Concept


In recent years, financial inclusion has become very topical because of the dimension of inclusivity that it brings to economic growth. Pursuit of growth, for its own sake, has been found to have limitations as it leaves behind certain sections of the population. The role of financial development in growth is well-established (King & Levine, 1993); what is missing is the aspect of outreach that is addressed by the concept of financial inclusion. Research has also established that financial deepening does not translate to inclusivity (Kostov et al., 2015).
The missing link to all-encompassing growth is financial inclusion; the concept is defined as a         process that ensures ease of access, availability and usage of the formal financial services by all           members of an economy (Sarma, 2012). Financial inclusion entails outreach to those at the bottom of the pyramid, thereby directly alleviating poverty (Dermiguc-Kunt, 2012; Tuesta & Camara 2015).

According to the 2014 Global Findex Database, 38 percent (or nearly 2 billion people) in the world are not part of the formal banking system. Considering the positive relationship between peoples’ welfare and financial inclusion, it means that 62 percent of the world’s adult population lack opportunities that will allow them to escape poverty.

A number of approaches have been employed to achieve financial inclusion: amongst others are microfinance, passing legislation to force banks to introduce low cost accounts and leveraging on technology. Technology has been the major driver in addressing financial exclusion and, specifically, mobile money has emerged as a key enabler, particularly in Sub-Saharan Africa. Mobile money became an instant hit in advancing the financial inclusion agenda in developing countries because it leverages on existing tele-communications infrastructure in an environment where the required infrastructure for upscaling formal financial services is lacking. In recent times, there has been convergence on the potential of mobile money in achieving financial inclusion. The 2017 GSM Association Report on the Mobile Economy in Sub-Saharan Africa notes that there were 315 million unique subscribers and sim card connections in 2015, with projections set to increase to 518 million by 2020. The mobile economy therefore represents an opportunity for embracing the hirtherto under-served and unbanked population. The mobile industry’s contribution to Gross Domestic Product (GDP) in 2014 was recorded at 5.7 percent, with projections to increase to 8 percent by 2020 (GSMA Report on Mobile Money, 2015)

Excerpt from a Research Assignment Paper by Samuel Moyo presented to Stellenbosch University (2017)

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