The World Bank estimates the global finance gap (the amount required to allow businesses to realize their potential) now stands at $5.7 trillion worldwide, rising to $8 trillion if informal businesses like mom-and-pop traders or flea market stands are included. In Africa, a massive, resource-rich region that has yet to realize its full potential, the finance gap is over $400Bn for the informal economy which drives 80% of the continent’s GDP. This has created a crisis of inequality on the continent that urgently requires business-friendly government intervention.
African governments should look at India’s ‘Jan Dhan’ (full name Pradhan Mantri Jan Dhan Yojana or PMJDY) as an example of what can be achieved when a government creates an environment for technology-enabled financial inclusion for all citizens and small businesses.
Established in 2014 by Indian Prime Minister Narendra Modi, Jan Dhan was a government initiative to allow the unbanked access to savings, remittances, credit, insurance and pensions, provided across India’s network of public and private banks. Zero deposit and zero opening fees allow access by low-income groups who now have the wherewithal to increase financial resilience and competence.
Since 2014 Jan Dhan has scaled to near universal adoption across India. 530M bank accounts deliver documented benefits to health, women’s empowerment and social mobility. In fact, nearly 300M women in India now have their own bank accounts, allowing them to maintain their own savings apart from their husbands and giving them more opportunities to start businesses and earn money.
Jan Dhan is also the prime enabler of the Indian e-commerce market, sized at $325Bn by 2030 and the fastest growing open finance system in world. A G20 report by the World Bank in 2023 revealed India had achieved its financial inclusion goals in just 6 years, a feat that would have taken 47 years without its advanced Digital Public Infrastructure. Bank branches per head now exceed China, Germany and South Africa.
By extending effective financial inclusion, Jan Dhan is catalyzing the transformation of the informal sector from a development liability to an engine of growth and prosperity. Providing them access to digital financial services and business skills is the pathway to a formal, integrated economy and the means to individual and collective prosperity.
Africa already has the components needed to replicate the historic success of India’s Jan Dhan program. The continent hosts thriving tech hubs in Kenya, Nigeria, Egypt and South Africa, drawing the majority of inward investment. Victor Basta of DAI Magister, a leading investment bank, views African enterprises and CEOs as some of the best in the world. Companies like 4G Capital, which harnesses AI and fintech platforms to provide capital to small businesses, are using creative, technology-driven solutions to expand financial access to more communities across the continent than ever before.
However, to further expand prosperity in the 21st century, African countries should emulate the drivers of India’s success: political determination, digitization, a pro-business environment, functioning institutions and rule of law, investment in innovation hubs, and smart regulation.
By expanding financial access and business opportunities through targeted technological application, Africa has the opportunity to avoid the high-tax, high spend, high debt model proving unsustainable in G7 nations. Developed countries are experiencing reduced productivity and confidence, and entrepreneurialism has been diminished by an expanded state which has displaced civil society and fostered dependency at the expense of resilience.
African economies cannot afford to follow this route, and they cannot afford to lose their most talented people in the flow toward welfare states which will inevitably change their rules. Governments everywhere should set the conditions for business success, with enabling regulatory frameworks focused on customer protection and effective rule of law, and then let entrepreneurs solve their local and social problems, whether in financial inclusion, education or elsewhere.
African regions should leverage existing regional communities which form the pillars of the African Union. The continent’s local needs, cultures, languages and geographical barriers mitigate against emulating the EU model or a common currency, so localised investment and policy reform is crucial. Also, in order to reap the full benefits of a financial inclusion revolution, Africa needs to reduce internal corruption and implement predictable, fair tax reform that encourages inward investment and value creation at all levels of society.
By all metrics, the opportunity in Africa exceeds that of India, today the world’s most populous nation. But with 54 countries, five official regions plus its worldwide diaspora and 3000 languages, cooperation, foresight and statecraft will be needed as never before. The key difference today is the penetration of smartphones and connectivity which allow people to see what is possible - and want it. Internal demand is in synchronicity with the need for sustainable growth on equitable terms, so now is the time for action.
By implementing a Jan Dhan-style investment scheme that’s tailored to the needs of individual countries and communities, along with key internal policy reforms, Africa could become a global economic powerhouse within a decade.
