Expanding Financial Access in MexicoA good indicator of a country’s overall inequality is the percentage of the population that has access to financial services. Countries lacking financial inclusion suffer from decreased growth and increased income inequality. One of the countries with the poorest financial inclusion for income classification is Mexico. Few Mexican citizens have financial resources at their disposal. This disparity perpetuates rampant economic inequalities in the country’s most impoverished regions. The government has implemented several programs in the past five years aimed at expanding financial access in Mexico.

The Problem

Mexico is a nation burdened by inequalities. With a Gini coefficient hovering around 0.5, Mexico is one of the most unequal upper-middle-income countries in the world. Contributing to the high income and wealth inequality are the massive gaps in access to financial services.

There is an undeniable correlation between financial access and inequality. For example, countries with extensive access to financial services broaden the economic opportunities for both individuals and firms. The World Bank’s Systematic Country Diagnostic for Mexico in 2019 found that expanding financial inclusion can significantly increase income for low-income individuals and populations.

The report also found that low financial inclusion negatively impacts economic inequality, productivity, growth and employment of micro, small and medium enterprises (MSMEs). Mexico is a stark example of a country with low financial inclusion. Only 37% of Mexican adults have bank accounts, which is a much lower number than the average percentage for upper-middle-income countries.

The poor level of financial access in Mexico sinks even lower for rural citizens. Although more than 20% of Mexico’s population live in rural areas, only 7% of rural residents borrowed from a financial institution in 2016. Another demographic hindered by financial access inequality is MSMEs, which provide about 70% of the employment in Mexico. Just 11% of these enterprises use bank credit due to the cost and access issues.

The Programs

To address the troubling lack of financial access in Mexico, the nation’s authorities have introduced several reform programs in the past five years. The Expanding Rural Finance Project received supplemental support from the World Bank. This allowed for greater oversight and more available resources. The Expanding Rural Finance Project authorized 192 participating financial intermediaries to supply 174,000 credits to 140,000 rural producers and MSMEs between 2016 and 2020. The average loans of $1,850 have helped ease rural poverty by providing funds for workers and employers in the area. Furthermore, more than 80% of these credit recipients were women, exceeding the set target of 60%.

In addition, the Financial Inclusion DPF, supports a comprehensive legal and regulatory framework for Fintech in Mexico. Financial institutions that adopt Fintech use technology to enhance financial services and make banking more accessible and effortless. Automated transfers, mobile payments and flexible loan management are some of the many benefits offered by Fintech-associated institutions. The newly implemented framework in Mexico is groundbreaking in the global picture and will increase financial inclusion by expanding convenient financial services.

The Results

Mexico’s programs addressing inequality in financial access have shown several signs of progress. Between 2016 and 2020, the Expanding Rural Finance Project widened financial access in Mexico for impoverished citizens, rural populations, MSMEs, women and youth. It provided hundreds of thousands of credits extending to participating producers. The project particularly helped Mexican workers on the disadvantaged end of income inequality. Of people who received credits, 17% live in communities classified as marginalized by the National Council for Population. The program distributed approximately 76% of all sub-loans in the Mexican states with the highest levels of poverty. About 12% of credit recipients had never borrowed from formal financial institutions. As gender inequality permeates income inequality, 81% of credit recipients from the project were women.

The Mexico Financial Inclusion DPF program also contributed to the expansion of financial access in Mexico. Only slightly more than a year after the program’s initiation, 93 businesses have already requested authorization to operate as Fintech institutions. About 59 of the businesses are electronic payment fund institutions and 34 are crowdfunding institutions. The quick adjustment to Fintech suggests an overarching trend for Mexican enterprises. Many want to benefit from the ease of access and innovation promoted by the Fintech model. The transition will benefit non-financial enterprises and average citizens as well. This is because the Fintech framework provides for faster payment transfers, easier loan processes and more convenient services available for remote residents.

Looking Ahead

Mexico’s glaring discrepancies in financial inclusion have supported ongoing economic inequalities for decades. However, programs administered by the government in the past several years have made strides in the right direction as financial access is widening for disenfranchised groups all over the country. If Mexico continues to expand financial access through credit programs and Fintech innovation, the country will likely see a decrease in economic inequality and reap the benefits of a more egalitarian society.

