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Stakeholders debate how to improve financial inclusion with digital public infrastructure

Stakeholders debate how to improve financial inclusion with digital public infrastructure
 

Digital public infrastructure (DPI) projects, including digital IDs, are gaining more ground as part of the fight against poverty. During UN Sustainable Development Goals (SDG) Action Week in September, global stakeholders promised to raise $400 million for DPI projects before 2030.

This week saw an update on an ambitious digital ID project for financial inclusion in Africa while experts from the Global South called for more funding, increased transparency and better infrastructure in order to fast-track DPI projects.

Mastercard’s digital ID for African farmers passes 2.5M registered

Mastercard has updated the progress and plans it has made for its Community Pass, a platform for digital IDs aimed at individuals such as business owners and farmers. The project focuses on African countries where many micro, small and medium enterprises (MSME) are facing obstacles in accessing credit because of a lack of a formal ID.

The global payments company plans to register 15 million people in Africa by 2027, according to Shehryar Ali, Mastercard’s SVP and country manager for East Africa. The company has previously stated it hopes to sign up the same number in the Asia-Pacific region.

“Through Mastercard’s Farm Pass, an initiative under Community Pass, farmers are provided with a chip card that can be used offline and includes a functional digital ID,” Ali writes in Kenyan newspaper The Standard. “They also have a digital profile which banks can use to understand the farmer’s risk profile, enabling them to provide faster credit decisioning.”

Community Pass has already onboarded 2.5 million users in Uganda, Kenya, Tanzania, and Mauritania, with plans to expand to Ghana and Ethiopia by the end of the year. Most are smallholder farmers who use the card to access traditional banking services and digital agricultural marketplaces.

In Nigeria, Mastercard has teamed up with technology service provider Alerzo, while in Kenya it is collaborating with the country’s Co-operative Bank, launching Co-op Bank Soko.

Gates Foundation calls for $500M in financing to help DPI

The Bill & Melinda Gates Foundation is calling on global donors to raise US$500 million over the next five years and help countries build digital public infrastructure (DPI) with technology, technical assistance and regulatory support.

Writing in The Banker, Michael Wiegand, director of the Financial Services for the Poor (FSP) strategy at the Gates Foundation, says the organization supports DPI because it believes it can transform an economy through inclusive finance. But there are two issues of concern.

“First, we worry that country demand to implement DPI will outpace the funding and technical assistance available; therefore, countries will turn their attention elsewhere or take shortcuts that will not deliver the benefits that they seek,” says Wiegand. “Second, the range of financial service providers and the number of citizens with financial accounts are growing so fast that it risks outpacing the ability of regulators to properly supervise the financial system.”

In Wiegand’s view, the development community needs to help regulators build the tools and capabilities to protect consumers as these ecosystems grow.

UIDAI has a transparency problem: researcher

Last week, global rating agency Moody’s raised concerns about security and privacy vulnerabilities in India’s Aadhaar identification system. In a report, Moody’s said that the system often results in service denials and questioned the reliability of biometric technologies.

The Indian government has fired back against the report highlighting that Moody’s only reference is a limited amount of data from the Unique Identification Authority of India (UIDAI), the government department in charge of Aadhaar. But tech researcher Srikanth Lakshmanan highlights that the UIDAI has not been releasing official numbers on transaction failures and biometric frauds recorded in the Aadhaar-enabled payment system, the Universal Payment Interface (UPI).

“Indians have been the guinea pigs to pilot the Centralised Digital ID system and the success of Aadhaar equally lies in under-reporting failures and narrative management,” Lakshmanan writes for The Wire.

The Moody’s report comes at a time when India is attempting to promote its solutions for digital public infrastructure through the G20. A credible reply to the allegations would be to publish hard data on the biometric reliability of its facial authentication, says Lakshmanan.

Digital ID systems in Africa need reliable internet: ITU Forum

African countries such as Ethiopia have made progress in their digital transformation, including launching national digital ID systems and developing digital payment ecosystems. But Africa is facing a number of challenges, most notably access to the internet, says Ethiopia’s Innovation and Technology State Minister Huria Ali.

Only 43 percent of the continent has access to the internet, Ali said during her opening speech at the International Telecommunication Union’s (ITU) Regional Development Forum for Africa 2023. The Forum is taking place this week in the country’s capital Addis Ababa, the Ethiopian News Agency reports.

The aim of the ITU forum is to reach commitments for projects outlined in the Kigali Action Plan, says Cosmas Zavazava, chief of the ITU Department for Partnerships for Digital Development. The Kigali Action Plan was created to promote the equitable and sustainable development of telecommunication and ICT networks and services.

“We would like to make sure the US$36.1 billion pledged to us is implemented for concrete works,” says Zavazava.

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