OPINION: How good digital payments infrastructure can help SMEs access new markets
Saying that small and medium-sized
enterprises (SMEs) are the backbone of economies in East Africa is an
understatement.
SMEs make up the largest part of all
registered entities in nearly every industry and sector in most East African
countries, averaging between 60% to 90%, including micro-enterprises.
As the region continues to experience
significant progress and development, the SME ecosystem plays a crucial role in
creating employment opportunities, encouraging innovation and entrepreneurship,
and diversifying economies.
However, only a few of these SMEs will grow
into larger-sized firms or expand their reach into markets beyond the area they
operate.
This is mainly due to the constraints they
face that limit their ability to expand and scale their business, such as
inadequate financing and access to investment and financial services and
insufficient integration into international capital markets.
Historically, the finance sector in East
Africa has shown a preference for traditional banks, which have been restricted
in terms of geographical reach and other factors.
This has resulted in limited access to
financial services for many merchants in the region, hindering economic growth
and development. But this is changing.
The emergence of an increasingly robust
digital payments infrastructure in East Africa presents an incredible
opportunity for businesses to scale by opening up access to new markets in the
region, across the continent, and around the globe.
Expanding the global footprint of
enterprise
Africa accounts for 70% of the world’s $1
trillion in mobile money value, mainly due to the boom in digital instant
payment solutions and inclusive interoperable payment systems across the
continent.
East Africa makes up the largest mobile
money market on the continent, with transaction values worth $491 billion for
390 million registered accounts in 2022.
These booming, secure, efficient, and
interconnected digital payment systems are transforming the business landscape
by breaking down geographical barriers and broadening enterprises’ ability to
collect and make payments to and from anywhere in the world.
Trailblazing fintech firms are
revolutionising the digital payments space and helping enterprises solve their
revenue collection and payment challenges, reducing operational costs and
leaving them free to focus on operational efficiency.
Now, SMEs can scale their existing services
into new African and global markets by capitalising on the growing digital
payment infrastructure without the need to build their payment infrastructure
or platforms. With just the right payment partner, businesses can expand into
new territories by establishing a virtual financial presence, helping duplicate
their services in the new market.
By leveraging the shared infrastructure and
resources from their payment partner, enterprises can now mitigate risks while
gaining access to local knowledge and networks.
Enabling enterprise to meet its full
potential
The increased access to new markets for
enterprises, facilitated by the digital payments space, enables their ability
to scale up, compete with larger firms, and increase their growth potential.
By scaling effectively, East African SMEs
can keep up with customer and market demands, improve their efficiencies and
find new avenues of revenue growth without being held back by a lack of
resources or infrastructure.
It encourages innovation, which could see
the development of new products and services, increase sales opportunities, and
further their ability to serve more customers and expand into new markets.
As the rapid growth of digital payments
technology continues, we can expect to see more enterprises take advantage of
the increased access to new markets, resulting in the growth of SMEs across the
region and subsequently driving the creation of better-paid jobs, economic
growth and ensuring more competitive economies.
Lukandwa is the head of commercial strategy at Onafriq.
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