Digital Financial Inclusion: Seizing a $3.7 Trillion Opportunity
Omidyar Network
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No where in this article is there an argument for why “financial inclusion” is a good thing. There is no argument for why we should want to be included in a financial system that has manufactured poverty — financial system set up best for Donald Drumpf and Peter Thiel. The strongest arguments for why we should extend financial inclusion to the world’s poorest is that financial services companies can make money by doing it — 3.7 Trillion dollars according to the title. This was the scaling argument for the microfinance industry and what we learned is that focusing on the opportunity for profit by providing financial services for the poor can end up very bad for the customer. Yes, it can also be good, but ONLY IF there is an explicit and rabid focus on social performance.

The article says lots of jargony stuff about user centric design but, again, says nothing about value to the user beyond “inclusion”. I am no conspiracy theorist. Actually, I am a pragmatist. (I worked for Grameen Foundation and managed the PPI for several years.) The article brings up India and the Aadhaar biometric ID system which “has signed up one billion people and functions as both a public good and a public utility”. There is nothing inherently good about this. It simply reduces friction in the effort to acquire more customers and this can be a horrible thing for customers. (Yes, it could also be a good, thing but ONLY IF there is an explicit and rabid focus on social performance.) SKS Microfinance demonstrated clearly in 2011 how Financial Inclusion can be just another stick with which to beat the poor and steal their money. (Right, Accion? You remember this, right?) A huge positive that came out of that crisis was the broad adoption of best practices for responsible microfinance and social performance. These new kids on the block — impact investors, fintech innovators and Finclusionistas (I just made that one up) — should be working closely with Laura Foose of SPTF to ensure they are building off of the learnings of MFI’s but last I looked, they were not doing that.

The only way this makes any sense is if your customers are better off being “included” than if you just gave them the money. So, are they? What is the argument for inclusion and where is the data that inclusion is good? How many customers are there in your estimate that generates 3.7 Trillion? Do the division. How much money is that per person if you just gave it to them. In what very concrete way will their lives be better? Will they still be poor? Will they have agency? Will they be free?

Why do we continue to believe that the thing we must sell is the opportunity for profit. In this case, an opportunity for profit generated by an industry that manufactures poverty. You likely generated this estimate using existing financial services assumptions — the same assumptions that are manufacturing the poverty you are trying to address.

The longer I write the more angry I get. That this article was posted at the Center for Financial Inclusion is outrageous. CFI is a project of ACCION and ACCION exists by virtue of the money made off the backs of the poor. ACCION has clearly also done good in the world and that money enabled them to do that too. It’s a complex world and lessons should be learned from experience so that we don’t repeat them. Here is the 2010 article in Forbes written about the IPO of SKS by the founder of ACCION and the former CEO of Compartamos (the other Microfinance IPO).

“First, we must make clear that financial inclusion is not a silver bullet. It is one tool–and we believe a very powerful one–among many in the global fight to defeat poverty.”

The irony is thick.

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