Calvin Melloh
Photo: Flickr

gender wage gap In “one of the most substantial moments for gender equality in New Zealand in decades,” the Equal Pay Amendment Bill was passed by the New Zealand parliament and took effect in November of 2020. This legislation intends to address pay equity, advance previous work toward pay equality and address the gender wage gap. Rather than just addressing gaps between men and women’s wages in the same professions, this bill targets differences between wages in female-dominated professions as compared to male-dominated ones.

How Equal Pay Addresses Poverty

Addressing gender wage gaps is key to fighting global poverty for numerous reasons. Not only do women tend to be in lower-paying occupations, but they also lack employment opportunities. Females are also tasked with two to 10 times the care work (housekeeping, childcare, etc.) than men. Research in developing countries shows that women lose out on $9 trillion annually due to economic inequality. As the number of women in paid work increased between 2000 and 2010 in Latin America, overall poverty fell by approximately 30%.

To truly appreciate this victory in fighting the gender wage gap in New Zealand, we can take a brief journey through the nation’s history of work toward equal pay.

New Zealand’s Work Towards Equal Pay

New Zealand National Tramways Union afforded equal pay to women in 1942. As women entered the workforce during World War II due to the shortage of male workers, the New Zealand National Tramways Union insisted women received the same pay as men. It became the nation’s first union to win equal pay for females working as tram conductors.

Almost two decades later, The Government Service Equal Pay Act was passed in 1960, thanks in part to the lobbying of the Council for Equal Pay and Opportunity (CEPO). The New Zealand government began to investigate equal pay in the country more holistically. The findings of that investigation led to the Equal Pay Act of 1972. This act gave women in both “private and public sectors” equal pay opportunities. By 1985, the gender wage gap diminished by 22%.

During that time in 1957, the collaboration among multiple New Zealand unions including the Māori Women’s Welfare League and the National Council of Women formed CEPO. The group began advocating for equal pay through raising awareness and educating people, political lobbying and more. CEPO was then revived in 1986 as the Coalition for Equal Value, Equal Pay and began work to disrupt male-dominated professions and fight for truly equitable pay for all New Zealanders.

In another effort to move the country toward pay equity as opposed to equality, the New Zealand Government formed the Joint Working Group on Pay Equity Principles (JWG). The JWG developed principles and formal processes through which the government would field pay equity claims.

National Organisation for Women

One of the more structured groups of the women’s liberation movement in New Zealand was modeled after the National Organisation for Women in the United States. Founded in 1972 New Zealand’s National Organisation for Women (NOW) fought not just against the gender wage gap, but for gender equality in all areas of life. This includes legal protections.

Unfortunately, the organization in New Zealand didn’t have the same impact that it did in the U.S. so members decided to help in different ways. Many feminists took to community projects or attempted to tackle the gender wage gap in the corporate world.

New Zealand ranks 6th place in the World Economic Forum’s Global Gender Gap Report for 2020. The Equal Pay Amendment Bill is not only an important step toward eliminating the gender wage gap in New Zealand but a great step toward narrowing gender gaps across multiple national benchmarks. This includes economic, educational, health, or political areas.

Despite a three-year stall in the nation’s gender pay gap, the New Zealand government’s continued focus on equal pay for work of equal value is bound to chip away at that gap and foster poverty reduction.

– Amy Perkins
Photo: Flickr

Branch App The world of financial technology has a lot to offer low- and middle-income countries. Financial technology is essential to accelerate poverty reduction and enhance the growth and development of developing nations. One such innovation in financial technology is a mobile lending app called Branch. The Branch app has tapped into Africa’s emerging markets and the results are inspiring.

The Branch App

Branch offers mobile financial services that are accessible via smartphone. The advantage of this technology is that the app bypasses some of the restrictions that come with traditional institutions. Branch’s goal is to make money lending and credit building opportunities accessible to all people, which the company believes will “open new channels for personal empowerment and financial growth.”

Currently, Branch serves Kenya, Tanzania, Nigeria and India. Its user demographic targets members of the middle class in areas with emerging markets. Branch recognizes that people in these areas are often underserved and is dedicated to servicing them with customer-first products.

