How digital financial services can provide a path toward economic recovery in Algeria


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While Algeria has made progress in boosting fintech innovations and developing digital financial services, more can be done to raise awareness to their benefits and stimulate their growth.
While Algeria has made progress in boosting fintech innovations and developing digital financial services, more can be done to raise awareness to their benefits and stimulate their growth. (Photo credit: Shutterstock)

Algeria, like the entire MENA region, has been hit by economic shocks exacerbated by the COVID-19 pandemic, including the drop in oil prices. The country’s economy is projected to post a significant real GDP contraction in 2020, according to the latest Economic Monitor. Digital transformation, one of Algeria’s main development goals before the crisis, is now a key element of the country’s recovery. 

Access to affordable financial services is critical for poverty reduction, economic growth and resilience to crises and paves the way for financial inclusion — particularly for women. In Algeria today, 57% of adults and 71% of women still lack access to even the most basic transaction accounts to send and receive payments more safely and efficiently.  As a result, they are denied access to broader financial services such as savings, insurance, and credit. Digital Financial Services (DFS), enabled by fintech, as well as more traditional financial services providers, have the potential to lower costs; increase speed, security, and transparency; and enable safer financial services. Better access to digital payments would be the gateway to DFS for Algerians less familiar with the financial sector.

Mobile money has leveraged high mobile phone penetration in many developing countries to deliver a 'first wave' of DFS. However, while mobile broadband connectivity in Algeria is above the MENA average, the use of DFS is still very low: only 16% of Algerian adults and 11% of women use digital payments, compared to 23% of adults and 18% of women across the MENA region, and 36% of adults and 32% of women in Emerging Markets and Developing Economies (EMDEs).

Digital payments

Digital payments allow consumers to transfer funds, pay bills, or pay for goods and services from their home, in a market, or a store. COVID-19 has amplified their benefits: they significantly reduce the need for physical contact in retail and financial transactions, keeping local businesses open during lockdowns.

How can DFS help Algeria cope with COVID-19?

DFS enable rapid, secure ways for governments to reach vulnerable people with social transfers and other financial assistance, especially when transportation and mobility are unsafe or limited. Before the current crisis, it was clear that two use-cases for DFS — beyond mobile money, remittances, and Government-to-Person (G2P) payments — were particularly beneficial for the poor.

According to the World Bank’s Remittance Prices Worldwide Database, the average global cost to send remittances in cash is 6.8%; digital transactions would drop the cost to 3.3%. Based on Findex data, millions of Algerians have an account, however, they still use means such as OTC services to send or receive domestic remittances. It is, therefore, more important than ever to reduce fees, increase funds available for remittance recipients, and encourage use of digital channels.

Digital payments can strengthen the accountability of governments that issue emergency funds to citizens and businesses by improving the tracking of funding and interventions. DFS help firms address critical liquidity issues, enabling them to interact with financial services providers, draw down on existing lines of credit without delays or disruptions and access alternative finance that can compensate for a lack of liquidity in traditional financial channels.

Other technological advancements have been critical to the development of DFS. Digital ID — launched in 2016 in Algeria — has enabled financial institutions to onboard customers efficiently in compliance with anti-money laundering and other 'know your customer' requirements. Open Application Programming Interface (API) developments have allowed DFS providers to access data from different public and private systems to improve the speed and reduce the cost of financial services without compromising safety and reliability.

DFS are also enabling entirely new business models that serve the poor. Large e-commerce platforms are gaining prominence, with the pan-African platform Jumia entering Algeria to join local platforms like OuedKniss, Batolis, and IdealForme. Telecom operators have leveraged the ability of DFS to facilitate payments and offer services such as 'pay-as-you-go solar energy, insurance and lending.

While many countries have begun to address the basic enablers for DFS and digital payments, they require robust enabling factors: conducive legal and regulatory frameworks, enabling financial and digital infrastructure, and ancillary government support systems.

Addressing these three areas requires policymakers to look at a wide range of critical issues, from basic digital connectivity and mobile-phone penetration, to providing access to national payment infrastructure and electronic money, to non-banks or rolling out digital and biometric ID systems, which enable access to government data platforms and ensure competition for access to DFS.

Critical enablers and drivers of access to/usage of digital payments (PAFI framework)


Source: CPMI-WBG Payment Aspects of Financial Inclusion Report, 2015


The benefits of financial services for the poor are well documented; however, they introduce risks to users and to the broader financial system: data privacy concerns, unequal access to technology and 'digital divide', cyber-security and operational risks, financial integrity, and challenges for the competition authorities. They all require careful regulation, monitoring and oversight by the relevant authorities.

While Algeria has made progress in boosting fintech innovations and developing digital financial services, more can be done to raise awareness to their benefits and stimulate their growth. By expanding access to DFS, Algeria will promote economic activity and facilitate the daily life of its people, allowing them to increase their assets or make productive investments, but above all, to mitigate the shocks caused by the COVID-19 pandemic.


