Vision and Discipline: How to Innovate for Increased Financial Inclusion
Tuesday, September 15, 2015
Globally, some two billion working-age adults in emerging markets are excluded from the type of financial intermediation that we take for granted in the developed world: a transaction account to send and receive money; the ability to save for a rainy day; access to credit if needed for bigger, spiky outlays; insurance to help mitigate the financial consequences of an unfortunate event.
Providing the excluded with appropriate financial access has emerged as an important item on the global development agenda. During the Global Policy Forum promoted by the Alliance for Financial Inclusion (AFI) in Mozambique earlier this month, there was a clear consensus among representatives of some 125 policymaking and regulatory bodies –largely from developing countries and emerging markets– that the key to closing this inclusion gap lies on practical innovations that can reach more people with a broader range of financial services at lower costs than traditional, branch-based banking.
Innovation is easier said than done. But there are ways to increase the likelihood of innovative breakthroughs to initially emerge and eventually succeed. At the opening panel of the event, the discussion among leaders from very different organizations in the financial inclusion space crystalized four common lessons across public and private sector, incumbents and start-ups. They are:
Start with a bold vision
Benno Ndulu, Governor of the Central Bank of Tanzania, where access to basic financial services more than doubled since he took office in 2008, highlighted his realization at the time that you can't conduct meaningful monetary policy in support of the real economy when the financial system doesn't even reach the vast majority of economically active people. It was the Central Bank's embrace of a bold paradigm change that started the country's journey towards financial inclusion.
James Mwangi took over Nairobi-based Equity in 1994 at the age of 28, when it was essentially a bankrupt building society. One of seven children of a widowed mother from Kenya's rural heartland, he put a relentless focus on low-income clients and their needs to seize economic opportunities at the center of Equity's vision and culture. Today, Equity is Africa's largest retail bank by customer numbers and expanding from its home base into a number of neighboring countries.