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Financial Inclusion for the Unbanked

Authored By : Joshua Ndolo


World Bank reports that there are currently slightly over 2 billion unbanked people who can’t access the simplest of financial services. The report also noted the emergence of mobile banking that has allowed majority of these unbanked people to get access to micro-loans and process daily cashless transactions however, this solution is not a panacea for the unbanked. Mobile banking has become very pivotal in the processing of domestic remittances in recent times after the introduction of M-Pesa by Safaricom in Kenya in 2007.

M-Pesa seems to be the pioneer of a breakthrough technology in financial inclusion. This burgeoning innovation has led to parallel innovations within the fintech sector in Kenya such as M-Kopa, M-Tiba and M-Akiba just to name a few. This attempt at financial inclusion has been relatively successful however; majority of its users still remain unbanked. This is due to a lack of required documentation and the banks reluctance to serve poor customers who are not profitable in the marketplace on a standalone basis therefore no attempts have been made to reach them at scale.


It is imperative to note that to currently provide a superior service to the end user as a Digital Financial Services provider you have to be able to facilitate financial services that are in line with the demands of the digital economy. These are push payments and same day settlement of financial transactions, immediate funds transfer, and open loop relationships between providers, all while addressing fraud, security, Know your Client (KYC) and Anti-money laundering (AML) regulation. You may also find it wise to build upon existing infrastructure to serve majority of the unbanked. However, for the solution to be feasible and attractive for banks it must also exist simultaneously and in parallel with the current bank centric payment system that serve consumers with higher incomes.

Access to financial services must go beyond only mobile money wallets and include major financial institutions that have more capital and product offerings that can serve the large under-banked population of the developing world. Access to accounts and to savings and payment mechanisms increases savings, empowers women, and boosts productive investment and consumption. The access can aid in the processing of financial transactions in both the private and public sector. From issuing letters of credit to paying utility bills and government transfers will all be efficient with a soultion that finds a way to on-board majority of this unbanked population.

However, as with any technology and innovations challenges are not few and far in between. Investments in the payment and financial infrastructure to allow easy collection and secure storage of data is only one of the challenges. An educational process to ensure recipients understand how accounts can be accessed cannot be neglected. You will also have to take major steps to guarantee a reliable, consistent digital payments experience, and with the different linguistic groups in the developing world the solution will have to limit the need for high levels of literacy to navigate the application. This innovation is also only viable if the method is as easy, affordable, convenient and secure as doing so in cash otherwise cash transfers will still be the preferred choice.


The World Bank reports that 64 million (12%) adults in Sub-Saharan Africa have mobile money accounts while globally only 1% globally say they have a mobile money account. The revolutionary mobile banking phenomenon seems to have gained massive adoption surprisingly, in Sub-Saharan Africa while most of the OECD and the developed countries have struggled to keep up pace with this new burgeoning innovation. The Global south must find an innovative solution to leapfrog financial infrastructure to compete with their Western counterparts and innovate using existing mobile banking infrastructure to enable financial inclusion.

Interoperable technologies that allow account ownership to move from having an account through a mobile money provider to a financial institution will also serve this use case very efficiently(e.g. Cloud computing). Mobile money is already very prominent in Sub-Saharan Africa as all 13 countries around the world where the share of adults with a mobile account is 10% or more are in Sub- Saharan Africa.

More adults also have a mobile account than an account at a financial institution and the system put in place will have to allow for easy integration of the different protocols. Surprisingly, in the poorest 40% of households in developing countries those with a financial account at a financial institution fell by 17 percentage points on average between 2011-2014 thus demonstrating either the inability or reluctance of financial institutions to provide financial services to the poor households. Financial products are also not provided to the majority of the poor who are unbanked and predominantly reside in rural areas whereas the most common way to withdraw that is ATMs are almost non-existent.

Remittances have been a source of capital inflow with World Bank reporting a $36 billion remittance inflow in 2016. Majority of these transactions are conducted in cash and a percentage of those are conducted over the counter (OTC). OTC is when the senders and receivers did not use their own accounts but instead transacted in cash at the service provider, which transferred electronically on their behalf. In Sub-Saharan Africa 14 %( 270 million) of those without an account send or receive domestic remittances only in cash. Additionally, of the unbanked population, 5 %( 100 million) conduct their transactions over the counter. Both of these processes are inefficient and hard to track with AML and KYC done entirely paper based and manually.

Any Small Medium Enterprise (SME) and majority of businesses in developing economies also requires credit but the unsustainable micro-loans is their only option. We find this method unsustainable for a business to scale up and provide a consistent source of income for any entrepreneur. However, the risks involved with providing loans to undocumented, poor owners of SME’s seems too high for the majority of the financial institutions. Additionally, in developing economies, 29%of adults reported borrowing from family and friends, while only 9% have borrowed from a financial institution.


To take advantage of this increase of capital inflow to the developing world from mainly those in developed countries the developing world must find a solution using existing technologies that will introduce a large population in emerging economies to the global economy. This technology should be easy to use, costs must be significantly lower and the app must be easy to integrate with the majority of phones in the market.


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