Dorothee Delort

Senior financial sector specialist

Isabelle Poupaert

Senior External Affairs Assistant

Ramesh Kumar Nanjundaiya
September 09, 2021

Digital Financial Inclusion (DFI) for business development, an important transformational change happening in India today:
A new business opportunity is getting developed for entrepreneurs from California and the US to tap the growing market in India in Fintech, content provision, interactive commerce, technology tools for incorporating business via the social media, promotion of evolved technology platforms for payments and commerce.
Any discussion in the current day India be it with academicians, policymakers, local government, the banking sector, business and corporate sector, the technology ecosystem, retail commercial sector, etc, etc, a very common discussion agenda is directly or indirectly on the digital India initiative, economy, and its ramifications and benefits.
With the current pace of rapid ongoing technology intervention in the financial sector via electronic banking activity and communication across India including rural and remote areas of the country, one witnesses a very huge increase in the use of financial services via technology as well as an uptake in the e-commerce sector.
Due only to the availability of this cost-effective "financial technology", one does not fail to notice the fact that the standard of living across India is improving at a fast pace. This has been an eye-opener to all the commercial banking activity in the country to tap the huge potential of the unbanked market area that is available across India as well as the e-commerce space.
As an example, today in India, it is conservatively estimated that about 60% of the Indian population have a mobile phone which they actively use for instant communication. Suppose financial tools are provided in the mobiles, then a handheld bank will be available with every India. Thanks to technology and digitization, welcome to Mobile banking in today's rising marketplace and an adaptation to mobile financial services. This had led to a new digital economy comprising of a "hybrid marketing & communication" tool as finance and business are going hand in hand. What is needed is content.
Let's briefly recall various initiatives in India post-2014; Jan Dhan Yojana, Direct benefit transfers, RuPay card, account dormancy, Aadhar card, Unified payment interface, Demonetization, GST, New regulatory framework, New NPA assessment in commercial banks, payment banks, fintech, small finance banks, etc. All these in a nutshell mean, we are witnessing an ongoing "digital financial inclusion" (DFI) phenomena in the country currently.
DFI can be broadly defined as digital access to and use of financial services by all sections of the country's population including remote and rural India. It is the availability of digital financial services across the nook and corner of India. So what is needed for this and how does this happen cost-effectively. We can identify 3 main components of this service. The players are a technology platform, retail agents or technology finance communicators, and a device that is the ubiquitous mobile phone which will enable all transactions via a platform. This platform enables a customer to use a device to make or receive payments and transfers and to store value electronically with a bank or nonbank permitted to store electronic value. A common example is a POS machine in a merchant outlet where payments are effected via a debit/credit card. The players here are the retail agents armed with a digital device connected to communications infrastructure to transmit and receive transaction details enable customers to convert cash into electronically stored value and to transform stored value back into cash.
With the ease of internet and data pack availability, the customer devices include a laptop, mobile phone, payment card, all used as a means of transmitting data and information or an instrument that connects to a digital point of sale POS terminal, all encrypted of course. Going forward and with awareness and trust, the whole of India can become financially wired.
Thanks to the digital initiative, today in India the Financial inclusion concept has become very important and has touched all aspects of society. It is a user-friendly technology method of offering banking and financial services to individuals. The market in India is growing by leaps and bounds with a good percentage of the young generations. The work for financial institutions, the regulatory organization that has adapted technology well, the sky is the limit for business development via the digital economy. It aims to include everybody in society by giving them basic financial services regardless of their income or savings. DFI focuses on providing financial solutions to all levels of society including the economically underprivileged both within the urban as well as rural areas of the country.
The term DFI is broadly used to describe the provision of savings and loan services to the poor in an inexpensive and easy-to-use form. It aims to ensure that the poor make the best use of their money and attain financial education. With advances in financial technology and digital transactions, more and more start-ups are now making financial inclusion simpler to achieve.
Given the above development, currently, a "transformation" is being felt in the country where business, commerce, and digital content are working hand in hand. What does this entail? The whole concept and mindset of shopping have changed. Today mobile shopping is picking up at tremendous speed across the country and without any influence via advertisement. Today what is fuelling technology and communication is the digital content for the smartphone users. Per available statistics, this has seen a huge uptake in the last year due to covid 19 pandemic and work from home arrangement. This is going to be the new India's growing digital economy which extensively uses such designations as FaceBook, YouTube and Instagram for content consumption. It is now the right time particularly for branding companies, in the highly competitive and growing market to use their best and sustaining interactive commerce marketing and influencing strategies for higher engagement with the growing digital customers. Today the tech-savvy customers are increasingly using social media platforms for their shopping. So what is needed for organizations to get a slice of this market is to combine e-commerce with digital payment platforms, with new content and communication, video shopping and content creators, an all-in-one package. What started as the Digital Financial Inclusion initiative has now given new inroads to a new market find both for business explorations and for commercial banks to seek new customers. This, in turn, leads to a new development, of customers now a days , undertaking their purchases via social media. Thus, this will give a new breed of marketers, advertisers, content writers, technology platform providers a new outlook to promote their respective products and services.

Ramesh Kumar Nanjundaiya