How digital wage payments can deepen social inclusion

As Africa works towards a more inclusive recovery from the pandemic, a new report from the government of Senegal in partnership with the United Nations Better Than Cash Alliance, the World Bank, and the National Agency for Statistics suggests a crucial correlation between combining digital wage payments with health insurance benefits, social inclusion, and financial innovation. The regional lead for Francophone Africa and the Middle East of the United Nations Better Than Cash Alliance, Jean Pascal Mvondo, sheds light on the potential impact of digital payments on the continent. With nine out of ten workers in Africa employed in the informal sector lacking social protection benefits, the push for digital payments presents a significant opportunity for financial inclusion. By enabling digital payments and connecting them to healthcare access, a worker-centric approach can boost economic contributions. In Senegal, for example, increasing digital payments from 7% to 50% could lead to an $18 million USD contribution to the GDP, showcasing the potential for economic growth. The findings from Senegal are pivotal as they can serve as a blueprint for other West African nations. The region has witnessed substantial growth in financial inclusion since 2014, particularly due to the rise of mobile money services. Leveraging this infrastructure for digital wage payments can enhance productivity, consumption, and ultimately, the GDP across West Africa. The shift to digital payments not only benefits employers by streamlining payments but also has a profound impact on workers' lives. In the agriculture sector, where many workers are seasonal or daily laborers, digital payments coupled with value-added services like health benefits can stabilize the workforce and improve productivity. Senegal's progress sets a precedent for the region, prompting other West African nations to follow suit. Several leaders in the region, such as the President of Burkina Faso, have already taken steps to mandate digital wage systems in their countries, signaling a political will towards financial inclusion. International organizations and private sector companies are also actively investing in the region, further bolstering the transition to digital payments. While the transition to digital payments in West Africa holds great promise, there are challenges that must be addressed. Two key obstacles include ensuring liquidity for employees to cash out their wages and designing products that cater to the needs of both companies and workers. Addressing these challenges will be essential in fostering a successful shift towards digital payments and reaping the full benefits for economic growth in West Africa.