How mobile banking could overcome constraints to financial inclusion

Published on: 08/02/2018




How mobile banking could overcome constraints to financial inclusion

Financial inclusion plays an essential role in driving progress and sustainable development, yet 45% of the world’s population does not have a bank account. Digital financial services could not only financially ‘include’ many underserved households, but they could also help fight corruption and fraud.

In sub-Saharan Africa, the fact that more people have a mobile phone than a bank account could provide the answer to financial exclusion. With estimates that the number of mobile phones in Africa will rise to 930 million by 20191, the technology revolution promises to accelerate growth significantly for the continent.

Often, the distance between towns is vast, and the rise of mobile technology could allow the expansion of financial services in a cheap and accessible way. With coordinated action by financial firms, telecommunication companies and governments in low-income countries, around 1.6 billion could gain access to financial services by 2025, according to a McKinsey report.

Mobile money as a driver

More than 40% of the adult population in countries such as Kenya, Tanzania, Zimbabwe, Ghana, Uganda, Gabon and Namibia use mobile money as part of everyday life. A study found that, by enabling people to store and transact money in a digital form, hundreds of millions of underserved people are safer, more productive with their time and money, and able to take advantage of more socio-economic opportunities2.

When it comes to energy access, the pay-as-you-go (PAYG) system is considered a key driver of growth for scalable off-grid energy providers, and could lead to a virtuous cycle of financial inclusion via accessible household services.

Projects such as D2D Pro and d.light are examples of how PAYG solar systems are integrated with mobile money, so that base-of-the-pyramid consumers can gain access to clean, affordable energy.

The M-Pesa effect on Kenya

In Kenya, the state of financial inclusion is markedly superior to the continental average, an achievement attributed to the promotion of mobile banking3. Today, the African country has become the global leader in the provision of financial services via mobile phones.

The biggest shift occurred in 2007, when Safaricom launched the money transfer service M-Pesa. Initially, it allowed users to send and receive money via SMS message, but other services were added later, such as access to savings and credit. While it is present in 10 countries, the service is extremely popular in Kenya, where it is used by at least one person in 96% of households4.

In areas where M-Pesa expanded more, the number of lowest-income households dropped, driven primarily by female-headed households. It is also argued that M-Pesa significantly reduces the potential of street robbery, burglary and petty corruption within cash-based economies5.

Mobile technology to fight corruption

In underserved markets, mobile technology is being used to empower those living in remote areas, but it also allows greater transparency in countries where levels of corruption are high. For example, applications such as the World Bank Integrity App give users the opportunity to report on concerns of fraud and corruption anonymously.

If governments used a digital system to pay pensions, salaries and welfare benefits, it would reduce opportunities for corruption. In addition, 400 million people could be included in the financial system if governments and businesses made their payments digitally rather than in cash. On the other hand, the transparency of mobile banking could also help government agencies tackle money laundering.

Financial inclusion is a catalyst for sustainable progress. Although it is not a stand-alone goal, it serves as a driver towards achieving a number of Sustainable Development Goals (SDGs), with which TRANSFORM is aligned.

2 GSMA, Mobile Money as a driver of financial inclusion in Sub-Saharan Africa:

Harvard Kennedy School, A Quantum Leap over High Hurdles to Financial Inclusion: The Mobile Banking Revolution in Kenya:

Innovation for Poverty Action, The Long-Term Effects of Access to Mobile Money in Kenya:

Vodafone, Vodafone marks 10 years of the world's leading mobile money service, M-Pesa: