Small businesses at risk of financial exclusion during Covid-19, says BoT

Dar es Salaam. Women and youth traders, as well as micro, small, and medium enterprises (MSMEs) in Africa, were at risk of financial exclusion as Covid-19 cases spiked, say the Bank of Tanzania (BoT) and the Alliance for Financial Inclusion (AFI), the world’s leading organisation on financial inclusion policy and regulation.

BoT and AFI co-hosted a roundtable event yesterday for the leaders of Africa’s financial regulators to address the financial exclusion of vulnerable groups due to Covid-19.

Under the theme ‘Innovative Regulatory Approaches to Counter De-Risking/Exclusion of Women, Youth and MSMEs during the Covid-19 pandemic in Africa,’ BoT and AFI are holding the virtual gathering as part of AFI’s African Financial Inclusion Policy Initiative (AfPI).

AfPI leaders are sharing high-impact, practical expertise outlining successful and innovative regulatory approaches adopted across AFI member jurisdictions in Africa. “Our long-standing partnership with AFI is based on two-way collaboration and support to ensure that we do not leave behind vulnerable groups who have been worst hit by Covid-19-related impacts,” said BoT Governor Florens Luoga. “It is, therefore, our pleasure to work alongside AFI for the second consecutive year to ensure the successful gathering of the AfPI, demonstrating our commitment and active participation in knowledge sharing and peer learning,” said Prof Luoga.

He said BoT is well-placed to lead the Africa-wide event, having taken quick action to mitigate potential financial shocks on at-risk groups and foster economic recovery, including by easing monetary policies and encouraging banks to implement payment holidays, lower interest rates and extend loan restructuring periods to provide financial relief for customers.

The central bank has also been at the forefront of Tanzania’s efforts to promote digital payment platforms with the development of an interoperable payments system and financial services registry. Prof Luoga will be joined at the high-level event by his peers, including the governors and deputy governors of financial regulators in Burundi, The Gambia, Ghana, Kenya, Lesotho, Namibia, Rwanda, Senegal, Seychelles, Sierra Leone and Zimbabwe.

The impressive attendance by AfPI leaders further underscores the pivotal role of central banks in facilitating widespread recovery for all.

“AFI’s members in Africa have accelerated the use of digital financial services (DFS) and other innovative technologies through fast Covid-19 policy responses, ensuring that years of financial inclusion gains made are not lost and that continue to lift up those at the bottom of the economic pyramid,” said AFI Executive Director Dr Alfred Hannig.

AfPI, formerly known as African Mobile Financial Services Policy Initiative, was launched in 2012. Prior to AfPI leaders coming together, important meetings for the regional initiative took place, including gatherings with the Experts Group on Financial Inclusion, member training and dialogue with developed country regulators and private sector actors. Despite important progress made, Africa continues to be adversely affected by the pandemic more than a year after its outbreak with supply chain disruptions, reduced sales and business closures disproportionately impacting disadvantaged segments of the population, including women, youth and MSMEs.

Women-owned businesses have experienced greater loss of revenue and business uncertainty given their high propensity for informality and dependence on sectors such as tourism, which have been hit hard by the pandemic.

Women have also taken on more responsibilities at home as schools have closed, limiting their ability to engage in economic activities.

Africa’s youth may feel the impact of the pandemic into the foreseeable future. Most youth are unemployed while others are involved in the informal and heavily impacted sectors. Youth also lack readily acceptable collateral that can be used to access credit from formal financial institutions.