A spike in scams and fraud across sub-Saharan Africa risks reversing recent gains in bringing previously excluded groups into the digital economy, with damaging results for economic development and inclusion in government services.
Sign up for Devex Invested
The must-read weekly newsletter that keeps you up to date with news about business, finance, and the SDGs.
This warning was made during a panel event Tuesday organized by the Consultative Group to Assist the Poor, the World Bank’s think tank on financial inclusion. Such fraud ranges from Ponzi schemes in the cryptocurrency space to various types of predatory lending.
Risk to women: Of particular concern were the lowest-income people and women, said Sophie Sirtaine, CEO at CGAP. Scammers have been able to take advantage of these groups largely due to their lower levels of financial literacy education.
“We very much are of the view that the promise of these services is real and important, but the risk needs to be monitored, understood, tracked, and mitigated,” Sirtaine said, insisting that the solution should not be to unwind advances in the digital economy.
Panelists stressed the need to improve education to match the growing digital economy.
Pandemic fraud: Between 2016 and 2020, the share of fraudulent transactions via mobile apps more than doubled in the region, while the share of mobile app transactions increased by a much lower 34%, CGAP officials said. These problems have only gotten worse during the COVID-19 pandemic as digital services expanded, said Majorie Chalwe-Mulenga, a financial sector analyst at CGAP.
“If we do not mitigate some of these consumer risks, we risk slowing down the financial inclusion. Sub-Saharan Africa will be left behind,” Chalwe-Mulenga said. By the end of 2020, rogue mobile apps became the primary source of fraud in the region.
The risk to sub-Saharan Africa is particularly acute due to fewer protections, including limited cybersecurity services and capacities, Chalwe-Mulenga said. Customer care services are also less developed.
To avoid harm, donors need to consider fraud when supporting projects around digital financial services, according to a recent CGAP study.
About the author
Shabtai Gold
Shabtai Gold is a Senior Reporter based in Washington. He covers multilateral development banks, with a focus on the World Bank, along with trends in development finance. Prior to Devex, he worked for the German Press Agency, dpa, for more than a decade, with stints in Africa, Europe, and the Middle East, before relocating to Washington to cover politics and business.