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Unlocking SME potential through the power of emerging technology

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By African Business. Published on April 5, 2022

Ngozi Megwa, Senior Vice President, Digital Partners & Enablers, EEMEA, Mastercard, tells us how the company is helping to empower small businesses in Africa.

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Mastercard

African Business: Why is a healthy SME sector so important for Africa’s economic recovery?

Ngozi Megwa: All over Africa, communities depend on the people that keep small businesses afloat, and the income they generate. These businesses have also been the ones that suffered the most over the past two years. 

As we look ahead, a healthy SME sector is vital for the economic recovery of African countries, where SMEs often make up more than 90% of all enterprises, significantly contributing towards inclusive economic growth. Sub-Saharan Africa alone has 44m micro, small and medium enterprises. They also offer jobs and the promise of a livelihood, as SMEs are responsible for an estimated 80% of jobs across the continent. 

If we can ensure these SMEs succeed, we’ll have a foundation for economic recovery that can fuel sustainable, inclusive growth in all corners of the continent. SMEs are playing an increasingly significant role in shaping national growth strategies, employment and social cohesion, as they contribute to improving the standard of living across the more vulnerable segments of society. A stable, growing, connected small business can be the key to financial inclusion for the whole community.

The role of super-apps in Africa’s financial inclusion drive

What are Super-Apps? Essentially, they are multi-function tools that offer a single location from which a person can engage in diverse commercial transactions, from calling a taxi and buying groceries, to paying an electricity bill – or applying for a loan, which is especially useful for small businesses and micro merchants.

Over the past decade, super-apps such as WeChat and AliPay in China have led the field. But Sub-Saharan Africa has a number of promising players too.

In Nigeria, the most populous country in Africa, Gokada, a courier service, established its own super-app allowing users to send packages, order food and hail cabs in one platform. SafeBoda, a Ugandan-based ride-hailing firm, also recently expanded into super-app territory. MTN Group, a telecoms provider headquartered in South Africa, is bundling instant messaging with m-commerce (transactions carried out via mobile phones) and entertainment in its Ayoba super-app.

A study commissioned by Mastercard and carried out by Economist Impact, From online bazaar to one-stop-shop: The rise of super-apps, examines this progress. It explains how various factors like population growth, digital access, connectivity, a diverse demographic, increasing trust, and affordability are contributing to the rapid progress of super-apps in the region.

Ngozi says: “With Africa already the youngest continent, and soon among the most populous, the continent presents a wealth of customer data, which regional players could leverage to add value for all stakeholders. Mastercard is that single technology provider of choice that can connect diverse players such as telcos, digital e-tailers and fintechs to become super-apps, enable a superior digital experience and drive greater financial inclusion for people and small businesses across Africa.”

What does the outlook for SMEs look like – are they optimistic about the future?

This is a great question and one we asked through our inaugural Mastercard SME Confidence Index. We reached out to over 1,500 SMEs across seven markets, to give them a voice and gauge their thoughts on what the future may hold.

The results that came back for Sub-Saharan Africa were very interesting, and our research revealed that confidence among SMEs here is on the rise. The Index found 74% of SMEs in the region are optimistic about the next 12 months. Almost half (48%) projected an increase in revenue. 

What truly stood out for me is what these SMEs see as key to their future success. Businesses in Nigeria identified accepting digital payments, easier access to credit, digitising business operations and doing business internationally, as the top four drivers for growth. Those in Kenya had easier access to funding at the top of their list, followed by digital payment acceptance, digitised business operations – and better insights and data. 

Another highlight from the research was that 89% of SMEs in Kenya, 81% in West Africa, particularly Nigeria, and 73% in Côte d’Ivoire say e-commerce will have a positive impact on their business. Among all regions surveyed, Sub-Saharan Africa also saw the highest potential in being able to do business internationally (62%). This highlights the opportunities for small businesses that arise from both internal transformation and global connections, as well as industry regulations and trends.

Digital inclusion through pay-on-demand

Africa is ahead of other regions when it comes to using mobile money and deploying related solutions. According to GSMA, nearly half the world’s mobile money transactions happen in Africa.

