In Africa, 85.8 percent of employment is informal, the International Labor Organization reports.
The $4 million investment in Nomanini was raised with participation from Dutch impact investor Goodwell Investments, which is focused on backing fintech and financial inclusion companies, according to a press release.
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Nomanini connects informal merchants with distributors by turning any mobile phone into a retail point-of-sale device for informal merchants through an app.
The mobile app is then connected to a merchant wallet device that is proprietary.
Merchants can use the mobile phone and merchant wallet device combination to offer basic digital banking services to their customers including mobile airtime, credit, savings and insurance products.
Africa’s largest bank investing in fintech
South Africa’s Standard Bank is Africa’s largest African bank by assets with a market capitalization of $23 billion and assets totaling $157 billion as of June 2019.
Standard Bank is aiming to use Nomanini’s platform in 15 African countries to offer credit and savings services to informal merchants, EWN reports. By targeting Africa’s informal sector, Standard Bank expects to expand its customer base.
Nine out of 10 retail transactions in Africa are concluded in cash or via informal channels such as kiosks and open-air markets, according to a report by Deloitte.
The majority of traders do not have a credit score and are financially excluded from the formal economy.
It is difficult for governments to bring informal businesses into the formal economy where they will have to pay taxes.
“Informal traders will only be willing to bear the cost of taxes and business registration if they perceive benefits from operating formally,” said Monami Dasgupta, a research analyst at IFMR Finance Foundation.
“These benefits include enforceable commercial contracts, tax breaks and incentive packages to raise their competitiveness, membership with trade union associations, access to government subsidies and incentives, employer contribution to pensions, and rights to organize and bargain collectively,” Dasgupta writes in a blog for the World Bank.
While the traders benefiting from the Nomanini and platform remain informal, they are given access to formal financial services.
Nomanini’s platform gives merchants a credit score through transaction data analysis. Standard Bank can use customers’ data to sell them financial services. Informal traders can also access loans for their own businesses, according to EWN.
The $4 million investment brings Cape Town-based Nomanini’s total funding to $5.1 million since it was founded in 2010, according to Crunchbase.