In January 2021, we held scenario-building exercises across four target markets – Egypt, Kenya, Nigeria and South Africa – with key public sector (data, innovation and financial services regulators) and private sector (fintech startups, data aggregators, financial service providers and other digital finance experts) actors. The purpose was to determine which problems in the regulatory space needed to be addressed to fuel a strong and inclusive post-pandemic recovery in these markets. These conversations informed the creation of problem statements that regulators, startups and other actors would discuss during dedicated TechSprints. The most relevant problem cited across markets was the unavailability and siloing of data and finance to enable the growth of micro and small enterprises (MSEs).
This scenario-building exercise validated and reinforced our hypothesis that financial sector, market and credit data have been lagging, sparse, or scattered across disparate sources, hindering prompt and informed decision-making by regulators and private sector players alike. The information deficit is especially acute when it comes to information on MSEs due to their high rates of informality. It has created blind spots for both lenders and regulators, thereby reinforcing patterns of financial exclusion. “Data silos” (restrictions on access and portability of data) compound these problems by depriving firms that can cater to these underserved segments of the vital inputs needed for innovation and growth.
While these issues predate the pandemic, the crisis has accentuated them by further swelling incumbents’ databases with newly digitized customers while simultaneously starving smaller players of financing. Failing to bridge this divide may hamper post-pandemic recovery.
In April, we ran two sprints over the course of two weeks, with a total of 60+ participants, to develop solutions that can address this major pain point. The first sprint sketched an open data platform that will source MSE market data from across the target market to provide public- and private-sector actors with meaningful insights that can facilitate lending and policy-making. The second sprint designed an open finance platform where stakeholders can share synthetic MSE credit data to test and calibrate models in a secure sandbox environment.
Both solutions seek to boost finances for pandemic-stricken micro and small enterprises. With the help of Fintech Sandpit, these blueprints will be developed into working POCs, to be evaluated at the Recovtech Symposium later this year.