“To advance financial inclusion in Africa, it’s crucial that we advance digital inclusion – enabling all African consumers and businesses to participate in this growing digital economy,” says Ngozi. “When small business owners are connected to a mobile device, they are also connected to better credit access opportunities.”

Mastercard’s Pay-on-Demand platform, built by Mastercard Labs, brings convenient financing opportunities to underserved consumers, entrepreneurs and merchants across Africa, helping to combat the socioeconomic problems they face from restricted access to financing.

One initiative that benefits from the innovative Pay on Demand platform is the digital partnership between Mastercard, Samsung, Airtel and Asante Financial Services Group. Samsung makes the mobile devices available at a low upfront cost, Airtel coordinates delivery of the product through its reach, and Asante facilitates the loan with affordable payments distributed over time.

As the product is used, the individual or business will establish a digital transaction history, which can be leveraged for making other financing solutions accessible, such as credit, savings, investments and insurance. For small business owners and entrepreneurs, this is particularly beneficial as it offers opportunity to obtain financing to drive their business forward as well as build digital capabilities for their everyday business.

How does Mastercard empower small businesses?

Small businesses are the backbone of local communities and they serve as the engine of the global economy. When they grow, everyone grows. But figuring out how to adapt in a post-pandemic world is complicated for even the savviest entrepreneurs. 

By empowering SMEs with digital payment solutions, data, and insights to run their enterprises more efficiently and securely, Mastercard is committed to helping entrepreneurs around the world not only recover, but grow and thrive.  

We work closely with government, financial organisations, fintechs and the wider business community to create opportunities for SMEs across the region.

Globally and particularly in the Eastern Europe, Middle East and Africa (EEMEA) region, the payments sector has increasingly become important for enabling and driving inclusive and digital economies. According to the PwC Payments 2025 & Beyond report, in developing economic regions in Africa, payments are growing faster than the global average bringing millions of unbanked and underserved individuals into the global economy. 

At Mastercard, we enable SMEs by providing tools for omnichannel acceptance and help them to create digital storefronts from an e-commerce perspective.

For many small businesses, reducing their dependence on cash through digital payments acceptance has played a major role in being able to get paid and maintain cashflow, particularly over the last two years. 

We believe a more digitally connected world is a better world. To that end, Mastercard has committed to connect 50m SMEs globally to the digital economy by 2025, using its technology, network, expertise and resources to build a more sustainable and inclusive digital economy. As part of these efforts, Mastercard is placing a direct focus on connecting 25m women entrepreneurs.

We also launched “The Entrepreneur’s Odyssey” last year – a first-of-its kind free digital education platform that brings together a range of world-class academic and business resources to help small businesses learn and thrive. It builds on previous resources we’ve made available, including the free Cybersecurity Toolkit online.

These are just some of the initiatives Mastercard has brought to the market as we work with our partners across Sub-Saharan Africa, collaborating with governments and the private sector to help SMEs.

Spotlight on new technologies

“Access to new technologies is becoming more pervasive in Africa. The proliferation and adoption of AI, machine learning, blockchain and cloud computing are accelerating opportunities for small businesses in Africa,” says Ngozi.

Blockchain technology for example, underpins the development of cryptocurrency. Last year, Mastercard announced it will start supporting select cryptocurrencies directly on its network, with a focus on consumer protection and compliance. Ngozi explains it’s about offering choice, and the fact that Mastercard wants to enable customers, merchants and businesses to move digital value – traditional or crypto – however they want.

“Another application of blockchain technology is in our Mastercard Provenance Solution, which delivers real-time traceability in supply chains. It bridges the gap between data silos, and allows decisions to be made based on a shared record that drives trust, confidence and accountability between buyers and sellers. We’ve recently launched this in Zimbabwe to benefit local cattle farmers in partnership with E-Livestock Global.”

