One of the reasons African businesses, including small and medium enterprises (SMEs), do not perform optimally to achieve the purpose for which they are set up is the menace of business identity fraud. This problem has been rampant in the last few years, especially with increasing use of technology in the running of businesses in many parts of the world, notably developed economies.
Business identity fraud occurs in many forms, including assumption of the identities of business owners, officials or employees to fraudulently receive payments or loans, leaving the victims with either loss of legitimate payments or responsibility to repay loans they did not obtain. This is usually done through hacking of mails or organizations’ systems for the purpose of obtaining relevant and sensitive information that would aid in the commission of the crime.
The challenge is exacerbated by the poor and low-level deployment of technology in running businesses in Africa, which results in the absence of the needed security controls to detect and prevent fraudulent activities. This makes them easy targets for criminal attacks.
Admittedly, business identity fraud is a global phenomenon, and is not limited to Africa. There is paucity of data on how much is lost globally to business identity fraud. But in the United States alone, about $43 billion is estimated to have been lost in 2022, a figure that is even a drop from the $52 billion recorded the previous year. That is one of the societies with presumably the most sophisticated technology available for preventing business identity fraud.
Apart from low application of technology, African businesses face the problem of lack of digital identity in a global business community that is digitally driven – a handicap that denies them access to adequate financing and equally exposes them to the activities of fraudsters. They face the twin problem of remaining invisible in a world business community where only the legally and digitally well-known thrive, and dealing with more sophisticated and technologically savvy criminals.
However, with the prominent role expected to be played by the Global Legal Entity Identifier Foundation (GLEIF) in Africa’s economy in the coming years, there appears to be hope for a new lease of life for organizations and SMEs on the continent. Established by Finance Ministers and Governors of Central Banks in the world’s 20 leading economies, GLEIF is an organization that manages a network of partners, with responsibility to provide open, trusted and reliable data for legal identification of businesses throughout the world.
The Legal Entity Identifier (LEI) is the organization’s major financial inclusion product that creates legal, digital and unique identity for businesses and organizations. The product allows business owners access to the true identities of their counterparts anywhere in the world, thus putting them in good stead to know and have relevant information on not just the personalities they are going to be dealing with, but the ownership structures of the organizations they want to do business with across all industries and sectors.
This helps to build trust among business counterparts, even in different parts of the world, and eliminates fear of business identity fraud. This is especially so because business counterparts, as well as clients and customers, would have access to one another’s digital identity portal. Since inception, GLEIF has used EIL to promote financial inclusion in developing economies in different parts of the world.
The growing interest being shown in Africa’s economy by GLEIF is quite significant and, in the estimation of organizations and SME operators on the continent, a welcome development. It is coming at a time the major economies of the world are seeking greater participation in the continent’s economy, which is not unconnected with the coming into being of the African Continental Free Trade Area (AfCTA). This is a market that is expected to be the largest in the world, when fully operational.
As an organization whose products are technology driven, GLEIF is hoping to use LEI to promote financial inclusion on the continent by spurring the growth and expansion of the ICT, Financial Technology (FinTech) and Regulatory Technology (RegTech) industry, as well as the SME sector.
Perhaps nothing underscores GLEIF’s interest in promoting financial inclusion in Africa than the fact that two of the non-executive directors recently appointed to the board of the company are Africans with vast knowledge and experience in the FinTech industry. Dr. Folarin Alayande, a Nigerian, is the Vice President for Public Sector, Eastern Europe, Middle East and Africa, at MasterCard. Angela Kyermaten-Jimoh, a Ghanaian, is Lead in Strategic Partnerships and Multinational Corporations, at Microsoft.
The presence of these two Africans in the highest decision making organ of GLEIF is expected to reflect in policies and projects that engender greater participation of African businesses in the global community of technology-driven economies. A major aspect of this participation is adoption of digital identity technology, which would act as a safeguard against business identity fraud of which African businesses have been perennial victims.
By fully embracing digital identification technology, African SMEs are going to be free of the threat posed by business identity fraudsters. This would position them for easier access to credit facilities and, very importantly, give them security in terms of protection of their finances, systems and processes, thus giving them the wherewithal to be the engine room of economic growth and prosperity on the continent.
Small businesses, the world over, are known to be the biggest employers of labor. The situation is not going to be different with African SMEs when they acquire digital identity that gives them security against business identity fraud. It would be possible for them to thrive well enough to create employment at the lowest level, and thus contribute significantly to the eradication of poverty on the continent.