{"id":34034,"date":"2018-11-13T17:34:33","date_gmt":"2018-11-13T22:34:33","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/the-benefits-of-a-i-in-sub-saharan-africa\/"},"modified":"2018-11-14T12:58:01","modified_gmt":"2018-11-14T17:58:01","slug":"the-benefits-of-a-i-in-sub-saharan-africa","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/the-benefits-of-a-i-in-sub-saharan-africa\/","title":{"rendered":"The benefits of A.I. in Sub-Saharan Africa"},"content":{"rendered":"

The benefits of A.I. in Sub-Saharan Africa<\/p>\n

 <\/p>\n

Artificial Intelligence is not immediately associated with Africa, a continent where c.60% of the population doesn\u2019t have access to the electric grid1<\/sup>. A.I. has the potential to impact positively communities in SSA. One example of that is the use of A.I. in Microfinance.<\/p>\n

 <\/p>\n

Traditionally, financial institution assesses the creditworthiness of a client by using a credit score. This credit score2<\/sup> is the output of an algorithm using as inputs record of the borrower’s credit history from a number of sources (including banks and governments) or personal data like a contract of employment.<\/p>\n

In SSA, this computation of the creditworthiness is not applicable for 2 reasons. First, the informal economy although declining still represents 38% of the GDP and 66% of the total employment3<\/sup>. Second, the banking penetration is very low4 <\/sup>(less than 30%) and banks can only offer loan to a small portion of their clients, those that they can appraise the creditworthiness by using the traditional sources mentioned before.<\/p>\n

Africa has one of the fastest growing mobile penetration (75% of the population have a SIM) and the smartphone use is on the rise. On their smartphones, customers can use Mobile Financial Services (MFS) like mobile money to send, receive or store money with their device5<\/sup>. There is 100 million mobile money user and that number has grown 30% per annum between 2013 and 20166<\/sup>.<\/p>\n

FinTech companies can take advantage of the non-traditional data that can be extract from the smartphones and create a new credit scoring model.<\/p>\n

 <\/p>\n

MyBucks is a German FinTech company operating in Sub-Saharan Africa. The company offers mobile financial services such as credit through a digital platform. According to the company, their success is due to their \u201cproprietary credit decisioning and scoring technology and self-learning algorithms\u201d.<\/p>\n

MyBucks has developed a credit scoring technology platform7<\/sup>, Jessie, that helps them assess the creditworthiness of a client. The platform uses traditional data such as transactional data or employment verification when available. Its singularity is that it also uses alternative data and behavioral data. A.I. main role is to analyze the alternative data coming from different sources like cellphone usage, mobile money or social media.<\/p>\n

As reported by Dr. Christiaan Van Der Walt8<\/sup>, Chief Technology Officer at MyBucks \u201cThe system assigns a unique credit score and determines a probability of default, which in turn drives a unique credit offering to the client, by adjusting the loan amount, term and interest rate.\u201d<\/p>\n

CEO and Founder of the company Dave van Niekerk gives more detail on how the machine learning algorithm works9<\/sup> \u201cThis credit decision and scoring system works to continuously learn customer behavioral patterns from historical loans and is able to very accurately predict a customer\u2019s probability of default for a particular product at any given time.\u201d<\/em><\/p>\n

Haraka is the star product of MyBucks. It is a real time nano-loan mobile banking app that has been developed in-house. The app can offer loans to clients that don\u2019t have a credit score or that don\u2019t even have a bank account. According to Dr. \u00a0Van Der Walt, real-time nano-loans is \u201ca product that would not have been possible without AI and technology since loan amounts are extremely small, and a system where human intervention is required for credit scoring and loan disbursements would not have been financially feasible\u201d.<\/em><\/p>\n

 <\/p>\n

Scholars Erik Brynjolfsson and Andrew McAfee10<\/sup> explain that the breakthrough of A.I. is due to 3 factors:<\/p>\n