Digital Transformation of Microfinance and Digitization of Microfinance Services to Deepen Financial Inclusion in Africa

This study reveals the role of technology in enhancing microfinance services in Africa and explores the convergence of digital financial services (DFS) and microfinance from different angles. Through extensive literature review and key informant interviews, the authors sought to understand the synergies between digital finance and microfinance providers in providing access to finance for low-income individuals and small businesses. The objective of this report is to present policy and regulatory recommendations that will facilitate the digital transformation of microfinance services to deepen financial inclusion in Africa.

The report is divided into four chapters:

1. Chapter 1 examines the transformation of traditional financial inclusion actors that have digitized their existing operations. It highlights their reasons for digitizing (the value proposition for customers and microfinance providers, or MFPs), delves into the different models MFPs can use and identifies the implications (risks and challenges) for MFPs.
2. Chapter 2 addresses digital financial service providers (DFSPs) entering “microfinance territory” and investigates how these new digital models have contributed to greater financial inclusion.
3. Chapter 3 discusses how partnerships between traditional MFIs and DFSPs (including FinTechs) can enable financial inclusion. 
4. Chapter 4 provides recommendations and policy options to optimize the synergies between digital finance and microfinance to enhance financial inclusion.