At CGAP, we believe that financial innovation has great potential to help solve big development challenges in access to energy, water, education, health and agriculture. We’re calling this concept Digital Finance Plus.
There is increasing evidence from Kenya, Tanzania, Pakistan, Bangladesh and elsewhere that shows that even a basic mobile wallet that allows people to save and transact brings benefits. But the story clearly is far from over. We all need this financial innovation to work harder and go further in order to really make an impact on people’s lives.
Earlier this year, CGAP CEO Tilman Ehrbeck blogged on Huffington Post about the exciting potential of companies and business models that link financial innovation with tangible benefits for the poor. He mentioned companies that ride on the ubiquity of mobile money in Kenya and Tanzania to provide basic electricity access (by providing solar lamps at a lower cost than kerosene) and water services. We have now identified 55 such companies and business models. They all share two key characteristics: they aim to solve a fundamental access problem and digital financing schemes (with or without mobile money) figure prominently in how their business works. There are many start-ups but there are also possibilities for public-private partnership models.
In subsequent posts in this series, we will introduce you to some of these business models from conversations with digital finance innovators and entrepreneurs.
Financial innovation is necessary to include the last mile poor and the bottom pyramid. It would be prudential to infuse digital financial plus .( direct inputshealth, education, water, sanitation etc) prior to financial (indirect ) inputs . Here sequencing assumes importances for avoiding financial exclusion
Dr. V, thanks for your comment. It gets at the heart of the issue. We see financial innovation as an enabler. In some ways, both finance and education, health etc are "inputs," as you put. But, whatever came first, we know the end which is that people want to light their homes, get reliable water access and so on.
Digital financing is at the fore front of strategy for most of the MFIs around the world. At the outset, products should be linked to the bank and also should incorporate an innovating savings feature which will attract customers of the BoP segment. The savings rate is marginal and thus is not luring enough to bring them into the system. No matter how much technology is being used, the product must be rational.