Over the past 15 years, China has emerged as one of the world’s financial inclusion success stories. While much attention has been paid to the rapid innovation and massive scaling of Chinese fintech companies, China’s successes in financial inclusion reach beyond fintech. Account ownership has increased significantly and is now on par with that of other G-20 countries. One of the largest agent banking networks in the world has been established. And a robust financial infrastructure has been developed that underpins these successes.
So what can policymakers in other countries learn from China’s experience? While China is in some ways a unique environment, there are still valuable lessons to be learned from both its successes as well as its remaining challenges.
A new report released last week -– Toward Universal Financial Inclusion in China: Models, Challenges, and Global Lessons - provides a wealth of data and information about the various initiatives and efforts that have contributed to China’s advances in financial inclusion. The report, which was jointly written by the People’s Bank of China and the World Bank Group, also outlines remaining challenges and distills lessons for policymakers in other countries.
"In Chad, young people increasingly turn to innovative entrepreneurship but often become demoralized when confronted with the common issue of lack of early-stage financing.” This is how Parfait Djimnade, co-founder of Agro Business Tchad, a leading e-commerce agribusiness and social enterprise in Chad, described the challenge many aspiring entrepreneurs face in securing the necessary capital to fund and grow their start-ups, specifically in the Sahel and West Africa.
The frustration Parfait highlights is common across the Africa region, where more than 40 percent of entrepreneurs cite access to finance as the major factor limiting their growth, according to World Bank Enterprise Surveys. West African start-ups and innovative young SMEs are indeed facing the classic ‘valley of death’ — the space between where the entrepreneur’s own resources from family and friends (“love money”) gets depleted and when the company is financially viable enough to attract later-stage investment and financing available on the market. The shortage of financing in the market starts from the pre-seed stage (US$20,000) to early-venture capital stage (US$1 million).
Eco-industrial parks (EIP) refers to putting in place serviced industrial infrastructure conducive to attracting new investments, especially in manufacturing, while at the same time promoting environmental sustainability.
The World Bank Group’s infoDev program has been working in Africa for years, helping to strengthen the ecosystem for digital entrepreneurs and seeding digital incubators in Kenya, Senegal, and South Africa. Start-ups in these “mLabs” have developed or improved more than 500 digital products or services, and some 100 early stage firms raised over $15 million in investments and grant funding. But is this the answer to scaling growth entrepreneurs on the continent?