In our previous blog, we covered the importance of Financial Inclusion and how Fin-Tech has developed a solution with what the underbanked already have: smartphones.
With smartphones, individuals now have the ability to open financial accounts so they can store money, make payments, and transfer between peers – decreasing the number of the unbanked population. In this blog post, there will be a focus on how we plan to achieve various financial inclusion goals through a real use-case example.
The utilization of technology plays a big role in achieving financial inclusion. Specifically, it brought forth e-wallets; a solution that is able to be accessed solely through one’s mobile phone. E-wallets provide an easy way for the unbanked to create and access a transactional account without ever having to visit a physical bank – which is a crucial factor.
A real use-case example that is achieving such feats for the unbanked is M-Pesa; a peer-to-peer money transfer service launched by Kenyan mobile phone operator Safaricom. This collaboration between banking and telecommunication has allowed its users to perform financial transactions all through a SIM card embedded into their mobile phones.
The benefits of introducing M-Pesa as a means to boost financial inclusion were immediate and ever-increasing. Unbanked individuals no longer felt pressured to meet a prerequisite of large deposits, the need to visit a physical bank to open and use an account vanished along with it. Users were now able to experience the liberation of financial connection with a swipe on their mobile phones. Within 5 years of its launch, Kenya had reached 19.5 million mobile money users.
“Through mobile payment services like M-Pesa, the standard of living in Kenya has improved greatly.” – Investopedia on M-Pesa
This e-wallet led to great strides; not only for its users but for the Kenyan economy as well. A great percentage of Kenya’s GDP is known to flow through M-Pesa, a number that is continuing to grow. A study also found that the usage of M-Pesa in rural households in Kenya led to an increase in household income.
Safaricom in its annual sustainability report said its operations sustained 1,013,728 direct and indirect jobs, up from 978,633 the previous year – bucking the trend in corporate Kenya that was awash with layoffs and employment freezes. Furthermore, the growth of M-Pesa and the subsequent success of mobile payment platforms have motivated other Nairobi startups to emerge as well, further adding to Kenya’s economic growth.
Source: Business Daily
The e-wallet world has just begun, with an abundance of potential effects to boost financial inclusion geared towards developing countries. The majority of unbanked adults consist of financially challenged people – specifically women in rural areas. Advocating for the adoption of Fin-Tech services such as M-Pesa for these individuals can have various positive ethical results.
“Countries with high mobile money account ownership have less gender inequality.” – World Bank Organisation
The World Bank also shows statistics of a steady trend of poverty levels decreasing alongside the increase of financial inclusion.
Source: World Bank
Achieving financial inclusion would be world-changing and would make its mark in history: checking off 7 of the 17 UNSustainable Development Goals:
SDG1: No Poverty
SDG2: Zero Hunger
SDG3: Good Health and Well-being
SDG5: Gender Equality
SDG8: Decent Work and Economic Growth
SDG9: Industry, Innovation, and Infrastructure
SDG10: Reduced Inequality
An increasing number of governments and organizations around the world are realizing the importance of integrating new accessible banking and payment services to uphold financial inclusion for their unbanked citizens. Judging by the still-high number of unbanked adults, it can be determined that the potential in this market is very high. By first unlocking a means to access basic financial services, many doors open for a plethora of innovative solutions to sprout: spanning from cross-border transfers, instant microloans, to even insurance. The future belongs to all – one digital breakthrough at a time.