The People Behind the Project

Matt Flannery and Daniel Jung co-founded Branch in 2015. Flannery, the CEO, previously developed and led Kiva, a nonprofit microfinancing company. Flannery then set out to create a “branchless bank” for Africa, resulting in a financial app that would provide accessible services to low- and middle-income customers. Flannery is a Skoll Awardee and Ashoka Fellow, making him a highly acclaimed social entrepreneur. He was also part of Fortune magazine’s “Top 40 under 40” list in 2009.

Recently, in March 2021, Branch added a new member to its team: Dayo Ademola, who will oversee Branch’s Nigeria operations. Ademola has more than 15 years of experience working with consumer-centric companies and banking institutions. She has former experience with global fintech and much of her efforts in the field have been toward improving financial inclusion in Nigeria. Ademola is particularly excited about continuing this mission and working with Branch to help Nigerians simplify their relationship with finances. Fortunately, Branch provides a successful avenue to do that.

Branch’s Success

Since its launch in 2015, Branch has made significant advancements toward improving banking accessibility in Africa. Since its establishment, Branch has facilitated $350 million in loans. This is a significant accomplishment since Branch operates in countries with new markets and limited resources. Fintech investments in Nigeria have grown nearly 200% in the past three years, showing that these emerging markets are increasingly recognized as valuable.

Flannery and others see the African markets for the significant opportunities they present. Fintechs, especially those with a background in social entrepreneurship, have the power to transform African markets and improve social and economic stability in these countries. As it stands, Branch has more than four million customers and has issued more than 21 million loans in the countries it operates in. If the  Branch app continues to spread across Africa and other developing nations, Branch has the potential to vastly improve financial inclusivity and lift millions of people out of poverty by providing financial solutions that cater to those with minimal resources.

Samantha Silveira
Photo: Flickr

Mobile Government
Worldwide, more people have access to mobile phones than to proper sanitation. As crazy as it sounds, mobile phone access can be advantageous. The International Telecommunication Union estimates that out of the 7 billion people on earth, around 6.5 billion have access to a mobile phone. As of 2018, 100% of the population in low- and middle-income countries had access to mobile phones, whereas 55% of the population in low-income countries owned a mobile phone. The pervasiveness of mobile technology can help build expansive government networks. Mobile Government (mGov) could provide citizens and businesses with extended benefits and stir up overall economic growth.

Since the COVID-19 pandemic began, several countries with pre-established digital governments have launched public services that people can access via mobile phones. The introduction of these online services could be a blessing for developing countries, where the communication between the government and the residents is almost nonexistent.

What is a Mobile Government (mGov)?

Mobile Government is a government-led platform that uses mobile technology to increase active participation in government operations while offering several government services and applications that individuals can access electronically. It provides quick and easy access to integrated data and location-based services and helps to empower citizens. Here are different ways Mobile Government can make a positive impact.

Increased Financial Inclusion

As per World Bank reports, by 2018, the number of people holding bank accounts shrank from 2.5 billion to 1.2 billion in just seven years. As a result, less than 50% of the adult population did not have a link to traditional banking systems. Therefore, to increase the financial inclusion of the citizens, governments all across the globe are undertaking initiatives to encourage and support the development of financial technologies.

In India, Jio, an Indian telecommunications company, in collaboration with the government, stirred a socio-economic revolution by providing subsidized 4G service to more than 200 million subscribers in under two years. Likewise, the mobile currency has transformed the Kenyan economy. More than three-fourths of the population have gained access to mobile wallets (M-Pesa) and can participate in financial transactions.

Similarly, online services can be useful in distributing money among the poor since only a small fraction have operational bank accounts. About 1.2 billion users across 95 countries use mobile money. Many countries use mobile payment services to provide monetary assistance through Government-to-person (G2P) payment systems.

In Bangladesh, the government is providing 5 million families with economic support by transferring money online, ensuring that families have a stable recovery from the COVID-19 pandemic. The usage of mobile has helped reduce corruption dramatically, improve access to financial services and boost participation in economic activities.

Better Access to Essential Services

Mobiles have made access to health, education, agriculture and other services trouble-free for the general public. In the same way, mobile phones are going toward addressing serious health problems. Increased communication can bring awareness about safe drinking water, birth control, maternal health and malnutrition amongst many others.

