The New Payments Digitisation agenda has been launched in Senegal by the government with the support of the United Nations – Better than Cash Alliance scheme.
Under this scheme, 8 out of 10 temporary workers are paid in cash; most are temporary workers and excluded from health insurance. A survey revealed that 77% of temporary workers would be willing to receive their wages digitally if this gave them access to health insurance.
According to the major findings of the World Bank publication and the National Agency of Statistics and Demography of Senegal, “combining digital payments with health insurance benefits offers an excellent opportunity for social inclusion, formalisation, and financial innovation.”
The report also noted that digital payments stimulate domestic production and consumption. If 50% of temporary workers in Senegal received payments digitally, 45 billion CFA francs would be added to GDP per year (around $80 million USD). Paying workers digitally speeds up the financial inclusion for the population, boosts business competitiveness and increases financial system liquidity.
In order to tap into this, the SME Development Agency (ADEPME) plans to bolster its SME support fund with $20 million USD (around 11 billion CFA francs) from the World Bank. This will be used to strengthen SME digitization initiatives and support digital payment projects for workers.
West African Leaders Support
Senegalese President Macky Sall and H.M. Queen Máxima of the Netherlands, who serves as UN Secretary-General’s Special Advocate for Inclusive Finance for Development (UNSGSA), have launched an appeal to fellow leaders, the private sector and civil society to “use this report to ensure digital payments are at the centre of a sustainable and fair economic recovery.”
Eight West African Countries lead
Eight West African countries including Senegal, Burkina Faso and countries under the West African Economic and Monetary Union (WAEMU) and the Central Bank of West African States and President of Burkina Faso, Roch Marc Christian Kaboré, have taken the lead on the digitisation of payments for workers, especially during the COVID -19 pandemic.
These initiatives have had tangible impacts which are beginning to change the lives of workers and companies. For example, in Senegal, the National Agency for Universal Health Coverage, partnered with Fintechs and private companies to link access to universal health coverage and digital payments – specifically targeting women. Flagship national enterprises such as the agricultural giant SODAGRI or SMEs such as QUALIOCEAN and Kossam SDE are setting an example by providing temporary workers with universal health coverage. More than 200,000 workers now have access to quality, government-subsidized health care.
While 81% of national companies have fewer than 20 employees, on average hundreds or even thousands of temporary workers are employed in their supply chains. Employees are generally banked, but 93% of employees on temporary contracts are paid in cash. The latter are systematically excluded from the formal health system.
Claude Fizaine, Fintechs Secretary-General, was quoted as saying that “For employers, the benefits of digitising payments include avoiding the constraints of managing large amounts of cash, and all the risks that distribution can involve. It also makes it possible to offer employees tools tailored to their financial and family situations, which can only have a positive impact on their personal and professional lives,” he added.
Three obstacles have limited the growth of payment digitisation in Africa; the size of the informal sector, sometimes up to 90% of the economy; the historically low financial inclusion rate, and most importantly, 21% of African workers receive a wage keeping them below the poverty line.