Africans are struggling to live by the rules instituted in the global financial systems, and this is limiting their access to participate in the global economy.
This was the position of Aigboje Aig-Imoukhuede, Chairman of Coronation Capital and former Group MD and CEO of Access Bank on the podcast “The Flip Africa”.
He noted,
- “If you think about the 1.6 billion Africans who are excluded from payment systems and the ability to participate as global citizens, it’s [really] unfair.”
Speaking about the risk premiums for Africans in the global financial system, he noted that the high-risk premiums placed on Africans participating in international transactions were due to a system that compelled conformity in Africans.
Aig-Imoukhuede noted,
- “A lot of risk premium dumped on Africa is the world’s way of saying, this is how we perceive an individual and if you don’t conform to it, it means you’re riskier.”
- “For example, if you don’t have a zip code or its equivalent, you’re risky, but in Africa, zip codes are hard to come by. So, if your credit score process requires a zip code and you don’t have one, then it means you’re not good for credit.”
Countries with global economic power dictate the rules
He noted that countries with global economic power dictate the rules behind this financial system. Highlighting the consequences of the system, Aig-Imoukhuede noted that only a few African banks are members of the global payment systems.
He said,
- “Because those who have economic power globally dictate the rules upon which things work with SWIFT and payment systems, and we don’t have a loud voice in Africa, these rules are made, and we struggle with living with these rules.”
- “One of the problems is there are fewer African banks that are members of the international global payment community.”
Giving an illustration, he noted,
- “If you’re a Nigerian bank in the UK and are not part of the UK clearing system, you have to apply to a UK bank to make your payments. And you’ll be routing through that bank.”
- “That bank demands that you show evidence that all your customers have Zip Codes, and if they don’t, your payments are deemed of a higher risk status than a payment coming from a country that is more compliant.”
What you should know
There are currently only 32 African banks live on Swift Go, out of the 847 banks that are subscribed to the platform. The 32 banks make up less than 5% of the 763 banks domiciled in Africa.
Swift Go is the “lite” version of the Society for Worldwide Interbank Financial Telecommunications (SWIFT). It facilitates low-value payments for SMEs and individuals across the world.
According to the Executive Summary published by the African Development Bank and the World Bank, “Financing Africa: Through the Crisis and Beyond”, integration into global financial markets has been a significant and contentious facet of financial sector policy worldwide, particularly heightened after the aftermath of the 2008 global financial crisis.
Unfortunately, African political leaders don’t seem to be bothered about such metrics and the far reaching economic implications unlike their Western counterparts, hence these trends may not be changing soon.