Globally, 774 million people are unable to read or write. Out of that group, 123 million are youth. One can frequently trace illiteracy to a lack of books. Studies have revealed a positive correlation between high illiteracy rates and a shortage of books. The majority of people in sub-Saharan African do not have access to books and the schools in the region rarely do anything about it. As a solution, several developing countries have replaced physical texts with online books, allowing a larger proportion to access books. For instance, educators in schools in countries like Zimbabwe, Uganda, Nigeria and Pakistan read stories to the children from mobile phones.

Mobile phones can also combat dengue fever in Pakistan. Sanitary workers use smartphones to send geo-tagged images of swamps to the central health experts. Afterward, health experts monitor the images.

The agriculture sector in Ethiopia and Uganda also utilizes mobile phones in a significant way. It employs mobile phones to deliver early alerts on droughts, food shortages, pests and weather-related calamities.

Enables Social Accountability

The governments in developing countries are using mobile technology to promote the use of SMS texts to enhance social accountability among the citizens. A study that took place in 46 African countries unearthed a correlation between high mobile penetration and low corruption rates.

In several developing countries, citizens receive encouragement to notify their governments of any matters that require addressing. In Pakistan, the Director-General of the Passport Office sends a message to the visitors inquiring about any bribery encounters or any other issues.

Mobile Government can be a powerful tool, useful in extending access to existing services, developing further innovative, inclusive services and increasing citizen participation in all realms of the public sector. Mobiles can dynamically foster civic engagement, facilitate transparent democracy, reform the outdated educational systems and create advanced healthcare infrastructure in developing countries. The use of mobile technology can tackle the growing digital divide between low-income and high-income countries. Hopefully, this will uplift the economies and literacy rates in developing countries.

– Prathamesh Mantri
Photo: Flickr

Blockchain in Southeast Asia
Early 2021 saw the formation of a new partnership between the San Diego-based blockchain platform, Solana, and the Vietnam-based investment firm, Coin98 Ventures. Together, they plan to provide a grant of $100,000 and technical, marketing and community support for Southeast Asian startups via the Solana platform. In total, the development fund will be worth $5 million. Solana’s development fund is among a trend of growing interest from private companies along with increasing government support across the region, now seeing supporting blockchain technology as a practical part of a development strategy. As a result, blockchain in Southeast Asia is increasing.

What is a Blockchain?

At its core, blockchain is an innovative database. Unlike the traditional form of storing data in a table format, blockchain operates as its name suggests: as a chain of blocks. Each block contains data, and each new inputted information adds a new block to the chain. When a new block is added, it undergoes time-stamping and encryption.

Essentially, blockchain software provides a secure and decentralized form of storing data, particularly financial data. The software operates on an algorithm to automatically record and encrypt transactions without a third party’s costly support. As a result, blockchain decentralizes financial transactions while also making them cheaper.

Blockchain: An Expanding Market

The blockchain market comprises one of the fastest-growing in the world. In 2020, the market size was $3 billion. The Markets and Markets firm predicts it to reach $39.7 billion by 2025. Moreover, its Compound Annual Growth Rate is a stunning 67.3%.

One can partly explain this growth rate by increasing access to the internet and e-commerce in the world. Access to the internet has increased rapidly. In 2000, about 413 million people had an internet connection; by 2016, this number jumped to 3.4 billion.

The Benefits of Blockchain

Billions of people still experience exclusion from financial tools and cannot use anything other than physical cash for transactions. As of 2017, 1.7 billion people across the globe remained unbanked. However, by sidestepping financial institutions, blockchain decentralizes banking and opens up possibilities for many locked out of traditional financial tools such as transferring and storing digital currency and investing.

Cutting out the middleman reduces the fees involved in transactions, which often run high. This is particularly important for migrant workers who pay high transaction rates to transfer money back home to their families. For example, in 2018, Western Union reported a $5.5 billion profit in fees from the money transfers in the same year.

Additionally, blockchain reduces the cost of doing business. It cuts overhead costs by lowering transaction fees, upgrading analytical tools to understand the market/customer needs and protecting and storing data more efficiently. For instance, by the year 2024, expectations have determined that blockchain will save the food industry $31 billion. And in early 2020, Cargill and Agrocorp and partners used a blockchain platform to shorten a U.S.-Indonesia wheat transaction from a month to a mere five days.

