These days, I hear headlines on Financial Inclusion so often that, it makes me wonder if Financial Inclusion is the new Fintech. The past three years in India, with the rise of payments, Aadhaar and last mile access to financial services is a great example.
We have also had Nubank from Latin America that won Softbank’s investment, and the Grab and GoJek story in South East Asia. Some of them are taking the digital banking route to genuinely address an unbanked population, while others are simply using their lifestyle apps to provide sticky financial services.
This is in stark contrast to the overbanked West, where we see challenger banks, trying to win brownie points using ‘financial inclusion’ as a marketing ploy. There are several arguments about their scalability and viability due to the overbanked markets they are going after.
Most Fintech events these days have a panel on financial inclusion. I recently came across an event planned in India, and the objective was to make it as grand as the Singapore Fintech Festival. I understand there are several panels focused on Financial Inclusion. It’s not surprising as Asia is seen as the hub of financial inclusion.
However, in several of these instances, trying to achieve financial inclusion before getting a financial identity to the unbanked is like placing the cart before the horse.
One of the first articles I wrote on Daily Fintech was about a firm called BanQ. They were working on providing economic identities to women farmers in Africa. They were also using Blockchain to achieve that.
It wasn’t just BanQ, another startup Agriledger led by Genevieve Leveille is looking at solving inefficiencies in the food supply chain. The transaction data that Agriledger would capture in the process would act as an economic identity for the farmer. As a result they can avail other financial services, thanks to their track record on the ledger.
Even when Libra was announced, one of my biggest hope and ask from the project was solving the identity problem. It was positioned as offering financial inclusion at scale – but they were in a perfect position to first solve the social and economic identity issue as the first step towards getting to inclusion at scale.
If identity solutions are globalised, refugees can be offered jobs in their countries of refuge – a farmer in Africa, seeking refuge in Spain, could find it easier to get a loan to start or work in a farm in Spain. All he needs to show is his track record as a farmer.
It should be the same as an executive moving from one country to another for employment, without having to start from scratch completely.
On that note, I came across a report by Oxford Economics and identify firm Juvo. The report highlights the following countries and the potential GDP growth in those countries with proper financial identity initiatives.
- India – $7 Bn
- Indonesia – $15 Bn
- Philippines – $15 Bn
- Pakistan – $9 Bn
- Mexico – $31 Bn
In essence, tapping into mobile operators and providing financial identities to one and all would add $250 Bn to the global GDP and make available about $408 Bn worth of credit.
These numbers feel too low to me, perhaps the numbers are just an immediate benefit, and not a weighted or discounted average across years.
The projection that caught my attention in the report was that identities could increase the per capital GDP by $25 in South and South East Asia. This is a massive value-add when put into perspective.
While I wish Juvo all the very best in achieving their goals on financial identities, I believe it has to be a big player like a facebook or google, who would be best positioned to launch an self sovereign identity platform. It could perhaps be centralised on day 1, but evolve into a self sovereign network of identities.
When that happens, there would be onboarding of people onto financial services like never seen before. At this stage, it is all just wishful thinking though!