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Digital ID: Boon or Big Brother for Africa's Economies?

By Andrew Larsen | Fri Jun 28 2024
Deep Dive on Digital IDs in Africa
In Context: In 2019, McKinsey published a report stating that in 2030, emerging economies could unlock economic value equivalent to between 3% and 13% of GDP if governments implemented digital ID systems. More specifically, the report noted that Nigeria could unlock 7% (~$23.6B) and Ethiopia could unlock 6% (~$20.8B) of GDP. Economic benefits can be derived from the efficiency of: optimized e-government services, verifiable tax collection, electronic KYC, formalized business registration and verifiable asset and land ownership. Five years later, Modular Open Source Identify Platform (MOSIP) is now active in nine African countries in the pilot or implementation phase. Rwanda, Egypt, South Africa, Nigeria and Kenya are also working on implementing their own non-MOSIP systems. Meanwhile, data protection concerns have slowed progress in some countries (Nation). And without proper controls, digital IDs can give rise to political manipulation and social control
How big is the challenge? According to UNICEF, nearly half of all African children under five are unregistered (UNICEF) and according to the World Economic Forum, a little less than half of Africans use some banking service (World Economic Forum). Countries are up against major obstacles to transition to digital IDs.
Some experts believe that digital identification systems unlock value for countries in five key ways:
  • Efficient and corruption-free distribution of government benefits and optimized e-government services.
  • Digitized and verifiable tax collection, increasing tax revenues.
  • Electronic KYC for financial transactions. In 2023, Egypt increased its digital KYC requirements, adding biometric requirements for certain transaction sizes to combat money laundering.
  • Formalized business registration greatly benefits informal businesses' connection to formal institutions, customers, and vendors.
  • Verifiable asset and land ownership to combat theft and to facilitate sales and purchases.
What is the continent’s progress towards digital IDs? The MOSIP is active in nine African countries in the pilot or implementation phase. So far, Togo, Morocco, Ethiopia and Uganda are implementing the system and Guinea, Niger, Sierra Leone, Madagascar and Burkina Faso are running pilot projects. And notably, as of March 2024, Ethiopia had onboarded 4 million citizens onto its MOSIP platform.
Several other African nations are also making progress in implementing their own digital ID systems to enhance governance, service delivery and commerce: 
  • Rwanda: Rwanda's Single Digital ID system, initially planned for 2023, aims for full citizen onboarding by 2027, with the core software bids closing in June 2024.
  • Kenya: Kenya is also upgrading its digital ID platform and rolling out biometric passports. The Maisha Munda digital ID system, re-launched in February 2024, targets issuing 32 million IDs by 2026. 
  • South Africa: South Africa's new biometric and digital ID system called NIS launched in 2022 and was planned to be fully implemented by 2024, however, we expect that implementation is still ongoing and challenges remain but progress is being made particularly around registering births. The system’s primary objective is to aggregate all disparate forms of information regarding its citizens and foreigners into one centralized system.
  • Egypt: Egypt’s digital ID system and online verification processes for e-government services are core components of the country's 2030 Digitalization Strategy. The Egyptian government is also enforcing biometric verification for certain non-bank fintech services to combat money laundering as of 2023. Requirements are tiered based on the risks associated with each transaction. 
  • Nigeria: Nigeria's National eID, launched in 2014, seeks to increase adoption beyond the current 13.6%. The government has also indicated that it plans to distribute social benefits to about 60 million citizens using its digital identification system. 
Learning from India’s ID Success
In 2012, India launched its Aadhaar digital identity system to provide unique digital identification systems to all of India’s citizens. Since then, the program has been a success, though concerns remain about the potential for the platform to be abused. The initiative has led to a more efficient distribution of government services and welfare, a substantial increase in digital payment use under India's Unified Payments Interface (UPI) and a reduction in corruption. The program grew rapidly even though before Aadhaar was launched, 40% of Indians lacked official birth certificates, and 60% lacked bank accounts, underscoring Aadhaar's relevance to emerging and developing markets (Forbes). An Indian non-profit launched MOSIP in 2018 with funding from the Bill and Melinda Gates Foundation. It is derived from the Indian Aadhaar digital ID system, which achieved almost 90% enrollment in less than a decade and facilitated a boom in digital payments and consumer spending in the country. As of 2023, 90% of Indian adults had an account at a formal financial institution.
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