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Development solutions: There’s an app for that


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Digital technology levels the playing field for entrepreneurs anywhere in the world—and there are proportionally more of them in Africa then elsewhere. Here are some solutions to help them prosper.


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Digital technology levels the playing field for entrepreneurs anywhere in the world—and there are proportionally more of them in Africa then elsewhere. Here are some solutions to help them prosper.


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[Development finance 2.0: digital solutions for developing countries]


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[Digital technology levels the playing field for entrepreneurs anywhere in the world—and there are proportionally more of them in Africa then elsewhere. Here are some solutions to help them prosper.]


Header

Title

Development solutions: There’s an app for that


Sub Title

Digital technology levels the playing field for entrepreneurs anywhere in the world—and there are proportionally more of them in Africa then elsewhere. Here are some solutions to help them prosper.


Summary

Digital technology levels the playing field for entrepreneurs anywhere in the world—and there are proportionally more of them in Africa then elsewhere. Here are some solutions to help them prosper.


Seo Title

[Development finance 2.0: digital solutions for developing countries]


Seo Description

[Digital technology levels the playing field for entrepreneurs anywhere in the world—and there are proportionally more of them in Africa then elsewhere. Here are some solutions to help them prosper.]


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By Benoit Denis

Africa is the world’s most youthful continent. According to UN World Population Prospects, about 60% of the population of Africa is less than 25 years old, compared to 25% in Europe.

The rapidly increasing youth population, especially in Sub-Saharan Africa, represents a major opportunity for the African continent and the world. To reap the economic benefits of this demographic dividend, while maintaining social cohesion, we need to digitalize Africa now.

Digitalisation is the great leveller of opportunities. In a digital society, access to entrepreneurship is democratic. A smart mind in Africa, like a smart mind in Silicon Valley, only needs a computer and an internet connection to turn a good idea into a successful start-up. We should therefore be investing in education to make digital skills available, in digital infrastructure and digital services serving entrepreneurs, and making financing available for these start-ups to get off the ground, and scale up – a major concern for a continent this size.

Culture of entrepreneurship in Africa

The culture of entrepreneurship is perhaps stronger in Africa than anywhere else in the world. Of Africa’s working-age population 22% are starting new businesses, the highest rate of any region in the world, according to the African Development Bank Group. Harsh conditions have raised generations of risk-takers who pursue self-sustainability.

And the ambition of young Africans is growing. Increasingly, more want to become entrepreneurs and use their creativity to improve life around them.


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But where do things stand now?

Over the past ten years, the African continent has recorded the highest growth globally in Internet access, moving to 24.4% in 2018 from 2.1% in 2005. The progress is not only visible in mobile-cellular telephone subscriptions but also in internet connectivity and progressively in households with a computer.

The trend is benefiting the economy as a whole. GSMA reported that the “mobile economy” accounted for 6.7% of overall GDP in Africa in 2016, representing $153 billion. This is forecasted to reach 7.6% ($214 billion) of overall African GDP by 2020. Technology-related productivity gains in crucial sectors (financial services, education, health, retail, agriculture, and government) in Africa are predicted to reach between $148 billion and $318 billion by 2025. With the right approach, all these figures have a potential to grow exponentially. 


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Vision for driving inclusive development through digitalisation

On a continent with large areas of fairly limited infrastructure of all sorts, digital infrastructure and services become even more crucial. Digital technologies efficiently address market failures. Connecting fishermen and farmers so that they would instantly know to which port or market to direct their goods provides huge efficiency gains in territories where those goods would have to travel a long distance on a low-quality road. Allowing people to use mobile banking services is more than a convenience in areas where a bank branch may be hundreds of kilometres away.

In Europe, we’ve recognised the benefits of connecting a continent all along. The EIB has been financing telecom infrastructure projects since the early 1970s. Throughout the deregulation and privatisation that increased competition and innovation, we have continuously increased our involvement. It was almost 20 years ago that we recognized telecom networks in Europe as “innovation-enabling infrastructure”. We apply the same vision to the African continent.

To achieve this, we should set a goal of reducing the digital divide for affordable connectivity in Africa. This means investment to densify and expand networks and technical assistance to structure viable projects. Digital services are the other side of that coin – online, or at least, mobile banking, commerce platforms, and government services are also necessary for a digital economy to sprout and grow. Start-ups often drive this change. Cybersecurity systems and education are a further layer of the digital ecosystem necessary for a productive e-environment.


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A good example of the kind of digital services we should be supporting is M-BIRR in Ethiopia, a European Investment Bank investment. M-BIRR provides mobile banking services that allow customers to perform a wide range of financial transactions conveniently, in a fast and safe manner—just by sending a text from their mobile phones.They are not required to endure lengthy travel and queues at a physical branch.


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Digitalisation can help the climate

The digital businesses that can be born and grow as a result of these infrastructure and services will create jobs and economic growth. They can also create potential innovation that improves lives across the world, just like digital solutions born in the US, Asia and Europe.

In addition to all that, investments in digital would have four other positive outcomes.


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More sustainable economic development can only be achieved through digitalisation and the use of renewable energy.

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First, reduced impact on the climate, and improved resilience to climate change. If developing countries were to develop in a similarly CO2-intensive manner as the course taken by industrialised countries over the past century, the effects would be detrimental to the entire world. The more advanced economies thus have an additional incentive, even a moral obligation, to support more sustainable economic development in Africa and elsewhere. This more sustainable economic development can only be achieved through digitalisation and the use of renewable energy.

Digitalisation is the basis for increased energy efficiency, by providing real-time information about demand and supply and bringing those together. Digitalisation replaces physical products with virtual products and services, with a much shallower environmental footprint—for example, replacing travel with online communication.

Digitalisation also allows efficient access to physical goods by optimising commerce. Digitalisation allows for smart farming, which does away with the spraying of pesticides when and where digital sensors say they are unnecessary. The range of sectors where digital solutions can abate greenhouse gases goes on and on.

Additionally, digitalisation can help monitor for climate change risks. For instance, solar-cell-powered sensors that are connected to a mobile network can send real-time information about extreme weather events and help create better climate risk models. The findings can then be distributed efficiently to communities in high-risk locations through fixed and mobile networks.


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Second, digitalisation will bring about improved public services. Digitalisation will foster not only the provision of private services to consumers, it will also facilitate the provision of public services, increasing transparency and accountability of the public sector and underpinning human rights. From examples around the world, we know that this can include areas such as healthcare (online prescriptions, for example, or teleconsultations with doctors, distributing demand and supply more equally), providing education (online courses), as well as facilitating many interactions between citizens and (local) governments. 


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Third, cross-continental integration. Universal access to affordable connectivity and fully digital services should increase the integration of the continent, allowing for the best solutions to emerge regardless of borders. This should allow for the most promising services and products to gather the necessary consumer base for growth. The African continent represents a tremendous untapped market opportunity for start-ups, before conquering markets elsewhere in the world.


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Fourth, digitalisation can help bridge gender equality gaps. Take for example SheInvest, an initative we launched in 2019. In communities where women and girls are still often excluded from access to financial products, SheInvest aims to mobilise €1 billion in investments in innovative digital solutions specifically catering to them. 


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We are already the international financial institution with the largest commitment to the digital economy, with a portfolio exceeding €15 billion globally. In Africa, investment in the digital sector has started to pick up as well. We have approved more than €430 million in the last two years alone. Together with our partners among development finance institutions and in the private sector, we can achieve a lot on our neighbour continent.

Benoit Denis is a senior economist on digital infrastructure at the European Investment Bank