Eswatini is a small, landlocked country in Southern Africa with a population of about 1.2 million and a GDP per capita of $3,958 (2021). The country’s financial sector is dominated by non-bank financial institutions (NBFIs), such as pension funds, insurance companies, and collective investment schemes, which account for about 110% of GDP. The banking sector, on the other hand, is relatively small, with assets of about 30% of GDP, and comprises the Central Bank of Eswatini (CBE), four commercial banks, three credit institutions, and one building society.

The banking sector faces several challenges, such as low financial inclusion, high household indebtedness, limited product innovation, and exposure to external shocks. According to the World Bank, only 45% of adults in Eswatini had an account at a financial institution in 2017, compared to the Sub-Saharan Africa average of 43%. Moreover, household debt to GDP ratio was 35% in 2021, higher than neighboring and other middle-income countries. The banking sector also lacks diversification and innovation, as most of its products and services are traditional and similar across banks. Furthermore, the banking sector is vulnerable to external shocks, such as the COVID-19 pandemic, and the fluctuations in the South African rand, which affect its trade, foreign exchange, and fiscal revenues.

However, these challenges also present opportunities for fintech companies to offer solutions that can enhance financial inclusion, efficiency, and resilience in the banking sector. Fintech, or financial technology, refers to the use of emerging technologies, such as artificial intelligence, blockchain, mobile platforms, and biometrics, to deliver financial products and services. Fintech can potentially improve access, convenience, affordability, and security of financial services for both banked and unbanked populations. Fintech can also enable product differentiation, customization, and personalization, as well as reduce operational costs, risks, and fraud.

Some examples of fintech applications that are relevant for the Eswatini banking sector are:

• Digital payments and remittances: Fintech can facilitate faster, cheaper, and safer domestic and cross-border payments and remittances, using mobile money, e-wallets, cryptocurrencies, and peer-to-peer platforms. This can benefit both individuals and businesses, especially those in rural areas, informal sectors, and diaspora communities.
• Digital lending and savings: Fintech can provide alternative sources of credit and savings, using online platforms, crowdfunding, peer-to-peer lending, and robo-advisors. This can increase financial inclusion, especially for micro, small, and medium enterprises (MSMEs), women, and youth, who often face barriers to access formal financial services.
• Digital insurance and pensions: Fintech can offer innovative and affordable insurance and pension products, using data analytics, smart contracts, and blockchain. This can enhance risk management, protection, and retirement planning for both individuals and businesses, especially those in low-income and vulnerable groups.
• Digital identity and verification: Fintech can provide secure and reliable digital identity and verification systems, using biometrics, facial recognition, and blockchain. This can improve customer due diligence, KYC, and AML compliance, as well as reduce identity theft and fraud.

The CBE, as the monetary authority and financial regulator, has been proactive in creating an enabling environment for fintech innovation and inclusion in the country. The CBE has established a Fintech Unit, a Fintech Regulatory Sandbox, a Fintech Innovation Competition, and a Fintech Working Group, in collaboration with various stakeholders, such as government agencies, private sector actors, academia, and development partners. The CBE has also conducted research on emerging technologies, such as central bank digital currency (CBDC), crypto-assets, and distributed ledger technology (DLT), and their implications for the financial sector.

The Eswatini Fintech Landscape Report 2023, a collaborative effort between the CBE, the Eswatini Fintech Working Group (EFWG), the Alliance for Financial Inclusion (AFI), and Olayinka David-West Consulting, provides a comprehensive overview of the current state and future potential of fintech in Eswatini. The report covers key aspects, such as market demand, supply-side dynamics, regulatory framework, infrastructure readiness, and ecosystem enablers. The report also provides recommendations for enhancing the fintech ecosystem and addressing the challenges and opportunities for fintech in the banking sector.

The report identifies four key areas of intervention for fostering a conducive fintech ecosystem in Eswatini:

• Developing a clear and coherent fintech strategy and vision, aligned with the national development goals and priorities, and supported by a strong leadership and coordination mechanism.
• Enhancing the fintech regulatory framework and supervision, based on the principles of proportionality, risk-based approach, and innovation facilitation, and informed by international best practices and standards.
• Improving the fintech infrastructure and interoperability, leveraging the existing platforms and systems, such as the Swaziland Interbank and Settlement System (SWIPSS), the Transactions Cleared On An Immediate Basis (TCIB), and the Eswatini Clearing House (ECH), and adopting new technologies, such as APIs, DLT, and cloud computing.
• Strengthening the fintech ecosystem and collaboration, fostering a culture of innovation and entrepreneurship, building capacity and skills, and facilitating partnerships and knowledge sharing among various stakeholders, such as fintech startups, banks, NBFIs, government agencies, academia, and development partners.

The report concludes that fintech has the potential to transform the Eswatini banking sector and contribute to the economic and social development of the country. However, this requires a concerted and coordinated effort from all stakeholders to create a conducive fintech ecosystem that can foster innovation, inclusion, and resilience in the financial sector.