Financial inclusion & inclusive finance


According to the World Bank’s definition, financial inclusion means that individuals and businesses have access to useful and affordable financial products and services which meet their needs – transactions, payments, savings, credit and insurance – delivered in a responsible and sustainable way.

  • Financial inclusion has been identified as an enabler for 7 of the 17 Sustainable Development Goals.
  • The G20 committed to advance financial inclusion worldwide and reaffirmed their commitment to implement the G20 High-Level Principles for Digital Financial Inclusion.
  • The World Bank Group considers financial inclusion a key enabler to reduce extreme poverty and boost shared prosperity.
  • Financial inclusion is on the rise. Globally, 515 million adults opened an account at a financial institution or through a mobile money service between 2014 and 2017. This represents a rise from 62 percent to 69 percent of the adult population owning an account. Despite this progress, 1.7 billion adults still remain unbanked and inequalities persist. Women in developing countries remain 9 percentage points less likely than men to have an account. (Global Findex)
  • Mobile money continues to grow in all regions, especially in West Africa. In low-income economies, there are twice as many mobile money accounts than bank accounts per 1,000 adults. (IMF Financial Access Survey)
  • Small and medium-sized businesses are mostly excluded from formal borrowing, despite increasingly having an account at a financial service provider. For instance, in Latin America and the Caribbean, about 90 percent of firms have an account – although only half have a bank loan or line of credit from a bank. (World Bank Enterprise Surveys)

The above findings represent the need to scale up financial inclusion or inclusive finance services, in a bid to offer financial services to the unbanked and underbanked population, especially for budding continents such as Africa.

Financial inclusion services come in many forms and through various offerings in Africa.

Mobile Money service offered by Electronic Money Issuers (EMIs), Banks and Fintechs has become the success story of the vertical. Mobile money technology has become an integral part of the African economy, with many businesses and individuals relying on it for day-to-day transactions. In 2021, for example, the continent’s mobile payments volume ​​increased by 39 percent and reached US$701.4billion – which is almost 70 percent of the total volume worldwide.

By 2025, at least 70 percent of all online transactions will be made with alternative payment methods, according to EBANX’s Beyond Borders study. In this scenario, digital wallets, mobile money and instant payments will rule the market, with cards representing only about 30 percent of online volume.

Aside from mobile money offerings, for instance, which is the key driver of the financial inclusion vertical in Africa, services such as Agency Banking have been rolled out extensively by banks offering various services targetted at the unbanked and underbanked population. Today, transactions such as deposits, withdrawal, funds transfer, account opening etc. have been democratised via agency networks.

Agency Banking is described as a function of a commercial bank that allows them to contract third-party retail entities such as digital financial service providers, supermarkets, pharmacies etc. as Banking Agents. These Agents are then authorised to offer selected products and services on behalf of the Bank.

Agency Banking offers the below benefits to customers:

  • Quick: no travelling to the bank, no queues, fast transaction processing.
  • Affordable: transaction fees are lower than branch fees.
  • Convenient: Agents open longer hours than bank branches, and are close to where customers live, work and shop.

Aside from Agency Banking, which is a key driver of the financial inclusion/inclusive finance vertical, Electronic Money Issuers and Fintechs are driving financial inclusion services in different forms.

Lendtech offerings, which usually focus on micro-credit products, have become a game-changer, roping-in the financially excluded. Key modalities deployed for on-boarding customers before they qualify for loans are based on a credit-scoring model that requires a history of transactions. The pre-qualification steps are a major driver of financial inclusion to the final step of loan disbursement and liquidation of loans.

Fintech products such as ‘Buy Now, Pay Later’ also continue contributing to inclusive finance service delivery.

Like the name suggests, ‘Buy Now, Pay Later’ allows customers make a purchase and receive it immediately but pay for it at a later time, usually over a series of instalments. Fintech-related products such as insuretech, agritech, femtech etc. are all key drivers of the financial inclusion vertical, and have become key offerings for bridging the gap between the banked and unbanked population.

Non-bank financial institutions such as Microfinance, Savings and Credit Cooperative Societies (SACCOs) also play a role in the inclusive finance ecosystem – albeit there is an urgent need to ensure they digitise for the seamless offering of services targetted at the financially excluded.

Over the past years, banks have played and continue to play a significant role in scaling-up the financial inclusion or inclusive finance ecosystem. Aside from offerings such as Agency Banking products which have improved the financial inclusion landscape, other services targetted at youth and women groups have also been identified as contributors to the success of financial inclusion/inclusive finance initiatives.

According to the Centre for Financial Inclusion, constant changes in digitalisation, increased use of artificial intelligence (AI), frequent climate-related disasters and a rapid rise in forced displacement will have a longstanding effect on financial inclusion initiatives.

The inclusive finance community has been grappling with digitalisation and AI for years, but most of the conversations to date have focused on decision-making tools and efficiency improvements. Now, AI is quickly expanding to all facets of financial services – presenting new opportunities and risks for operations and staff.

Climate change, for instance, is increasingly impacting people across the globe, with huge consequences for livelihoods and economies. Against this constant drumbeat of accelerated change, the potential for exclusion is ever-magnified, especially for women, low-income and other marginalised populations.

Innovation is therefore required to ensure the drive of financial inclusion rather than exclusion. In this light, it will be imperative to implement the right policies and ensure that their implementation does not lead to risk exposures. Upcoming policies in Africa, such as open banking for instance, are set to bring changes to the ecosystem and be a catalyst for the growth of financial inclusion or inclusive finance services.

Ultimately, the future of financial inclusion or inclusive finance will be driven by implementing the right policies in line with established objectives, in order to achieve the narrative of bridging the gap between the financially included and financially excluded.

>>>the writer has over ten years of hands-on experience in sales, marketing and operational management of digital financial products and services, with strength in developing strategies and coordinating complex projects within the digital banking, financial inclusion and Fintech ecosystem. He is the Founder of Financial Inclusion Forum Ghana, and can be reached via [email protected]


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