Inclusive finance

In 2006 when Muhammad Yunus won the Nobel Peace Prize for pioneering microfinance, he described his vision as creating banks for the poor, who were largely left out of financial system. Under the sustainable development goals, giving more of the world’s people access to financial services has been identified as a means of accelerating development. 

The UN inter-agency task force on financing for development describes financial inclusion as “the universal access to and usage of a wide range of affordable financial services, provided by a variety of sound, responsible and sustainable financial service providers”. Inclusive finance on the other hand  “strives to enhance access to and usage of financial services for both individuals and MSMEs”.

Application of digital technologies to financial systems has greatly advanced financial inclusion. In the global south, millions of people accessed their first financial services through mobile money- a novel concept where money is held in electronic form in mobile phones. The success of mobile money in inclusive finance has led to spin offs, the fastest growing trend being mobile money credit. This involves data mining of an individual's mobile phone data in order to access micro-credit without collateral. In Kenya, there are reportedly about 200 mobile loan applications that offer micro personal and business loans that one can repay in in short periods of between one day and six months. 

The intersection of finance and digital technologies is not without challenges. From a regulatory perspective, it requires collaboration between financial, communications and competition regulators. This comes with the risk of overregulation or stifling of innovation as service providers experiment with financial models for including the unbanked. 

A key in using personal data for financial inclusion is digital identities. Under the Identity for Development project, the World Bank has been offering technical assistance to low and medium income countries implementing digital identification systems. Biometric identification has been widely adopted to cater for (digitally) illiterate populations. 

The use of big data and artificial intelligence to provide financial services heightens the risk of intrusion into privacy. Financial decisions can be made without human intervention from person’s digital profiles. The balance between inclusive finance and protection of personal autonomy is therefore a policy consideration in regulation of financial inclusion. In addition, as with other big data based industries, there is a tendency towards creating huge technology corporations that become monopolies. In Kenya, for example, concerns are being raised about the crippling effect of outages on the popular mobile money service M-Pesa.


Ms Grace Mutung'u

Associate at the Kenya ICT Action Network (KICTANet)

Ms Grace Mutung’u researches ICT policy in Kenya and Africa, specialising in digital rights, governance, and development. She is an associate at the Kenya ICT Action Network where she carries out ICT policy research and advocacy. Grace is an alumna of DiploFoundation’s Internet governance capacity building courses and holds a Master’s of

Arts in Contemporary Diplomacy from the University of Malta. Grace also provides regular updates on Internet governance developments from Africa for GIP Digital Watch observatory. She lives in Kajiado county Kenya and enjoys local travel and theatre.

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