Blockchain in Southeast Asia

Perhaps more than any other region, Southeast Asia can benefit most from blockchain’s developmental potential. As a region, it has a high internet penetration rate of 58%. Moreover, it is an underbanked region with a shocking 73% of its population still unbanked in 2017. Additionally, Southeast Asia has a large migrant worker population around the globe who would benefit from blockchain. In 2017, the International Labor Organization estimated that of the migrant worker population, 20.2 million originate from Southeast Asia. Finally, as a manufacturing hub with a large e-commerce presence, blockchain technology plays an essential role in facilitating online shopping and supply-chain tracking and data storage.

Appropriately, Southeast Asian governments have supported this nascent technology. For starters, the Association for Southeast Asian Nations (ASEAN) has embraced the technology in its Economic Community 2025 Strategic Action Plan for Financial Integration. The organization claims that it will “promote innovative financial inclusion via digital platforms.”

Likewise, countries like Thailand, Malaysia, Singapore, Vietnam and the Philippines have invested in blockchain education programs to promote its development. Singapore, for instance, launched a $9 million program, the Singapore Blockchain Innovation Program, to facilitate and research blockchain applications. Vietnam, for its part, has transitioned the storage of government education records to blockchain technology and has plans to use block-chain infrastructure to transition Ho Chi Minh city to a smart city.

Southeast Asian Blockchain Companies

Through this support, hundreds of blockchain start-ups are rapidly growing across the region, utilizing blockchain in diverse ways that cut across different sectors. Some of the significant blockchain companies that illustrate its diversity are:

  • Electrify (Singapore): Founded in 2017 to introduce “trans-active energy platforms that will democratize access to clean energy across the Asia Pacific.”
  • Pundi-X (Indonesia): Partners with retailers worldwide to install its XPOS – a blockchain-powered point-of-sale device that allows retailers to accept cryptocurrency.
  • LuxTag (Malaysia): Utilizes blockchain to verify the authenticity of luxury items.
  • HARA (Indonesia): Founded in 2015, it relies on its blockchain software to provide data exchange for the food and agriculture sectors.

Blockchain’s potential as a developmental force is palpable. The growing blockchain market in Southeast Asia is vital for development in the region. It gives many people access to financial tools who otherwise would not have it while also easing business flow across industries. These factors have propelled blockchain in Southeast Asia as a critical tool in its development.

– Vincenzo Caporale
Photo: Wikipedia Commons

Bank Access in Afghanistan
Bank access in Afghanistan is a step toward financial inclusion for the rural poor. According to Jan Chipchase and Panthea Lee’s research on the nascent mobile-phone-based financial services that were available in Afghanistan in 2010, theft and bribery plagued the banking system. Person-to-person transfers were not widely available until the creation of the M-Paisa mobile money transfer service. Roshan launched the M-Paisa mobile money transfer banking in Kabul in 2010 when 83 bank accounts existed per 1,000. Through this service and other programs, improvements in the availability and quality of bank access in Afghanistan have been a major contributor towards reducing income inequality and poverty.

Gradually Improving Access

With limited credit available, Afghans were hiding money at home under the mattress, and forms of money ranged anywhere from banknotes to gold jewelry to livestock. The rural poor did not trust the banking system, and the use of the word “Paisa” helped to make the service seem more trustworthy, although it posed access challenges for the rural poor. By 2014, banking access improved for 40% of Afghanistan’s population, with a 7% increase in the availability of financial services. However, access to credit was still out of reach to the rural poor as most of the banks were located in Kabul province, an urban area. This made it more difficult for rural people to get loans to start businesses.

In 2015, a project to bolster bank access in Afghanistan made a step toward financial inclusion for the rural poor with the start of the Afghan Rural Enterprise Development. The project sought to integrate rural agricultural communities into the economy. Employment opportunities emerged in poor rural villages by the creation of savings and enterprise groups along with loan associations. According to The World Bank, the rural poor received assistance in building their own businesses, which increased the value of trade, ensuring new opportunities. This created access to credit through internal lending, which focused on small and medium-sized enterprises, or SMEs. This program was so important because it targeted people who traditionally could not access the banking system.

