Is Fintech the Key to Financial Inclusion?
Despite it being 2021, many people around the world still lack access to basic financial services. In fact, there are an estimated 2 billion adults in the world who still do not even have access to a bank account. But could fintech provide the solution?
Over the last decade, the rise of fintech has turned the financial service industry on its head. Innovative services such as mobile payments, digital banking, and alternative lending platforms have surged in popularity. It could be services such as these that help promote financial inclusion around the world.
What Is Financial Inclusion?
Financial inclusion entails providing underprivileged populations with access to different financial services such as bank accounts or loans. Financial inclusion is important because it does not only help alleviate poverty and inequality, but can also help stimulate economic growth in some of the poorest regions in the world. According to the McKinsey Global Institute, financial inclusion could help increase the GDP of all emerging economies by $3.7 trillion by 2025, and lead to the creation of 95 million jobs.
Who Can Benefit the Most From Fintech?
Emerging markets, like Asia, Africa and some parts of the Middle East, are the markets that can benefit the most from financial inclusion. Currently, many people living in these areas have limited access to financial services. However, the rise of fintech solutions could address this issue and help with the following:
- Providing small businesses with access to loans to facilitate expansion and create new jobs.
- Enabling transactions to be carried out internationally through mobile payment systems.
- Help people save for their future, e.g. education and housing.
- Make transactions safer and more secure.
- Help improve financial literacy and encourage more people to save and invest their money.
How Fintech Companies Are Currently Helping
Although there is still a long way to go in alleviating poverty through financial inclusion, there are some notable examples of fintech startups who are helping to tackle the issue. Jumo and Kuda are two fintech companies in Africa who are serving those excluded from traditional financial services.
Perhaps the best example of a fintech company that’s had the most profound effect is M-Pesa. Before the introduction of M-Pesa, many Kenyan’s could not access basic financial services. Fast forward to today, and Kenyan citizens can pay bills, transfer money, and even receive salaries all from their phone.
The impact M-Pesa has had on Kenya is quite remarkable. Overall, an estimated 2% of Kenyan’s have been lifted out of extreme poverty, thanks to M-Pesa’s services. It’s fintech companies like M-Pesa that are helping to improve financial inclusion in Kenya significantly. Financial inclusion in Kenya now stands at 83%—up from 27% in 2006.
Fintech Is the Key
There’s no doubt that fintech will help developing nations in their economic development. Will it help in completely eliminating poverty? Certainly not. However, fintech has huge potential to improve financial inclusion and provide hope to people who have had their financial needs neglected for so long.