In Senegal, 9 out of 10 workers are paid in cash. Most are temporary workers and excluded from health insurance but 77% of temporary workers would be willing to receive their wages digitally if this gave them access to health insurance.
These are some of the major findings of a report recently launched by the Senegalese government, with support from the Better Than Cash Alliance (United Nations), the World Bank, and the National Agency of Statistics and Demography of Senegal. Combining digital payments with health insurance benefits offers an excellent opportunity for social inclusion, formalization, and financial innovation.
Digital payments stimulate 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 USD). Paying workers digitally speeds up the financial inclusion for the population, boosts business competitiveness, and increases financial system liquidity.
To tap into this potential, the SME Development Agency (ADEPME) plans to bolster its SME support fund with USD 20 million from the World Bank. This will be used to strengthen SME digitization initiatives and support digital payment projects for workers.
Senegalese President Macky Sall and H.M. Queen Máxima of the Netherlands, who serves as UN Secretary-General’s Special Advocate for Inclusive Finance for Development (UNSGSA), have launched an appeal to fellow leaders, the private sector and civil society, inviting them to: “use this report to ensure digital payments are at the center of a sustainable and fair economic recovery.”
To set an example, the President of Burkina Faso, Roch Marc Christian Kaboré, also decreed, in late 2020, the digitization of payments for workers in the administration of Burkina Faso. When the COVID crisis emerged, the West African Economic and Monetary Union (WAEMU) and the Central Bank of West African States (BCEAO) took decisions aimed at reducing the circulation of cash in the 8 countries.
These actions have had tangible impacts which are beginning to change the lives of workers and companies. For employers, the benefits of digitizing payments include avoiding the constraints of managing large amounts of cash, and all the risks that distribution can involve
While receiving a salary is often linked to health care contributions, globally at least 61% of workers operate in the informal sector without adequate coverage, according to the International Labour Organization (ILO). Indeed, in some countries, there is not always a legal obligation for employers to contribute to any kind 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 in Senegal has launched an ambitious digital payments platform. It has partnered with fintechs and private companies to link access to universal health coverage and digital payments – specifically targeting women.
While 81% of national 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.
Three obstacles have limited the growth of payment digitization in Africa: the size of the informal sector, sometimes up to 90% of the economy; the historically low financial inclusion rate; and most importantly, 21% of African workers receive a wage keeping them below the poverty line.
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