TOWARDS MORE RESILIENT POST-COVID-19 ECONOMIES

IN the year since Covid-19 hit, economies across Africa have experienced a dramatic slowdown.

Even countries with limited initial incidence of the virus faced severe economic aftershocks.

Significant disruption in agricultural markets and labour in sub-Saharan Africa has restricted income and led to rapid food insecurity for many.

Making sure emergency financial support could reach people quickly became a priority for many governments, but with lockdowns and social distancing, traditional means of distributing relief were often unavailable.

Countries which had invested in making their financial systems more inclusive before the pandemic were able to mitigate the most severe economic shocks to households.

The ability of these countries to act wasn’t built on radical reinvention, but rather on effective use of established solutions that drive digitisation, growth, and inclusion. Of course, there is a limit to how much countries can expand financial access amid a crisis, so the time to upgrade financial regulations and infrastructure to drive inclusion is now.

As African and global leaders look to implement plans after discussions at the World Bank and International Monetary Fund spring meetings last week about steps countries can take to rebuild their economies from the pandemic, they need not reinvent the wheel. Here are three suggestions for how countries can make their economies more resilient to future shocks including climate change, natural disasters, and the next pandemic.

First, countries should craft financial services regulations that provide space for companies and industry to innovate, while safeguarding consumers against risks, including data privacy and cybersecurity. When countries get their financial regulations right, the benefits of financial inclusion can accrue rapidly.

For example, mobile money penetration in Ghana tripled between 2014 and 2017, while overall financial account access increased from 41% to 58%.

The catalyst for this remarkable growth was the Bank of Ghana’s introduction of new electronic money regulations in 2015, which permitted non-banks, such as mobile operators, to own and run mobile money businesses.

But upgrading financial services regulations is only part of the solution.

Governments need to increase their ability to identify citizens and transact with them safely and quickly. Investing in inclusive digital payment and identity infrastructure is the second step governments should take to rebuild their financial systems and build more resilient economies.

During the pandemic, countries with high levels of payment and ID connectivity could quickly identify and deliver payments to households eligible for emergency funds. Digital payment and ID systems eliminated the need for people to complete paper forms or contend with crowded lines to receive emergency funds; they could apply online or by SMS and be paid digitally.

A third step governments can take to build more resilient economies is to put women front and centre.

A growing body of experimental evidence demonstrates that getting money into the hands of women to connect them to the formal financial system can lead to long-term benefits, including more decision-making power in their household, and greater economic security.