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Fintech’s potential for financial inclusion in emerging markets

Fintech can have a big impact on increasing financial inclusion. To find out more about how, we spoke with Diana Cazacu, founder of Amsterdam-based financial inclusion consulting firm AdVision Finance, about fintech’s impact on financial inclusion in emerging markets.
Why do you think fintech matters for financial inclusion? What’s the potential of fintech for financial inclusion?
No financial institution will survive in the future in emerging markets without fintech.
There’s been a lot of progress in financial inclusion over the last 25 years, but there are still a lot of inefficiencies in financial institutions (FIs) preventing them from providing products and services to low-income individuals and entrepreneurs at affordable prices. For example, most FIs focused on financial inclusion in Africa and Asia have a 60% – 80% cost-to-income ratio.
I think fintech can help achieve 90% – 100% inclusion in the next 10 years. Fintech solutions can help FIs implement efficient processes and delivery channels, minimise credit risk, help create ecosystems, bring different market players together, and increase financial education and pricing transparency. Last but not least, it can provide tools to more effectively measure the social impact financial services have on low-income individuals.
Is technology one of the great democratisers of our time? If so, how does it affect financial inclusion efforts?
I do believe technology has brought, and can bring, a relative level of equality. Most access to information today is through different types of technology. Access to information and knowledge enables people to better understand their rights and make better choices. For example, a farmer receiving daily updates on a mobile phone on price information can sell their products at a fair price, hence avoid being marginalised by more knowledgeable players.
Similarly, internet access can increase financial literacy and transparency of financial products offered by FIs, hence increasing the chances of more people having access to diverse financial services no matter their location, level of education or gender.
The 2017 Global Findex Database shows the gap between rich and poor has not improved since 2014, and that the urban population has better access to financial services. This is partly due to a complete lack of, or otherwise poor, technological infrastructures in rural areas. The solution then is not necessarily providing the means for rural entrepreneurs to move to urban areas but creating an environment of economic growth in the villages where the women and men, rich and poor, can benefit from equal opportunities.
Could increased public intervention help prevent more inequality?
Governmental institutions can help increase financial inclusion by: investing in infrastructure in rural areas to accelerate technology penetration; establishing or relaxing regulatory or tax frameworks for fintechs or fintech partnerships; enhancing customer data protection regulations; and partnering with the private sector to increase financial literacy.
Interventions providing people in rural areas with access to financial services are already in place or in progress in a lot of countries in Africa, Asia, and Eastern Europe. Additionally, European countries, including The Netherlands, have multiple funds and initiatives supporting financial inclusion in emerging markets.
Do you see any partnerships between fintech and financial inclusion organisations happening in emerging markets, and do they add any value to financial inclusion?
I see more and more partnerships happening between fintech companies and financial institutions or investors focused on increasing financial inclusion. There is still a learning curve with regards to the best structure and framework for these partnerships.
A mismatch in expectations is the biggest challenge to partnerships between financial institutions and fintechs. Most FIs expect fintechs to immediately solve their operational inefficiencies and improve their product delivery. In fact, the most successful partnerships between fintech and financial institutions are the ones where financial institutions have already gone through digitisation prior to the partnership. Additionally, FIs have to do a thorough assessment of their current systems/IT architecture to ensure that it is compatible with the fintech they want to partner with.
The 2017 Global Findex Database shows that women are overrepresented among the unbanked, both in developed and developing economies, and the gender gaps have remained the same in the last three years, in both developing and developed economies.What’s a good strategy to increase women’s financial inclusion?
Women’s access to finance has seen a good deal of improvements. Having lived and worked in Africa for almost 15 years, I have seen that women have less opportunities due to customs and traditions, religion, and lack of access to education.
Changing a culture is a slow process and financial services on its own will not necessarily provide the needed opportunities for women. Baby steps need to be taken, like education in health issues and financial literacy, but also increasing development of vocational skills for women. Only together with these other interventions can financial inclusion have the positive effect on women’s equal opportunities and the gender gap will start to close.
What is the future of financial inclusion?
Financial inclusion is a continuum and not a status quo. Having a bank account and access financial services is not enough to contribute to better lives. Ensuring the affordability of financial services should be the next big thing for financial inclusion practitioners and experts.
by Asli Seven, Research Analyst

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