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What is the ideal measure of financial inclusion? Is registration for mobile accounts (wallets) really enough?

We tend to celebrate spectacular access levels to digital financial services such as M-Pesa, yet they are becoming more expensive every day, even without the higher taxes.

According to the Alliance for Financial Inclusion (AFI), the first measure of financial inclusion is access to financial services and products. To achieve meaningful access, we must solve problems related to the cost of depositing and withdrawing electronic funds. This raises the question: Are we serving wine to customers who need blankets?

In order to boost financial inclusion among low-income earners, the products on offer must deliver meaningful value.

A second dimension of financial inclusion is effective demand for services. This may be measured by how often and how conveniently low-income users receive, send and spend their money. This requires an environment where they can affordably spend their money digitally — akin to blankets.

Better policies, and not taxation, would encourage digital payments — such as waiving charges for low-value transactions. Towards the end of 2017, India waived digital transaction charges for values below 2,000 Rupees ($30). The government has been paying the providers on behalf of merchants and customers to encourage usage.

The digital ecosystem is not well developed in many countries, including in East Africa. This prevents users from using digital funds to pay for goods and services. Hence, digital funds must be converted into cash first, often at significant expense. This discourages the poor, particularly micro-entrepreneurs, from accepting digital value.

Merchant services are typically designed for medium-sized enterprises that may already benefit from more advanced banking services at the back-end.

Point-of-sale devices typically exist either at a steep price-point or make overbearing demands on micro-businesses. Users who accept payments this way may not meet stringent requirements such as tax compliance for small and micro-merchants.

Considering that a significant proportion of micro-businesses in developing markets operate informally, merchant services designed for them must be simple and affordable.


The third dimension of financial inclusion is quality of digital financial products, and is at best, still nascent for low-income consumers. Efforts have unlocked more financial services for middle-income earners, which is the wine from our analogy. But wine is not the best sustenance for microbusiness.

The swarm of digital savings and credit products that have invaded developing markets offering easily accessible loans is a good example of this. Unfortunately, the results bear a striking resemblance to microfinance in its early years.

As highlighted in MicroSave’s recent research in Kenya, the proliferation of digital credit products does not yet offer low-income borrowers real value.

In contrast to the celebration of digital transactions and consumer loans, there is little discussion around or evidence of digital micro savings. There is a need for real design focus as fintech is irrelevant for most low-income earners, as providers have made little effort to tailor interfaces or use-cases for this market.

The vast majority of fintech providers develop solutions for the affluent and the middle classes. This makes sense — these segments have the money and connectivity to use the solutions. Furthermore, fintech developers typically come from this background. They, therefore, understand the challenges this segment faces and the opportunities it provides.

By contrast, when and if fintech developers focus on the low-income segments, they tend to create solutions and then look for problems to solve in preference to understanding the needs of the poor first.

The fourth dimension of financial inclusion is impact. Digital financial services have had an impact on the lives of users and non-users, including through direct and indirect employment. But we are yet to solve a number of fundamental design issues with these products.

A few exemplary outfits such as Twiga Foods have taken the right approach to understanding the low-income segment and solving their financial and social inclusion issues. Real value, as Twiga has shown, can go beyond access to formal financial accounts to solve day-to-day problems like access to markets to buy and sell products.

Such success needs to cascade further down the consumer income brackets.

Improving access to financial products, usage of the services, and quality of those products and services for the lower-income segment requires significant investments from financial service providers, and especially fintechs, if they wish to look beyond offering traditional one-size-fits-all products.

Edward Obiko is a consultant in digital financial services at Microsave.