African innovation is spoken about with such high regard by those that live in the continent, and those outside that understand the implications. There are massive changes taking place across the continent, although they are often limited to areas in which there is stable power, internet and mobile phone connection. Nevertheless, a huge population of people are having their lives changed by the internet and connected phones.
Whether gaining agricultural advice, having access to educational information and prices of goods, or powering your house via a solar mini grid, lives of many are changing across the continent. And while we talk positively and enthusiastically about these changes sometimes we fail to acknowledge that they are happening so quickly, there is often no chance to for people to understand their implications, both positively and negatively.
One example of this is the rising availability of mobile loans to people who haven’t previously had access. With mobile phone usage, and the popularity of mobile money, those who do not have a bank account are now finding themselves in a situation where their transaction data can be used to build up a credit rating. With this, they can be offered micro financing in order to develop their businesses, or even for personal development, such as school fees. Credit is vitally important for small businesses owners, such as subsistence farmers, so they can invest in their business, plan better and create more efficiencies and therefore more profit. Companies such as Lending Square are offering a great service, but is it being used by citizens for positivity.
The problem is, when people take out a loan, there are often no regulations in place to make sure that people are using it for that reason. On the 25th of March, a report came out suggesting that many Kenyans were falling into a pit of disaster by taking advantage of micro finance loans offered to them. 6.5 million Kenyans are taking advantage of these loans, which is unsurprising as the mobile money system their is far more advanced than across the continent. Whilst a lot of course do use the micro financing as it was intended, to develop their businesses, many are using it to pay off existing loans, or even to gamble with.
Such irresponsible usage of micro financing can and will obviously cause disaster for many people. By continuously refinancing loans, and falling further and further into debt, people will be left worse off than in the first place, meaning businesses can begin to fail, and certainly not get the required capital to develop. This not only has a devastating effect on the life of the individual and his family, but also on local economies. If many take up the micro loans, and squander the money on other things, then there will be a lack of growth across small businesses in some areas, leaving the local economy in tatters.
That people actually take this loan and gamble with it is a symptom of the same problem and incredibly sad. Lack of education around the topic of finances and lack of time to sensitise people to the issues around loans and gambling. In many ways, they are in the same category, as there is no guarantee that investing a loan in your small business, will make a stark difference. As I mentioned in a previous blog, gambling is quickly getting out of hand within Africa. In the last 10 years, casinos and small betting shops, often in a little container in rural communities, have increased in number exponentially in Ghana. During my time in Kenya, I also couldn’t help but notice that gambling had gained prominence in many towns and cities.
Of course, the world over has many with gambling addictions, as well as those that take loans to repay loans, and find themselves in increasingly difficult situations. In Ghana, and I am sure other parts of the continent, people have long since played the lottery, pouring over the previous data to try and find a pattern and becoming obsessed with winning against the odds. But in Africa there was a chance to make sure that the right education was put in place before gambling and loans gained prominence. The hope is, that it is not too late to assist those who have already fallen into this hole, and educate those who have not yet thought about gambling and using loans for unproductive reasons.
There also must be measures taken to make sure that people that take out loans use the credit to develop their businesses, skills, and the local economy. There of course needs to be a certain amount of freedom in usage of personal capital, but in the case of loans, the money essentially belongs to the loaner. If these companies are to remain ethical, they must ensure that capital is used productively.
Innovation usually a positive, especially for a continent, which has lagged behind much of the world, economically. Innovation can assist Africa to catch up and even surpass other nations worldwide. But we need to prepare people for the changes. It is not just loans and gambling. Social media and the internet also cause vulnerable situations for many, who are not clear on how much personal information they should share, as well as the potentials of fraud. Even the potential depression and anxiety issues, or body image issues caused by an obsession with social media perfection is an issue that is not covered enough in schools or generally in Africa. Many people are struggling with new technologies worldwide, and measures need to be taken so that people understand the potential negative implications.