African Fintech Markets Attract Investors

Minnesota entrepreneur Garad Nor launched his first Africa-focused money transfer business in 1993. Decades later, Garad Nor leads two of the highest-grossing money transfer firms based in Minneapolis—Banana Pay and Tawakal Express. Much of this success can be attributed to the firm’s embrace of mobile money and other advances in financial technologies (fintech).

In many developing African nations, fintech financial products are the first type of banking system that is accessible to the majority of the population. For this reason, fintech startups have attracted the interest of local and international private equity investors. In 2017, a third of all capital invested in African startups went to companies in the fintech sector. 

A strong fintech market also supports the growth of other aspects of the African tech industry. For example, the feasibility of widespread adoption of mobile money increases when a robust, secure, and reliable cloud computing network is in place. 

As a result, investors are funding systems that support fintech infrastructure such as card readers and point-of-sale systems for small businesses. Additionally, as fintech becomes more commonplace, consumers will demand better service, which also drives innovation within the market.

Fintech Reduces Poverty and Increases Financial Inclusion

Innovative financial executive Garad Nor has spent more than 15 years overseeing Tawakal Express and Banana Pay, two of the largest money transfer companies serving East Africa. Aware of the major impact of mobile money on the livelihoods of underbanked Africans, Garad Nor has increased the use of advanced financial technology (fintech) within his money transfer services. 

Advances in fintech have removed many of the barriers that precluded people from obtaining loans from traditional banking institutions. Mobile money applications have enabled underbanked populations such as people living in rural communities or small-scale farmers to have access to credit. This influx of capital can fuel activity in the local economy, boost agricultural productivity, and increase educational attainment.

Mobile money has also made it possible for people without access to brick-and-mortar financial institutions to store their money safely in digital wallets or online bank accounts. According to a study examining the saving behaviors of mobile money users in Tanzania, Uganda, and Kenya, people with access to digital accounts were 10 percent more likely to have savings than non-account holders. A cushion of savings can be used to pay for an unexpected health emergency and reduce the likelihood of falling deeper into poverty.

Children from Low-Income Backgrounds Need Family Support to Succeed

Garad Nor is the CEO and president of Banana Pay, LLC, a money transfer service company catering specifically to people around the world who struggle with high fees for remittance payments. Outside of his professional life, Garad Nor enjoys engaging in volunteer philanthropic work within his community, with a particular interest in activities which benefit families from low-income backgrounds.

One thing that many people forget to consider about families from low-income backgrounds is the effect growing up in poverty has on the children of this particular group. According to the nonprofit DoSomething.org, children from low-income backgrounds are likely to have a higher number of school absences, are less likely to graduate from high school, and are less likely to be performing at their actual grade’s level of academic competency.

Though the causes of these academic struggles among students from low-income backgrounds are dependent on several factors, the fact remains that students who underperform in school or fail to graduate from high school are more likely to struggle with poverty themselves in adulthood. In their youth, they may lack stability in their homes, have language barriers that prevent them from equal access to local education, or lack academic support due to the fact that their own parents also come from a low-income background and may not have completed schooling themselves.

Because of these facts, it’s important to note that to support students from low-income backgrounds and improve their hope of a better future, concerned parties must support programs for low-income families as a whole. It is only possible to support the academic and future potential of children from low-income backgrounds if their families receive social benefits which help create home environments which support achievement.

Remittances Boost Educational Attainment in the Developing World

Garad Nor serves as the CEO of two Minnesota-based international money transfer companies that cater to the needs of the state’s Somali and East African populations. Since Garad Nor founded Banana Pay in 2018, the company has processed more than $120 million in remittances to countries in the developing world.

Millions of people in the developing world use remittances to pay for education costs and fill the gaps left by insufficient government funding. According to a 2017 United Nations report, a third of all education costs in developing countries are covered by families. For this reason, cost reductions in remittance transfers can free up money to meet educational costs.

Improvements in money transfer speed and reliability can also increase educational attainment. Faster transfer times and options to send money directly to schools will ensure that more children remain in school and have the supplies they need to succeed. According to one report, remittances have prevented more than three million children from dropping out of school in the past year.

How Digital Payments Boost Entrepreneurship

In response to the needs of the people in East Africa, Minneapolis-based businessman Garad Nor has established money transfer companies to help facilitate remittance payments between the United States and Africa. Garad Nor is the CEO and president of the successful remittance firm Banana Pay.

Evidence suggests that digital payments and expanded mobile banking options increase opportunities for entrepreneurs due to facilitated financial transactions, increased access to business loans, and cheaper payroll processes. Entrepreneurship is vital to the economy of developing countries such as Somalia, where years of civil war and government instability have resulted in weak financial institutions and no significant bank presence. 

In addition, formal work opportunities can be difficult to find. Youth unemployment hovers just under 70 percent in Somalia. 

However, because of mobile banking services, small business owners can safely and conveniently collect payments from their customers, pay their expenses, and raise capital. Today, the fintech (financial technology) sector itself is ripe with opportunity for Somali entrepreneurs.

Consumer Protections for International Remittances

Entrepreneur Garad Nor launched his first money transfer business in 1993 in Marshall, Minnesota. Ten years later, Garad Nor turned around Tawakal Express, an international remittance firm that handles millions of dollars each month. In addition to providing secure, reliable service, Tawakal Express operations follow all the laws and rules set forth by regulatory bodies such as the Consumer Financial Protection Bureau (CFPB).

Many consumer protections regarding electronically-transferred remittances are enshrined within the 2014 CFPB remittance rules. Before an international transaction is completed, remittance companies are required to clearly state the exchange rate, any additional fees, applicable taxes, and the amount directly wired to the receiver.

Recipients are also notified in writing of their rights and the company’s cancellation and dispute policies. Remittance agencies are also required to provide their clients with their privacy policy and a disclosure that includes the expected transaction date and ways to contact relevant regulators. Many companies translate these policies into the most common languages used by their customers.

Under these rules, consumers are protected against errors such as unequal exchange rates for senders and recipients or transfer delays caused by actions of the agency. Additionally, all errors have a reporting period of 180 days. Agencies can take up to 90 days to investigate any error claims and must resolve the error if the agency is found liable.

The Importance of Remittances on the East African Economy

Focusing on the money transfer needs of the African diaspora in Minnesota, entrepreneurial senior executive Garad Nor heads two successful international remittance operations, which process millions of dollars in transfers every year. As a reflection of the lucrative remittance market, Garad Nor’s latest venture, Banana Pay, handles over 10 million dollars in international transfers every month. 

The earnings of East Africans in Europe, Canada, and the U.S. are often sent back to relatives in their home countries. In Kenya, nearly four percent of the Gross Domestic Product comes from remittances. 

The billions of dollars infused into the economy helps boost flailing currencies and drives business growth. Moreover, the increased purchasing power of remittance recipients contributes to increased spending on education, healthcare, and other sectors that support economic development. 

Researchers have found that remittances can have ripple effects throughout a community. Recipients often use their extra income to buy more goods, which increases localized production and creates more jobs. 

However, remittances may deepen economic inequality and reduce participation in the workforce. In an attempt to democratize the benefits of remittances, the Kenyan government has enacted a series of policies to increase diaspora investment in nationwide projects.