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Digital financial services (DFS) have become a cornerstone of financial inclusion across the globe, offering products like credit, savings, insurance, and transactions through digital platforms. The expansion of financial inclusion has been driven by innovative and affordable solutions provided by financial service providers, making money easily accessible to people, particularly in low-and middle-income countries. However, challenges persist, including the complexity of financial terms and the distance to service providers. In response, many financial institutions have leveraged technology to bring financial services closer to those who are often excluded, particularly in underserved communities.
Digital finance has revolutionised how financial services are provided, monitored, and accessed. In Ghana and other Sub-Saharan countries, "mobile money” stands out as the most popular digital financial service. It offers a convenient way to send and receive money, save, obtain credit, and quickly convert electronic money to cash. The COVID-19 pandemic further highlighted the importance of digital financial ecosystems, enabling people to access and manage their money without needing to leave their homes.
To better understand the role of digital financial services in the lives of informal merchants in Ghana, the Institute of Statistical, Social and Economic Research (ISSER) launched a pilot project in 2022 titled "Digital Finance Services, Technology and E-Commerce among Informal Female Entrepreneurs.” Sponsored by the Retail Finance Distribution Research Initiative (ReFinD)1, this project sought to explore the experiences of informal female entrepreneurs in the Ga Central municipality of the Greater Accra Region, focusing on the benefits and challenges of integrating digital financial technologies (DFT) into their businesses.
Pilot Study Overview
The pilot study involved training selected informal female traders in the Adenta and Ga Central municipalities, who were primarily engaged in selling clothes, textiles, and cosmetics. The training aimed to enhance the usability of digital financial services among these traders. Observations and interactions with the participants during the Baseline and Endline data collection phases revealed that while DFT has significantly enhanced their trading activities, several challenges need to be addressed to improve its practical application.
Enhancing Financial Inclusion
Feedback from the informal female participants highlighted the potential of DFT to drive inclusive finance in Ghana, bridging the gap between formal and informal sectors. Traditionally, many players in the informal sector have shied away from DFT due to a lack of trust in the security of their financial resources and insufficient education and training. However, after receiving training from ISSER researchers, one participant shared her excitement about the benefits she has experienced since integrating DFT into her business activities.
“Being in the shop can fetch you customers but not as compared to online and you get to know more people because you can get about two thousand people viewing, commenting, or purchasing your items in a couple of minutes after posting available items. The payment plan is instant and flexible because, without mobile money payment, I cannot release available items to any customer”.
The feedback from this informal female trader highlights the significant role digital financial technology (DFT) can play in the growth formal and informal businesses. Some entrepreneurs have already begun sharing the benefits of DFT with their colleagues based on their experiences. This informal peer education indicates that even those without prior digital financial literacy are beginning to gain exposure to the advantages of these technologies.
Challenges in adopting DFT
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Religious and marriage barriers
Despite the benefits of the training, some informal female entrepreneurs face significant obstacles in acquiring knowledge about DFT. Marriage, religion, and illiteracy were identified as notable barriers. One entrepreneur from a staunch Islamic background shared that her husband prevented her from attending the training because it was held on church premises, even though the training was purely educational. She lamented that it would have been an ideal opportunity to learn, given the demands of her work. Another respondent expressed her frustration with the patriarchal constraints in her marriage, which hinder her from fully utilizing DFT platforms to enhance her business, despite having received training from ISSER (see textbox below).
“I benefited from the training yet I have not been able to fully utilize it because my phone is faulty. I am ready to buy a new one but my husband has promised to purchase a new one for me, and I do not want to disrespect him because he said he will withdraw any support towards my business”.
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Lack of formal education
Another significant barrier to the adoption of DFT among informal female entrepreneurs is the lack of formal education. Formal education plays a crucial role in enabling individuals to post messages and read responses from customers. One participant in the pilot study shared how her limited educational background has significantly hindered her ability to trade using DFT, as described in the textbox below.
“I am uneducated. I cannot read or write nor can I speak English fluently. I am unable to use my smartphone without the help of my daughter, how much more navigating Facebook, WhatsApp or the mobile money platform”.
Conclusion
The adoption of DFT platforms by some informal female entrepreneurs following their exposure through the ISSER pilot study has shown promising benefits. However, the desire of many other entrepreneurs to leverage these platforms for business growth has also highlighted several challenges. To effectively advance Ghana’s digitalization drive, particularly the uptake of DFT platforms by informal business operators, it is crucial for policymakers and relevant stakeholders to implement essential measures to address and overcome these barriers.
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