## Leveraging Financial Technology for the Underbanked

_IMF News, September 19, 2016_

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**Canonical URL:** [Leveraging Financial Technology for the Underbanked](https://www.imf.org/en/news/articles/2016/09/17/na091916-leveraging-financial-technology-for-the-underbanked)

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## Bibliographic details
- Authors: Rodolfo Maino IMF African Department September
- Published: September 19, 2016

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### Financial inclusion boosts growth
- More than two billion people worldwide are without bank accounts.
- Only a third of adults in sub-Saharan Africa have access to any kind of basic financial services.
- Financial inclusion benefits cited:
  - Allows families to smooth out consumption and invest in education and health.
  - Access to credit enables businesses to expand, creating jobs and reducing inequality.
- IMF perspective:
  - Mitsuhiro Furusawa (IMF Deputy Managing Director) emphasizes financial inclusion as key for promoting strong and stable economic growth in Africa, particularly amid slower global demand and pressure on natural resource exporters.
  - Roger Nord (Deputy Director, IMF’s African Department) identifies technological innovation within the financial sector (Fintech) as a promising way to advance financial inclusion.

### Technological drivers and adoption
- Fintech advantages highlighted:
  - Tackles geographic concentration of bank branches in urban areas.
  - Reduces costs & fees, making services available to anyone with a mobile phone at a fraction of the cost.
- Regional leadership:
  - Sub-Saharan Africa leads in the adoption of mobile banking around the world.

### Case study — Kenya and M-Pesa
- Origins and evolution:
  - M-Pesa began as a way for mobile phone users to transfer unused air minutes and evolved into a cash payment platform using text messages.
- Impacts and services:
  - Enables users to send money rapidly and at minimal cost, avoiding multi-day bus travel to deliver cash.
  - Local banks partnered with M-Pesa to offer savings options that pay interest regardless of how small the account balance.
  - User data supports issuance of micro-loans to those deemed creditworthy.
- Outcomes:
  - As a result, more Kenyans are saving and borrowing.
  - The proportion of the population excluded from financial services in Kenya has fallen below 17 percent.
  - Kenya ranks third in sub-Saharan Africa for financial access, behind South Africa and Mauritius.
  - Other East African countries following Kenya’s example: Tanzania, Uganda, and Rwanda.

### Broader applications and global examples
- Cross-border transfers:
  - Fintech could lower the cost of cross-border transfers, addressing loss of correspondent banking relationships caused by rising compliance costs.
  - Potential significant boost for low-income countries that receive significant remittances from overseas.
- International examples:
  - China: The financial services arm of online retailer Alibaba has grown so rapidly that it now surpasses the largest Chinese commercial banks in transaction volumes.
  - India: Biometric identification system Aardhar has started to open up low-cost financial services to previously underserved populations.
  - Advanced economies: Technology start-ups are aiming to revolutionize global payment and settlement systems through digital currencies and blockchain technology.
- Global dialogue:
  - A recent conference co-organized by the IMF and Singapore Management University illustrated the global potential of Fintech.

### Policy and regulatory considerations
- Regulatory focus areas:
  - Impact of new technology on the stability of the financial system.
  - Risks related to money laundering and the financing of terrorism.
- Institutional response:
  - Financial institutions and central banks are quickly adapting to Fintech innovations to bring more unbanked individuals into the banking fold.
- Event engagement:
  - Furusawa attended a conference in Dakar to promote financial inclusion in West Africa.
  - The conference in Dakar is co-hosted by The Bank of West African States (BCEAO) and the IMF and will examine prospects and policy options for promoting financial inclusion in West Africa.

*Source: "Leveraging Financial Technology for the Underbanked", IMF News (September 19, 2016). https://www.imf.org/en/news/articles/2016/09/17/na091916-leveraging-financial-technology-for-the-underbanked*

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## Content in this bundle

- [Staff Discussion Note (PDF)](/external/pubs/ft/sdn/2015/sdn1517.pdf){rel="external" type="application/pdf"}

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## References

- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [PRESS CENTER](http://presscenter.imf.org/)
- [IMF Country Focus](https://www.imf.org/en/news/country-focus)
- [Dakar conference](http://www.imf.org/en/news/finance-for-all)
- [Virtual currencies paper](http://www.imf.org/external/pubs/cat/longres.aspx?sk=43618)
- [conference in Dakar](http://www.imf.org/en/News/Finance-for-All)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2016/09/17/na091916-leveraging-financial-technology-for-the-underbanked_