Expanding digital payments for more climate-resilient Africa

The ‘Global Stocktake’ during COP28 in Dubai last December will be seen as a critical milestone for African economies for at least two reasons: the agreement to ‘transition away’ from fossil fuels and the operationalisation of the Loss and Damage Fund.

In the long history of climate change activism and actions, with common but differentiated responsibility set out in the Paris Agreement, these are giant steps that will help the African continent build resilience and adaptation to the disproportionate burden of climate change while accelerating sustainable development.

It is now clear.

Africa is becoming warming faster than the rest of the world. Left unabated, climate change will continue to have adverse impacts on African economies and societies and hamper growth prospects and well-being.

According to the 6th IPCC Assessment, Africans are disproportionately employed in climate-exposed sectors: 55–62 per cent of the sub-Saharan workforce is employed in agriculture and 95 per cent of cropland is rain-fed.

In rural Africa, climate hazards pose heightened risks to low-income and female-headed households, with UN Women projecting a worst-case scenario of 158 million more women and girls pushed into poverty by mid-century in low-income countries.

 These statistics are grim. Protecting these people and promoting their prosperity will require a stronger voice and stronger partnerships.

That is why Ghana, in its role as the chair of the V20 Group of the world’s most climate-vulnerable nations, raised a clarion call in Dubai for urgent financial and technical support to adapt to climate change while advancing the UN Sustainable Development Goals.

The appeal comes in the light of staggering figures. Since 2000, V20 countries have incurred $525bn in costs due to multiple impacts of climate change.

It is even more distressing that about 98 per cent of the nearly 1.5 billion people residing in these countries are bereft of financial protections.

We cannot triumph from this adversity in a vacuum.

We must, together, confront this challenge using all available and imaginable tools.

 So, financial innovation and technologies are paramount because they have an outsize role in building climate preparedness and emergency response.

Importance of digital payments

Responsible digital payments have emerged as critical enablers to addressing climate change in Africa as highlighted by the World Bank Group in 2020.

Indeed, the success of digital payments during the COVID-19 pandemic offers a valued blueprint for building climate resilience, particularly in vulnerable communities.

The indispensability of a robust digital payment ecosystem during emergencies was underscored.

Investing in a digital payment infrastructure and extending essential digital services to regions most affected by climate change, holds a better and bolder promise for responding to extreme weather change.

In Ghana, for example, government initiatives ensured that financial aid reached those most in need and in time.

Leveraging existing digital payment infrastructure and collaborating with financial institutions, the government reduced inefficiencies, minimised physical contact and played a vital role in the broader containment effort.

The government of Ghana’s dedication to advancing a digital economy has been matched by significant investment in digital infrastructure.

 With Ghana pioneering an integrated interoperability system through the Ghana Interbank Payment and Settlement Systems (GhIPSS), interoperable mobile money transactions surged to $138m, totalling over $2bn in 2022.

A digital ID system, the New Payments Systems Act, and the Consumer Recourse Mechanism directive, also continue to play a vital role in promoting responsible digital financial inclusion in Ghana.

The Ghana.gov platform equally underscores the government’s commitment to providing a comprehensive one-stop-shop for digitally paying for all public services; thus improving predictability and accountability for public resources and mitigating climate challenges.

Together, these infrastructures have laid the foundation for resilient social protection systems and enhanced anticipatory action in the context of climate-related transfers, particularly for women who often disproportionately bear the burden of climate change.

Call to action

Recognising their value and potential, and while at COP28, Ghana, the Vulnerable Twenty (V20) Group, the Philippines, Ethiopia together with the UN-based Better Than Cash Alliance, the World Food Programme (WFP) and Mercy Corps, launched a bold call to action.

The call urges faster up-take by governments, international organisations and the private sector to expand digital payments and digital public infrastructure for a more climate-resilient future for all.

It is a secure and sure way to close the digital divide by increasing access and connectivity to reduce climate vulnerability and put women, the youth, indigenous peoples and communities in fragile and climate-vulnerable areas at the centre of adaptation planning.

Investing in digital payment infrastructure and extending essential digital services to regions most affected by climate change, hold a better and bolder promise for responding to extreme weather and transforming despair into hope for millions of Africans.

Financial innovations by the private sector need to be spurred on with public funds.

Adoption efforts by households need to be more affordable to inspire uptake.

Yet, the squeeze on public finances across the continent is palpable.

Over 60 per cent of low-income countries are in, or at high risk of, debt distress, while access to capital markets is constrained by the prohibitive cost of borrowing.

This leaves little room to fund these and other critical investments in support of climate action.

The world needs to deploy all the tools to protect our planet and people.

Fortunately, critical voices were raised and heard at COP28.

What remains is actions: actions that enable countries to actualise historic agreements and invest in known solutions. 

The ‘call to action’ on Responsible Payment Systems is a call to ‘lead by example’ at all levels for the sake of our common humanity.

The writer is the 
Minister of Finance