In Africa, social relations are vital in shaping economic behaviour and influencing market outcomes. This is due to the continent’s unique cultural, historical, and political context, which has shaped relationships and the various functioning of markets and institutions. As such, actors involved in the financial sector working in Africa need to heed social correlations and relationships to understand the complexities of the African economy and to develop effective policies and organisational solutions.
In this blog, we will touch on some of the challenges that actors working in the financial sector could face due to social relations.
1. The relationship of economic actors
Social networks and relationships are essential in facilitating economic transactions in Africa, such as credit, investment, and trade access. For example, an already-established trust and cooperation between individuals or social groups can lower the costs of transactions, increase efficiency, and facilitate sustainable growth. On the other hand, distrust and conflict between the different actors can increase the fee of proceedings, reduce efficiency, and overall limit economic growth.
Social Relations in Africa
2. Unequal distribution of resources and wealth
In many African countries, social relations have been shaped by historical factors, such as colonisation, slavery, and ethnic conflict, which have contributed to the unequal distribution of wealth and resources. For example, discrimination based on gender, race, or ethnicity can limit the access of specific individuals and groups to education, employment, and other resources, perpetuating existing inequalities and further limiting economic opportunities.
3. Allocation of power and influence in the economy
Social relations can also further impact the functioning of institutions and the allocation of power and influence in the economy. For example, institutions such as governments, corporations, and civil society organisations can be shaped by social relationships, leading to unequal outcomes and limiting economic efficiency. In Africa , it is important to recognise that historical factors such as colonialism and authoritarianism have played a significant role in shaping the current state of institutions. These challenges have impacted the continent’s ability to fully unleash its economic potential.
Understand your markets
To address these challenges, the actors involved in the financial sector must adopt a more interdisciplinary and holistic approach. Broadening their perspective beyond traditional economic theories and financial models that predominantly prioritise quantitative insights, often overlooking the importance of qualitative factors. This approach can help to better understand the motivations and behaviour of individuals to engage with financial systems, and of institutions to provide accurate services that can support economic growth beyond financial inclusion. Additionally, the use of qualitative methods to understand markets would provide a deeper understanding of social relations and their impact on the African economy.
Develop new policies and solutions
In addition to these analytical approaches, the financial sector, has the potential to contribute to addressing the challenges posed by social relations by formulating and implementing policies and frameworks that include the complexities of the African context to ensure stability and promote economic growth. For example, policies aimed at reducing inequality and improving economic opportunities can be designed to address the unique social dynamics of the African context, such as cultural norms and values, historical legacies, and political relationships.
Our contribution
Building healthier and more inclusive economies through innovation requires a comprehensive approach that combines financial and economic expertise , front-line experience in value chain systems, social and context awareness, discipline, and strategic decision-making.
At Correlaction, we are committed to driving this transformation by collaborating with big market players in the supply chain and financial sectors to further digitise the inclusion of Micro, Small & Medium Enterprises (MSMEs) to access financial services. By partnering with forward-thinking financial institutions and integrating the physical and financial value chains, we aim to foster transactional convenience and financial efficiency. Through these efforts, we strive to create sustainable value and economic prosperity for every sector and actor within the ecosystem. Together, we can realise the full potential of innovation and collaboration to shape a future of inclusive growth and shared economic wealth.
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Today, Correlaction powers Kenya’s most extensive retail finance programme whilst expanding into Uganda. We provide a simple, secure, least-cost solution fit for Africa, connecting 4+ banks with 7+ suppliers and 20000+ retailers.
With Correlaction, let’s strive to achieve economic wealth for African retailers.