Artificial intelligence (AI) is powering advanced loyalty solutions like Session M. By fusing machine-learning and real-time decision-making, with an ability to deliver messages, offers, or loyalty tactics across any channel, marketers are able to create smarter interactions that drive incremental behaviors and profit.

“AI is also enhancing fraud detecting capabilities,” says Ngozi. Brighterion, a Mastercard company whose AI and machine learning secures more than 100bn transactions annually, helps organisations manage the credit risk lifecycle, predict delinquency, prevent payments and acquirer fraud, and detect abuse.

As fraud management rises in importance on the back of fraudsters trying to outsmart traditional cybersecurity measures, Ngozi says the answer is “Connected Intelligence”. “By linking insights across the entire customer journey, businesses can stop fraud in its tracks and provide a more frictionless experience.”

Africa already has several outstanding women entrepreneurs, but do we have enough?

To reach the full potential of our economy, we need to activate the contributions of the whole 100%. We’ll have enough when every woman who wants to launch a business, feels supported to do so, and we work closely with partners to empower women entrepreneurs. 

An equal world is a more inclusive world, and Mastercard remains wholeheartedly committed to supporting the journey to gender balance with all our resources, technology, and the power of our network.

In the meantime, female SME owners in Sub-Saharan Africa are leading the way, despite challenges around funding, support and attention. According to the 2021 Mastercard Index of Women Entrepreneurs (MIWE), Botswana, Uganda and Ghana were the world’s three leading economies having the most women business owners as a percentage of total business owners.

Angola is ranked first among all 65 economies analysed for its “women’s entrepreneurial activity rate” which surpasses that of men, even though “general access to finance” is ranked low. Although women’s entrepreneurial activity rates declined in most economies during the pandemic, South Africa, Angola and Botswana are among only 12 economies where it increased.

Growing the contribution of women entrepreneurs is a positive sign, as almost half of female entrepreneurs (48.7%) around the world report being driven by a desire to contribute to the greater societal good. 

However, the report also notes the disproportionate impact of the Covid-19 pandemic on women entrepreneurs around the world, with 83.8% saying they have been adversely affected. 

Overrepresentation in sectors hardest hit by the economic downturn, and the pronounced digital gender gap in an increasingly virtual world, are some of the factors that have left women particularly vulnerable.

This is also why digital inclusion, for all members of our society, is so vitally important. In addition to empowering women-led businesses everywhere with digital payments acceptance tools, Mastercard is also advancing social progress through financial literacy training to encourage the growth of entrepreneurship among women.

 For example, the Mastercard Center for Inclusive Growth awarded a seed funding grant to the Omaness Skinfood Company, to empower 10,000 women entrepreneurs in Nigeria to run their own skinfood merchant businesses. 

But without the uncertainty of cash weighing down their efforts, we could see the contributions of women vastly ramping up prosperity in communities. They would have more time to follow their passions, to confidently grow businesses in a digital age and to inspire the next generation of women. 

Where do the opportunities lie for SMEs in the year ahead?

As a technology company, Mastercard is very passionate about innovation, and exciting new ways to develop the digital economy – because that is where the growth is – especially for small businesses and micro merchants. We want to help them go digital and grow digital.

E-commerce remains a key opportunity and in our Economy 2022 Outlook report, the Mastercard Economics Institute anticipates that 20% of the digital shift in retail will stay put – reshaping how and what consumers buy. E-commerce subscriptions gained traction in 2021 as nearly 88% of countries across 32 markets saw a surge in subscription services compared to the previous year. Notably, virtual workout partners, bike rentals and pet services are among businesses benefitting from this model.

Covid-19 further heightened the need for SMEs’ digitalisation. At Mastercard we encourage SMEs to strongly consider accepting different payment methods, especially given the rise of hybrid commerce, the omnichannel experience, and the focus on providing choice.  

Trust is the new currency of the customer experience, especially as it migrates towards digital. New technologies are very helpful in this respect and can help SME’s build deeper engagements with their customers. For example – Mastercard’s human-centred AI solutions, delivered to SMEs via our partners, can create new business value, by leveraging insights beyond the purchase transaction or point of sale.