The Reason it Matter

As of November 2019, more data exists to support the successes of bank access in Afghanistan that The United Nations Economic and Social Commission for Asia and the Pacific published. The goal of the report was to assess the status of financial inclusion for all adults in Afghanistan age 15 to 64 including women. Financial inclusion in a “broad range of quality and affordable financial services including but not limited to account, payment, saving, and credit provided by formal financial institutions in a fair, transparent, and sustainable manner.” According to this presentation, 15,000 bank accounts exist per 100,000 adults, and in 2021, projections determined them to be 20,000. Expectations have determined that mobile money accounts and accounts that women hold will also grow during the same period. Although the success of banking the unbanked in Afghanistan has been slow, steady progress has occurred toward financial inclusion of the rural poor and women.

It is clear that bank access in Afghanistan and credit is allowing the rural poor in Afghanistan to do better financially. However, according to the World Bank Afghanistan, “the COVID-19 crisis will have a serious and sustained impact on Afghanistan’s economy. Recovery is expected to take several years, with new investment constrained by political uncertainties, continued insecurity, and questions around ongoing international support.” It is important to maintain international support for improving banking access to preserve opportunities for Afghanistan’s rural population.

Kathleen Shepherd-Segura
Photo: Flickr

Brightlife Brings Financial Inclusion
BrightLife is a program from FINCA, the microfinance organization. The program is a Uganda-based, social enterprise that pairs access to finance with access to energy. This allows for connections to financial inclusion for the “unbanked.” BrightLife brings financial inclusion to Ugandans and clean energy products to poor and impoverished areas through multiple initiatives and products. BrightLife ensures financial inclusion and wellbeing for those areas. People pay for their BrightLife products with a system called PAYGO. This allows people to pay for only the electricity they use as they go. This then allows BrightLife to build credit profiles for “unbanked” people and connect them with FINCA.

The Situation in Uganda

There are currently 1 billion people in the world living without electricity and 73% of the Ugandan population does not have access to electricity. People living without electricity must often use insufficient fuels to heat, light and energize their homes. This can then lead to indoor air pollution causing premature death. These energy uses are also dangerous in homes since they can cause fires.

Lack of energy in any area can cause a cycle of poverty since so many people cannot access the most basic necessities. This is why BrightLife brings financial inclusion to Ugandans. As FINCA states, the program “provides last-mile distribution and end-user financing for products that create healthier and safer homes, increase productivity, reduce household expenses and provide additional income-generating opportunities.”

BrightLife’s Impact

To date, BrightLife has impacted over 202,000 lives with clean energy. By providing education, distribution, financing and after-sale support, BrightLife is able to bring clean energy products like home appliances to people who cannot acquire them. However, access to energy is just the first step in FINCA’s BrightLife enterprise.

BrightLife announced a new product called “Prosper” in March 2019 to further its impact on the Ugandan people. Prosper is an initiative that helps Ugandans access the clean energy that BrightLife provides. Then, Prosper helps people transition from unbanked to FINCA Uganda where they can access savings and credit opportunities, increasing their financial inclusion.

A Better Tomorrow with BrightLife

Now, BrightLife is working to better understand the solar energy needs of their clients and is positioning itself to serve communities more efficiently. Through COVID-19, it has been able to grant access to solar lanterns and give students the ability to still get the education they need from home. Since BrightLife brings financial inclusion to Ugandans, it also won the Smart Communities Coalition Innovation Fund grant. As USAID reported, this grant will allow for the development of “a solar-powered hatchery” and small-scale solar systems used for poultry farming in Kiryandongo, Uganda.

– Grace Aprahamian
Photo: Flickr

digital finance sourcesIt is no secret that cash is becoming more and more obsolete in developed nations. Venmo, Cash App, Square, PayPal, Zelle and Google Pay — none of these popular money transfer services require a physical transfer of cash. The onslaught of a global pandemic has only accelerated the shift to cashless transactions amid efforts to minimize physical contact. China is rapidly moving forward with central bank digital currency (CBDC) trial rollouts while the United States Federal Reserve is conducting ongoing research to potentially develop its own CBDC, a “Digital Dollar.” In lower-income nations, digital finance sources have the potential to transform economies.

