E-business and financial inclusion as a catalyst for the formalization and growth of MSMEs

Event report

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The moderator Mr Paul Donohoe, Digital economy, e-commerce and trade programme, Universal Postal Union (UPU), explained that this session would examine the contribution of WSIS Action Line C7 to Sustainable Development Goal 8 in the 2030 Agenda (promoting sustained, inclusive economic growth, full and productive employment, and decent work for all). This session would cover cases from Africa and Asia, getting perspectives from their experiences with digital financial services and explore the opportunities and challenges of attempts to reduce financial exclusion and promote development-oriented policies.

Mr Youssouf Sy, manager of the Financial inclusion technical assistance facility at UPU, stated that postal operators are key actors in financial inclusion, as they have experience in providing financial services, one of the largest physical networks reaching rural areas. One and a half billion people access financial services through the post. However, to remain relevant, efficient, and impactful, postal operators need to undertake a digital transformation. Postal operators need to address their weaknesses, such as limited know-how in technology, weak connectivity within their network, and limited financial resources. Sy presented various business models postal operators use to provide digital financial services. He then explained the role of UPU in the area of financial inclusion.

Mr Jorge Ortega, Global Financial Inclusion, Visa Inc., spoke about the issues in the small merchant area and the opportunities Visa is taking in these areas to enable inclusion. He pointed out that only 15% of small merchants are formal. Ortega also explained how Visa engages small merchants.

Mr Anir Chowdhury, project advisor at a2i, Bangladesh, recounted the experiences of Bangladesh in digital financial inclusion. He presented a case study from his country. He stated that there is a huge opportunity to digitise payments in Bangladesh and the first step would be to make a comprehensive payment architecture that would allow all actors (banks, mobile financial service providers, post offices) to work together. Another activity is linking the national identification of the person, which is biometrically verified, to the financial identification of that person, which would result in extreme mobility. a2i is also looking to expand e-commerce to rural areas through its digital centres across Bangladesh, acting as e-commerce houses.

Mr Bisi Adegbuyi, postmaster general at NIPOST (the Nigerian Postal Service), recounted the experiences of Nigeria in digital financial inclusion. Ten innovative products have been launched and invitations for bids by the National Cash Transfer Office have been announced. Adegbuyi pointed out that financial inclusion does not automatically lead to poverty reduction, and the starting point should be projects and products that can lift people out of poverty, such as Nigeria’s Address Verification system. Postal operators must diversify, Adegbuyi stated. NIPOST is creating an architecture that can assist in ensuring that the products result in added income for people in rural areas of Nigeria. NIPOST is also looking to integrate with International Financial Services and looking to sign an agreement with Masria cards. Adegbuyi concluded that it should be ensured that financial services brought to rural areas will not be elitist.

Mr Mohamed Es Fih, advisor on eSolutions for business at the International Trade Centre (ITC), shared the perspective of micro, small, and medium enterprises (MSMEs) and how they digitise. They want to benefit from digital access to financial services but are afraid of other actors: bigger competitors that may steal their ideas and the fiscal authority of their country and its fiscal pressure. There are human and technical costs to integrating MSMEs in the digital world that these enterprises often cannot withstand and compliance regulations that entrepreneurs cannot understand. Once they digitise, the reporting problem appears. MSMEs calculate that staying informal and not digitising creates more value for them. E-punishment is another off-putting factor: buyers can destroy the e-reputation of the enterprise and the government can easily find and punish the enterprise. MSMEs should be incentivised to become transparent, otherwise they cannot participate in e-commerce. Es Fih also identified some solutions: using the postal system to facilitate compliance or to digitise information such as photos of products, and letting small enterprises grow before subjecting them to formalisation.

Ms Scarlett Fondeur Gil, ICT Policy section, United Nations Conference on Trade and Development (UNCTAD), invited participants to investigate other solutions of payments in e-commerce to leverage e-commerce for development. Such solutions should be part of the e-trade platform of which ITC and UPU are partners. It is important to see what they and other partners offer in terms of development solutions for an enhanced payments environment for e-commerce and eventually, for economic development.

By Andrijana Gavrilovic