How can MSMEs flourish with enhanced Cross Border Financial Services?

MSMEs are the lifeblood of the African economy and are the crucial drivers of growth and GDP, so much so, that their share of employment, the share of enterprises, and operational processes have spurred a number of researches, case studies, and surveys.

Before we dig deeper into the subject matter of the impact of cross-border financial services on the growth of MSMEs, let us take a quick look at some of the noteworthy stats.

MSMEs Cross Border Financial Services

The global cross-border B2B payments are projected to hit the 133 trillion US dollars mark in 2022, and the value in the retail sector is projected to stand at 3.56 trillion US dollars by 2022.

With such big numbers, it is expected that the FinTech sector is all set to face new disruptions apart from the one it had way back in 2007 with the advent of M-PESA – mobile money. Mobile money targeted the “financial inclusion” of African people that had no access to any kind of financial services and were deadlocked in a state of financial incapacity because of the lack of money movement.

While mobile money became a huge entity in the FinTech world of Africa, it also set things in motion for cross-border financial services, which makes up the subject for the current discussion.

Let us begin by understanding the term first.

What are Cross-border Financial Services?

Cross-border financing refers to the financial deals and transactions that happen across the borders of a country and include different things, such as bankers’ acceptances, letters of credit and repatriable income, etc. Beyond-the-border loans are also included in cross-border financing.
The companies offering cross-border financing have a full-fledged team setup comprising tax consultants, legal advisors, accountants, and financial experts. The professionals help them cater to the financing needs of people in some other country (African countries in this case) all the while keeping the company operating as per the laws and regulations.
Cross-border financing offers financial help to anyone seeking it via loans, credits, and other such financial transactions operating via mobile money. So, the person taking the loan need not have any bank account or any direct contact with the lender. They can use mobile money or digital money via their mobile accounts, of which PayPal is an excellent example.
This entire operational philosophy becomes extremely important in the African countries, where the large masses are still without access to a full-fledged banking system. Such people are the best target audiences for all types of financial inclusion endeavors.
Now that we have understood the concept of cross-border financing and mobile money, let us move on to explore how African MSMEs can benefit from the same

How are African MSMEs availing of Cross-border Financial Services?

Just a few years ago, the majority of the population in sub-Saharan Africa including small business owners had very limited awareness and access to the current financial system. But as per a study conducted in 2019, 80% of Africans did not have a bank account. The advancement in technology saw a solution here as 80% of Africans owned a mobile phone which led to the rise of mobile banking. The digital revolution and the rise of Fintech startups and agent banking in Africa started spreading rapidly in 2020 post the outbreak of the pandemic.
With cross-border finances readily available without the need for bank accounts and other complex requirements for availing the money, more and more people are opting for them. They are getting money for starting their micro, small and medium-sized businesses and leveraging the digital channels for brand popularity and brand repositioning.
While the SMEs have an organizational structure to leverage these services in a better manner, the micro-business setups still have a long road ahead.
This is because they cannot kick-start their financial and business transformation just with the money. They must be educated or guided about the various digital platforms that they can leverage to get more customers, venture into unexplored markets and maximize their reach.
However, one thing, that all of us can agree upon is – cross-border financing allows EVERYONE, we repeat, EVERYONE to have a chance to bring a positive change in their financial odds and take the first step towards financial inclusion.
Hence, apart from cross-border financing, it is important to provide a comprehensive and holistic digital platform for all kinds of business transactions and money transfers that can spur the movement of money in the underdeveloped economical zones of Africa.
Before we move ahead, it is important to understand the various advantages cross-border financing enjoys in African countries.

Advantages Cross-border Financing enjoys in the African Countries

Mobile money generates financial resilience as households are better prepared to deal with unforeseen financial emergencies.
It allows the households to save more money, which certainly improves the quality of life.
Mobile money is transparent and comes with a formal approach to money transactions. As it is legal, the users don’t have to worry as well.
The post-riot scenario in Africa called for a reliable and robust way to perform money transactions without leaving the home, and mobile money was a perfect fit!
Some ethnic groups still consider banks and banking systems a “devil” and don’t find any problem with money they carry on the go!
Finally, while the banks were still grappling with online banking and mobile banking, people were already using and benefitting from mobile banking in extremely interior zones of Africa.

Hence, it is highly favored by the people and enjoys obvious advantages in African countries.

Enhanced Cross-border Financial Services and How can MSMEs leverage them?

Enhanced cross-border financial services are more extensive, more advanced and even more enabling as compared to the common cross-border financing. They offer holistic and cross-platform support to the MSME business owners and allow them to make the most of their business ventures by offering more optimized and professional digital services.

Some of these services include:

Open digital payment platforms
Digital banking
Digital transformation
International money transfer etc

Hence, the enhanced cross-border financing focuses on many other business verticals apart from offering financial support to the end-users.
Let us now explore the different use cases of cross-border financing to find out how it improves the operational efficiency and revenue of small businesses.

Mobile money offers:

Ease of money movement among individuals with varying purchase capacities
Improved remittances
Better returns on savings
Higher access to credit

Now, we will discuss the various use cases of enhanced cross-border financing.

1- Entrepreneurs

Microbusiness owners can find better selling opportunities by leveraging the enhanced business-related services, such as selling their products online to international buyers without having to deal with common banking procedures.
The buyers can click and buy their products and the sellers can get the money in their mobile accounts instantly.
This promotes a universal and more consolidated monetary transaction system that is away from the criticalities of the banking system.

2- Women entrepreneurs

The women in financially excluded zones of Africa don’t have the education and resources to market and sell their goods, after completing all the paperwork for their business establishment. They simply want to earn by selling what they have.
For such women, enhanced mobile money is like a boon that allows them to do business without any daunting registering and banking processes.

3- International business

The demand for handmade items and decor essentials is immense across the globe, and traditional African handicrafts are renowned globally. However, the craftsmen and craftswomen don’t have any means to sell them directly to the international buyers at good prices without having to give a middleman commission.
With enhanced cross-border financing systems, these sellers can simply list their products online and sell them directly. The payment comes right inside their mobile accounts. So, they don’t have to give any commission to the middlemen and they can easily sell their products without the need for various certificates and approvals.

CIT Vericash: Enabling and Revolutionizing MSMEs like Never Before

CIT VERICASH is a division of CIT GLOBAL, an international leading provider of innovative eCommerce and mCommerce software solutions and services with solid expertise spanning 25 years, since its establishment in Toronto, Canada in 1993. By applying CIT Global’s dedicated centers of excellence and its specialized leading products, in cooperation with its strategic partners, the company has delivered innovative and award-winning solutions to its clients in more than 48 countries, serving leading brands from North America, Europe, Asia Pacific, the Middle East, and Africa.

In conclusion, MSMEs have become the core of any growing emerging market, and through enabling all kinds of Fintechs through innovative technology platforms, they in turn would be able to empower their MSME clients to access & leverage all sorts of financial services that would help their customer reach and easily facilitate making and receiving payments and extending their services beyond borders of their country!