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West Africa launches new payments digitization program

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West Africa launches new payments digitization program

In Senegal, 8 out of 10 workers are paid in cash. Most are temporary workers and excluded from health insurance. A survey found that 77% of temporary workers would be willing to receive their pay digitally if it gave them access to health insurance. Here are some of the main findings of the publication (https://bit.ly/3anLM71) that the Senegalese government launched today, with the support of the Better Than Cash Alliance (United Nations) (www.BetterThanCash.org ), the World Bank and the Senegalese National Statistics and Demography Agency. The combination of digital payments and health insurance benefits offers a great opportunity for social inclusion, formalization and financial innovation.

Digital payments drive 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 US dollars). Paying workers digitally, accelerates the financial inclusion of the population, stimulates the competitiveness of companies and increases the liquidity of the financial system. To exploit this potential, the SME Development Agency (ADEPME) plans to strengthen its SME support fund with USD 20 million (approximately CFA 11 billion) from the World Bank. This will be used to strengthen the digitization initiatives of SMEs and support digital payment projects for workers.

Top executives speak out in favor of digital payments for workers

Senegalese President Macky Sall and HM Queen Máxima of the Netherlands, who is the United Nations Secretary-General’s Special Advocate for Inclusive Finance for Development (UNSGSA), called on their fellow leaders, the private sector and civil society, inviting them to: “Use this report to ensure that digital payments are at the center of a sustainable and equitable economic recovery. We look forward to playing a leadership role in this agenda to achieve an inclusive and digitally-facilitated recovery”, added the two leaders.

To set an example, the President of Burkina Faso, Roch Marc Christian Kaboré, also decreed, at the end of 2020, the digitization of the payments of workers in the Burkinabé administration. When the COVID crisis arose, West African Economic and Monetary Union (UEMOA) and the Central Bank of West African States (BCEAO) made decisions (https://bit.ly/3mZVAcr) aimed at reducing the circulation of cash in the 8 countries. These actions have had tangible impacts that are starting to change the lives of workers and businesses.

Digitize payments and advance universal health care coverage

Although collecting a salary is often linked to health contributions, at least 61% of workers worldwide work in the informal sector (https://bit.ly/3sxhSUd) without adequate coverage, according to the International Organization of labor (ILO). Indeed, in some countries, there is not always a legal obligation for employers to contribute to any type of coverage for their informal / self-employed workers, which affects women more than men.

To meet this challenge of inclusion, the National Agency for Universal Health Coverage of Senegal has launched an ambitious digital payment platform (https://bit.ly/3n0Rv83). It has partnered with fintechs and private companies to link access to universal health coverage and digital payments – specifically targeting women. Leading national companies such as the agricultural giant SODAGRI or SMEs such as QUALIOCEAN and Kossam SDE set an example by offering temporary workers universal health coverage. More than 200,000 workers will now have access to quality health care subsidized by the government.

While 81% of domestic 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.

The successful transition to digital payments

Three obstacles have limited the growth of the digitization of payments in Africa: the size of the informal sector, sometimes up to 90% of the economy; the historically low rate of financial inclusion; and above all, 21% of African workers receive a salary that keeps them below the poverty line.

All of this has radically changed. Financial inclusion has jumped since 2010 (https://bit.ly/3gmU0Aq) with the arrival of electronic money issuers and fintech.

The country’s largest employer, Compagnie Sucrière Sénégalaise, has succeeded in digitizing the payment of around 8,000 workers through a partnership with local fintech. “We wanted to digitize payments without using the banking system, which is not suitable for certain populations”, noted Claude Fizaine, general secretary of the company, in an interview with an African media (https://bit.ly/3x8hvmn). “For employers, the benefits of digitizing payments include avoiding the hassle of handling large amounts of money and all the risks that distribution can involve. It also makes it possible to offer employees tools adapted to their financial and family situation, which can only have a positive impact on their personal and professional life, ”he added.

WAEMU innovations should continue to inspire the rest of Africa. Since 2012, it has been the engine of economic growth and stability on the continent (https://bit.ly/3x23abr). The examples of Senegal and its neighbors reinforce the ILO’s global agenda (https://bit.ly/2Qe24IW) which may well make digital payments for workers a new global standard for promoting decent work.

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