Digital Finance in Developing Countries

In developed countries, the notion of an entirely cashless society is not far out of reach. However, the story is very different in developing nations. Many individuals are excluded from participating in even the most basic financial systems and instead rely primarily on physical cash. As of 2017, about 1.7 million adults globally were “unbanked.” This means they lacked any account with a financial institution or mobile money provider. This is nearly one-fourth of the world’s population.

Some of the most commonly cited barriers to account ownership include insufficient funds and inaccessible banking services. Virtually all unbanked adults live in developing economies, with women over-represented among this cohort. Digital finance services delivered via mobile phones, the internet or cards, function as a means of including these unbanked populations. The benefits of digital financial inclusion are prolific.

Digitizing Financial Inclusion

The strong link between financial inclusion and a wide array of global development goals is becoming increasingly clear. Significantly, seven of the 17 U.N. Sustainable Development Goals for 2030 explicitly mention financial inclusion as central to achieving these objectives.

Digital technologies offer financial services at lower costs, fostering opportunities for large-scale inclusion by enabling institutions to serve lower-income customers profitably. Such broadened financial access can sustainably transform emerging economies. A 2016 report by the McKinsey Global Institute estimated that digital finance alone could boost the annual GDP of all emerging economies by $3.7 trillion by 2025 due to productivity gains of businesses and governments.

Digital services include those such as M-PESA, a mobile phone-based transfer, payment and micro-financing service. Mobile money has lifted an estimated 196,000 Kenyan households out of extreme poverty from 2008 to 2016.

The Benefits of Digital Finance Sources

  • Increased Security: Digital footprints provide greater transparency and hold individuals and institutions accountable, reducing vulnerability to fraud and corruption.
  • Time and Cost Savings: Digital services are quicker and more efficient, lowering costs for both providers and consumers.
  • Financial Inclusion: The lower costs and convenience of mobile services make them accessible to more people, including those living in remote or rural areas.
  • Women’s Empowerment: Women with access to financial services like loans, savings accounts and mobile payments can achieve independence. It has been found that women with digital savings accounts also spend more on development endeavors like education.
  • Higher Tax Revenues: Digital finance has been proven to increase tax-paying compliance, and in turn, government revenues.

Given the wide-ranging benefits of digital finance sources, it is clear why many organizations are attempting to accelerate the transition from cash-based to digitized economies in the developing world. A growing number of groups such as the U.N.-based Better Than Cash Alliance are working to extend the reach of financial services by using digital technologies to go where physical banks cannot, bringing access to mobile money, savings accounts, credit and insurance to the under and unbanked. Digital finance is more than a trend of modern societies. It is a vital tool for achieving inclusive and sustainable development in emerging economies that are still far from being cashless.

Margot Seidel
Photo: Flickr

Financial inclusion can fight povertyRoughly 1.7 billion adults around the world are unbanked and most unbanked adults live in developing countries. Unbanked people have limited political, economic and social power and influence. For roughly half of the world’s unbanked who come from the most impoverished 40% of households in their economies, inaccessible financial services compound problems of poverty. Financial inclusion can fight poverty as it opens doors for people to improve their lives. The pace of technological advancement around the world is bringing universal access to financial services closer to fruition.

The Global Unbanked

Unbanked people are not connected to any type of financial institution. The most commonly cited reasons for being unbanked are not having enough money, account expenses, the distance of financial services and insufficient documentation. Nearly half of the unbanked population falls into just seven economies. The highest numbers of unbanked people are in China and India. It can be clearly noted that banking and poverty are closely related.

“Financial tools for savings, insurance, payments and credit are a vital need for poor people, especially women, and can help families and whole communities lift themselves out of poverty,” says Melinda Gates. Without a bank account, people cannot sufficiently save and the cash is not well protected. The digital economy also has the benefit of keeping a clear record of financial activities, which banks can use when underwriting loans. Loans are among the financial tools that are essential to financial growth and stability.

The Gender Gap

Women make up the majority of the unbanked population in most developing countries. Women may face deepened or additional gender-based barriers to account ownership, rooted in financial institutions, governments or society.

