Financial inclusion – a leg up for the little guys

22 Oct 2015

The Souks, Marrakesh, Morocco

Fintech is an industry that many people, it could be said, view as a narrow, suited, out-of-reach industry that tailors to a niche in society. However, when discussing fintech’s role in financial inclusion, nothing could be further from the truth.


Financial inclusion, for those unaware, is the process whereby technological advances allow greater parts of society into positions that can service finance better.

‘Better’ could be faster avenues of transactions, less obstacles, a clearer understanding or a lower cost of service but, either way, it is improving access for people to transfer money and, therefore, run a business.

Including the masses

This could be as simple as antiquated mobile phones in poorer countries that are now capable of handling minor transactions for a local trader, or a clearly laid out set of affordable credit options for those on lower incomes.

Speaking of the former, the uptake of mobile phones has helped fuel a swelling industry of financially inclusive services, with a weighty figure of $100bn contributed via mobile to the entire sub-Saharan economy last year.

That equates to 5.7pc of the entire region’s economy being passed through mobile phones.

GSMA, an organisation that represents mobile operators worldwide, recently published a report on this area, citing better internet speeds, across better ranges, as a key element to growth.

Silicon Savannah

“Technology innovations have gained momentum in sub-Saharan Africa over the last five years,” according to the GSMA. “Nairobi in Kenya – referred to as ‘Silicon Savannah’ – has been the epicentre of this development.”

It is Kenya that has seen the creation of things like M-Pesa and Ushahidi, which are mobile money and crowdsourcing services.

Incubators and accelerators are also beginning to emerge, with mobile technology playing a real role in socio-economic progression.

Rwanda and Uganda, too, are making strides in this regard. Today it was revealed that Nigerian inclusion is continuing its stark rise, too, with more than 60pc of adults in the country engaging in some form of financial service.

This is driven by banks reaching out to the populace, trying to get them engaged on the ground. That could be as simple as more ATMs or mobile payment support.

Middle East investment

Earlier this month, a major summit in Dubai heard that enhancing financial inclusion should be a policy, with the industry set to grow to $3.25trn by 2020. Investment in African infrastructure would be key to this.

What’s notable about this type of technological development is necessity breeding invention. We don’t need a new Angry Birds game, but some people do need better ways to accept payments.

Of course it’s not simply a scenario for Africa or the Middle East – financial inclusion can play a role closer to home as well.

An Irish issue, too

On RTÉ Radio late last year, reporter Paddy O’Gorman spoke to people who use money lenders, rather than borrow from credit unions or banks. He couldn’t believe how much money people were willing to pay, on a regular basis, just to borrow easy cash.

“Borrow €500, if you pay back €15 per week over 52 weeks you pay back €780, an APR of 56pc,” explained O’Gorman. “When I put people on the spot and ask what they are paying, often they didn’t know.”

There doesn’t seem an era in history where moneylending recedes, with education and availability of affordable credit – inclusion, perhaps – the only ways to challenge this.

That’s before we even look at inclusive insurance, which, rather surprisingly, is booming in Latin America and south and east Asia, according to The Economist.

Many are taking notice

In the UK, a financial inclusion think tank is working on making greater numbers of financial advisers available to those previously outside the net. In Ireland, IPSO is pressing for assistance in other areas.

All these scenarios are driven by access. Access to mobile devices. Access to sufficient internet. Access to information. Access to services.

Considering the vast populations relying on this quadrumvirate of accessibility, is it any wonder that such levels of investment are being poured into the area of financial inclusion?

If, like me, this whole concept is rather new to you, I get the feeling we’ll be hearing a lot more about this industry in future.

Fintech Focus is a week of fresh fintech-focused content hosted on from 19 to 23 October. Stay up to date with the latest stories by subscribing to our news alerts, or follow the hashtag #FintechFocus from @siliconrepublic on Twitter.

Main image via Shutterstock

Gordon Hunt was a journalist with Silicon Republic