Get to Grips with Artificial Intelligence in African Fintech

AI plays a strong potential in the wider global economy, whose contributions by 2030 could be as high as at least $15 billion according to PwC. While North America, China, Europe and Developed economies of Asia stand to benefit the most of AI, developing economies will have more modest increases in AI impacting their gross domestic products (GDP) due to much lower rates of AI technology adoption. Can this change?

Countries in Africa have begun prioritising AI across its wider economic development strategies – similar to other parts in the wider Middle East & Africa (MEA) region such as in Gulf Cooperation Council (GCC) countries like Saudi Arabia or the United Arab Emirates (UAE).  For instance, Mauritius was the first country in the continent to have a formally recognised AI strategy that was launched in 2018. In terms of the continent, according to the 2020 Global Government Artificial Intelligence Readiness Index, the top five African countries listed are Mauritius (45th globally), South Africa (59th), Seychelles (68th ), Kenya (71st ), and Rwanda (87th); Tunisia and Egypt were also highlighted in the same report with government progress towards AI readiness. Interestingly, almost all the countries listed are also classified as emerging fintech hubs in the Fintech: Middle East & Africa 2021 Report by The Fintech Times.

This can be seen in focus with Egypt, which is aiming to have 7.7 per cent of its GDP (around $43 billion) derived through AI by 2030, the government is developing AI capabilities through various means. This includes launching its first AI faculty at Kafr El Sheikh University as well as in 2019 launching its national AI Strategy (focused on two pillars: building human capacity and supporting scientific research and innovation), and creating a National AI Council which is responsible for supervising the implementation of the strategy.

From a wider continental level, various attempts in the past have been done to try to bring the continent more unified together with a common AI stance and/or strategy. These have included events and/or initiatives in the past such as the 2014 African Union (AU) Convention on Cyber Security and Personal Data Protection and an UNESCO convened forum on AI in Africa in Morocco back in 2018. A more unified Africa such as with the recently implemented African Continental Free Trade Agreement (AfCFTA) can not only foster international trade and investment with fellow AU countries who are a part of the free trade agreement, but, potentially helping sectors in particular where AI is playing a strong front in. The spirt of economic integration could potentially help further drive in the near future a wider AI strategy that can be cross-border and help benefit the continent as a whole.

Artificial Intelligence-driven technology in fintech can be seen across the African continent such as with mobile phone solutions IMAGE SOURCE GETTY

With regards to sectors in Africa in particular that can/are benefiting from artificial intelligence, they include the likes of agriculture, healthcare and fintech. With regards to healthcare as a whole, the continent on average has one physician per 5,000 patients, a general lack of integrated health management platform, and a low penetration rate of insurance. In particular with the ladder, the rise of insurtech globally can see AI play a stronger part of that in the African continent, especially as the continent generally has a low insurance penetration rate and is mostly concentrated, in particular with South Africa.

As much of Africa remains to be unbanked, coupled as mentioned earlier with regards to the lack of access to relevant data, it becomes a challenge for say banks and other lenders to make decisions on potential borrowers; this is where AI can definitely help fill a gap. For instance, in Kenya, alternative credit scoring appeared the previous decade that saw AI tools built into Safaricom’s M-Shwari mobile-credit services via M-Pesa. As a whole, regions in Africa such as East Africa have seen growth and actually help lead the world with respect to mobile penetration. Therefore, other solutions such as supporting payment transactions via mobile phones through AI and big-data backed innovations can help further bridge current gaps in the market.

A report by Google and the International Finance Corporation (IFC) estimated that Africa’s digital economy has the potential to contribute $180 billion to the broader economy by 2025. Generally, digital economic development has a strong role as well in emerging economic regions such as the African continent.

With regards to Africa – home to over 1.3 billion people – despite the opportunities, there still remains to be various challenges. With regards to technological advancements, the continent as a whole often lags behind compared to much of the rest of the world, in particular with the developed economies. This not only stems from the lack of basic and other tech infrastructure across parts of the continent to adapt to innovative technologies but also with regards to human talent to be able to service such industries. In addition, some of the best and brightest of Africa often go to tech hubs – which brings within it brain drain challenges. Also, other challenges such as privacy and data and governance are also common issues. However, this hopefully looks to change as what was highlighted earlier.

In addition, countries that have been more active more than others – notably the ones mentioned earlier such as Mauritius, Kenya, Nigeria, South Africa, Ghana, Egypt, Tunisia and Rwanda – which were also generally emerging fintech hubs in MEA, will hopefully see a spillover effect and see others also follow suit with adoption of AI openness in their economies such as with AI strategies.  Also, the COVID-19 pandemic has also brought with it more readiness the global economy needs to be in terms of its wider digital transformation and adaption to conducting business. In particular, for the African continent, this can really help in particular help bring financial inclusion. On a final note, the fostering of the likes of the new AfCFTA can hopefully bring with it both organic and ease of facilitation of trade and investment across digital cross border services such as AI.

Africa has seen its emergence not just with fintech but also with AI and due to its large and growing population can bring both opportunity and innovation for the future.

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