Financial institutions often lack products and policies that are gender-inclusive. For instance, women may find it difficult to obtain the identification or the assets needed to open and maintain an account, sometimes due to government-enforced barriers. Additionally, banking-related expenses are also a burden for women looking to enter the formal economy. Finally, the responsibility of unpaid household labor, along with barriers to education, keep many women from earning enough money to access financial services.

The Societal Roles of Women

Women may earn sufficient money but could be part of society that does not allow for them to connect to a financial institution.

For instance, the tradition of men being the head of household and in control of the finances leaves some women with little to no influence in matters of money. Approximately one in 10 women in developing countries are not involved in spending decisions involving their own earnings.

Women’s Empowerment for Poverty Reduction

Women must be part of financial inclusion efforts as they are integral to fighting poverty. Bill Gates explains that women are most likely to be behind the decisions that benefit the family. More women-led businesses and reduced inequalities are ways that an emphasis on financial inclusion for women can further a nation’s development.

Financial Inclusion Using Fintech

An emerging industry is making strides in financial inclusion. Financial technology (fintech) can be described as technological innovations in the processes and products of financial services. Fintech offers solutions to many of the problems at the root of financial exclusion. A fundamental problem is the lack of time or money to travel to distant financial institutions. Fintech has given users the convenience of accessing their accounts and financial services on a mobile device.

Fintech development has been gaining momentum since the COVID-19 pandemic began. Touchless transactions and banking reduce the risk of transmitting COVID-19 and have led many to embrace digital payment, in business and in personal practice. Fintech leaders are proving that underserved communities can be reached through financial technologies. Significantly, this helps foster financial stability for the formerly excluded.

Female-led fintech, Oraan, is working toward financial equality in Pakistan because women make up 48% of the population but only 6.3% of the formal economy. Oraan developed a platform that allows for digital savings groups. Savings groups can help empower women and ensure financial equity as they are well-established financial tools.

The Road to Universal Access

Because financial inclusion can fight poverty, digitized financial services are an effective way to improve access and inclusion. Online banking communities are empowering individuals and opening up opportunities for economic growth. By facilitating conversations about finances, informing underserved groups on the best financial practices and ensuring digital finance infrastructure is accessible, the world can make greater strides toward financial inclusion.

Payton Unger
Photo: Flickr

Indigenous communities in Canada

The Canadian Constitution recognizes three Indigenous communities — First Nations, Métis, and Inuit. Here are five of the many Indigenous-led organizations in Canada, collectively working to create success and prosperity for Indigenous communities.

5 Canadian Organizations for Indigenous Prosperity

  1. First Nations Information Governance CentreThe First Nations Information Governance Centre (FNIGC) is working to achieve data sovereignty. With support from regional partners and a special mandate from the Assembly of First Nations’ Chiefs in Assembly (Resolution #48, December 2009), the FNIGC collects and uses data to “build culturally relevant portraits of the lives of First Nations people and the communities they live in.” Their motto, “our data, our stories, our future” reflects their vision of Indigenous stories being told by Indigenous people, for Indigenous people.
  2. IndspireIndspire is using the gift of learning to help provide academic success and long-term prosperity with support through financial aid, scholarships/bursaries, awards, mentoring and physical resources.
  3. Aboriginal Financial Officers Association of Canada – Aboriginal Financial Officers Association of Canada (AFOA) is creating a community of Indigenous professionals by supporting successful self-determination through “improving the management skills of those responsible for the stewardship of Indigenous resources.” This includes aid in management, finance and governance.
  4. Reconciliation CanadaReconciliation Canada facilitates the engagement of Indigenous and non-Indigenous people with meaningful conversations on reconciliation and the lived experiences of Indigenous people. They aim to inspire positive change and understanding. At present, the programs and initiatives offered by the charity are Reconciliation in Action: A National Engagement Strategy, Reconciliation Dialogue Workshops, interactive community outreach activities and Reconciliation Canada.
  5. First Nations Child and Family Caring SocietyThe Caring Society supports First Nations children, youth and families. The organization has been able to provide 250,000 services and products to Indigenous children by putting Indigenous children and families first.

These five organizations are just some of many who are working to support success and prosperity for Indigenous communities in Canada. Their work helps blaze a path for a brighter future for Indigenous people and the country alike.

– Jasmeen Bassi
Photo: Flickr