Embedded Podcast: AI Can Unlock Opportunities For Africa’s Informal Economy
Small business owners are not high-risk borrowers. Traditional banking metrics just can't see their creditworthiness. AI might finally change that.
Greetings from The Rundown Studio Team
Our next Embedded episode dropped today, featuring Maxwell Gomera, UNDP's Resident Representative for South Africa and Executive Director of UNDP’s Africa Sustainable Finance Hub.
Maxwell views AI as a practical tool for Africa's financial transformation, particularly in using data to unlock financing for small businesses traditionally labeled as "too risky" by conventional systems. He’s building data so AI can help measure the actual entrepreneurial potential in Africa's informal economy, which generates billions in economic activity but remains financially excluded.
Meet Maxwell
Maxwell is the UNDP Resident Representative for South Africa and Director for the UNDP Africa Sustainable Finance Hub. Before this he was the Resident Representative for UNDP Rwanda. With over 20 years of experience as a resource economist specializing in nature conservation and agricultural development, Maxwell has made significant contributions to economic development initiatives, including being part of the team that developed the 'Global Green New Deal' following the 2008 financial crisis.
Now he's tackling one of the continent’s most stubborn development challenges: unlocking finance for the continent's massive informal sector.
Listen to the full episode:
What We Spoke About
🏬 Using AI to unlock credit for small businesses in informal economies
💰 How traditional banking rules inadvertently exclude Africa's informal sector
📊 Building alternative credit assessment systems using real spending patterns
💼 Africa's pension funds as a potential source of startup capital
👩💻 AI creating diverse jobs beyond coding - from data center maintenance to services
🔋 Focusing technology on unsolved problems like cooking energy access for rural women
🧠 The importance of African agency in shaping AI development
❤️ Using AI for routine tasks while enhancing human empathy in leadership
Banking Rules That Exclude 60% of the Population
Maxwell talks about how AI can transform South Africa's township economies
"What we are doing now with generative AI is we're building data sets that enable banks or those in the financial sector to be able to rate the credit worthiness of individuals. Now traditional, most traditional banks, have been using rules and regulations that were developed for more mature economies. That's not how it works on the continent, and we've been inadvertently keeping people on the fringes of the economy because the rules of the game have been rigged against them. With generative AI, we're now beginning to understand how do people actually spend their money, and are they credit worthy? And we are finding that the people who are running SMEs, a lot of them in South Africa, they are finding with banks like Capitec, that their default rates are much lower than people who have more resources."
South Africa's informal economies employ about 60% of the population, yet they've been systematically excluded from formal financial systems. The problem isn't that these small businesses are poor credit risks. The problem is that our credit assessment systems were designed for economies nothing like Africa's. When banks demand a physical address, six months of financial statements, and traditional collateral, they're using metrics that automatically exclude the informal sector.
Maxwell's work with UNDP shows that AI can look at different patterns - mobile money usage, payment histories, business activity metrics - to assess creditworthiness. When you look at this data with local context in mind, what did they find? That SMEs, supposedly "high-risk" borrowers, often have lower default rates than wealthier clients.
Using AI to see patterns invisible to traditional banking could unlock capital for millions of businesses across Africa stuck in the "too small to bank" trap.
The Jobs Question: Beyond Coding
The question of jobs comes up in almost every conversation on AI in Africa and emerging markets, given our growing youth population. Maxwell offered a really pragmatic take:
Listen to the full episode:
He says the real scale comes from the surrounding ecosystem - the technical maintenance, the physical infrastructure, the services built on top of AI.
A great example is Cassava technologies building "Africa's AI factories." These facilities will need entire workforces - not just elite programmers, but technicians, managers, administrative staff, and support personnel. The economic multiplier effect extends far beyond the coding and technical teams.
I was at a conference where one young person said, 'You know, I've played by the rules. I've done everything that you advised me to do. I went to school, I studied and I got my degree. I don't have a job.' So we've started thinking about, how can AI be part of the solution to the jobs problem on the continent? And we are seeing AI and digital, the whole digital space, that actually it has the potential to generate a lot of jobs, and those jobs will come some from people who are gifted, who will be doing the coding, but I don't think that's where a lot of the jobs will be coming from. We'll still need people who do the plumbing, people who will be running the data centers."
Think about how mobile money (Mpesa) created entire new job categories nobody predicted - agents, merchants, service providers. AI will likely generate similarly diverse employment opportunities across skill levels.
Leaders Need to Listen to Young People
Maxwell didn't hesitate to call out leadership gaps in the continent’s AI readiness:
"One of the things I would urge our leaders to do is to listen to young people a lot more. I do not think that there is sufficient understanding at the leadership level of the nature of the problem we're dealing with if we do not get ahead of the AI bandwagon, if I can call it that… The people who understand it better are our young people, and if we listen to them, their problems, what they are trying to solve, and then flip it back to how can AI then be of service to these ambitions, I think we might see different outcomes."
Maxwell sees a fundamental disconnect between African leadership's grasp of AI's transformative potential and the younger generation's intuitive understanding of technological change.
Our Embedded Series From Rwanda
This concludes our special series from the Global AI Summit on Africa in Kigali. I’d like to thank the Rwanda Centre for the Fourth Industrial Revolution for partnering with us on this series, and a major thank you to our wonderful guests! We've brought you six conversations with innovators, policymakers, and thought leaders reshaping the continent's technological future.
Tonee Ndungu about his innovations in African EdTech
Prof. Vukosi Marivate's work building language models for the continent's languages
Rwanda's ICT Minister Paula Ingabire on Rwanda’s AI Blueprint
Nigeria's Minister 'Bosun Tijani on Nigeria’s AIStrategy
Amini AI founder Kate Kallot's mission to ensure Africa keeps control of its data
UNDP’s Maxwell Gomera on unlocking finance for the continent's massive informal sector.
These voices represent Africa's determination to write its own AI future.
We hope you enjoyed this special series. I'd love to hear which insights from our series resonated most with you, and what AI futures you see for the continent.