SDG5 on achieving gender equality and economic empowerment of women; SDG8 on promoting economic growth and jobs; SDG9 on supporting industry, innovation, and infrastructure; and SDG 10 on reducing inequality.

Africa has taken giant strides in the area of financial inclusion recently, where innovation in digital finance has expanded financial opportunities to 43% of the people in Sub-Saharan Africa alone and growing! However, this is barely enough for the region to achieve sustainable economic growth. Trade finance, as well as increasing economic activity, accelerates inclusive growth. And Africa has a real opportunity here.

Trade finance is essential to international trade. According to the World Trade Organization, approximately 80 to 90 percent of global trade depends on trade finance. Trade finance keeps international trade moving by ensuring the availability of capital. As crucial as it is, Africa lacks an adequate supply of trade finance opportunities to support African merchants and develop its $2.6 trillion economy. The estimated trade finance deficit in Africa is more than $100 billion.

Medium and small-size enterprises are the most excluded from the available trade finance opportunities in Africa. Banks target big corporations, leaving out small businesses. That informed our goal to leverage our innovative embedded trade finance platform to expand financial opportunities to African MSMEs in the international trade sector.

We observed that for us to achieve the most crucial aims of the sustainable development goals, African businesses must have access to affordable and fast trade finance opportunities. Under the current condition, medium and small-size African enterprises have little stake in international trade, although they’re responsible for more than half of Africa’s GDP.

In Nigeria, MSMEs account for 96% of businesses and contribute about 50% of the national GDP. Yet, they have limited access to international trade finance instruments. For Nigeria and Africa to develop, we must support these businesses that generate the most widespread value for Africans. To do this, we built an embedded trade finance product to drive financial inclusion by allowing medium and small-size African merchants to access trade credits to conduct business all over the world. By doing this, we believe we will facilitate trade activities and boost economic output in Africa, leading to poverty reduction and a higher standard of living on the continent.

Here’s how MVX benefits African merchants:

• Quick access to logistics and finance through an easy-to-use platform, powered by technology.
• Bridge the cash flow gap between when merchants pay their suppliers and receive payments.
• Provide an additional line of credit that African merchants can use to fund product expansion and business growth.
• Access to trade finance opportunities from trusted sources.
• Improve the company’s revenue and profitability.

Financial inclusion opens up tremendous growth opportunities for Africa. It is the key to eradicating poverty and increasing economic participation for millions of Africans. Our goal is to secure Africa’s economic future by financing trade activities for millions of small and medium-sized enterprises on the continent.

Oluwatobi Amusan is the Chief Technical Officer at MVXchange

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