Why digital promotes inclusion
Recently, many people have told me, “You can’t be doing social good because you work for a corporate, and they can only ever be driven by profit.”
It is stated with the certainty that you might use in stating, for example, that the sky is blue or ice is cold.
This is almost always followed by a look that says, “Why do you do what you do?”
As someone who has crossed the lines between not-for-profit and for-profit several times, I’ve lived by the belief that you can ‘do well by doing good’. And while it’s true that a for-profit is – well, for profit – profit doesn’t preclude social good.
I’m not even talking about corporate social responsibility and branding here (which is a different beast) but finding ways to tap unmet needs in the market which result in profit for a business and an improved life for the people impacted. In these kind of cases, a social business model can have a more lasting impact than charity.
Back to why I do what I do – I do believe that digital banking services can be beneficial for financial inclusion as well as financial institutions. Here’s why:
- Digital allows traditional institutions to serve more people. The industry average cost to serve one transaction is approximately $5 USD. That’s the cost of your swish ground floor mall branch with the desks and screens and tellers all waiting to serve you. At that cost, how is it possible to cover the cost of serving someone who makes $100 a month? By contrast, a digital transaction can be served at 30-50 cents, leading to a lower cost for the customer and greater access.
- Digital transactions create records that can be used to access credit. According to the Kenya National Bureau of Statistics, 63% of informal enterprises view access to capital as a barrier to business. For these people, the lack of a payslip and a majority of cash transactions means that they have very little proof of the money they make (even if they make a lot of money). Having some form of record for transactions allows those businesses to demonstrate that they have income and are therefore credit-worthy. Like it or not, anything short of charity is going to come with a risk assessment and a cost.
- Digital transactions promote transparency to reduce corruption. Nobody’s naive enough to think that corruption will go away just because there is a record, but it does make it more challenging to conduct low-level corruption. In the same KNBS survey, 60% of respondents felt their business was threatened by being asked for bribes, either to get business or stay in business. On the flipside, many people have been caught out for soliciting bribes through M-PESA.
- Digital is easier to access. The most obvious benefit of a service that’s offered digitally is that it can be accessed anywhere, anytime. That might seem like a trivial benefit in the context of financial inclusion, but imagine the following situations:
- You’re one of 74% of the population that lives outside an urban area and the nearest bank branch or agent is 20-90 minutes away via public transport
- You’re a sole proprietor whose main source of income is a stall – if you leave, you can’t make sales and risk having your goods stolen
- You’re a mother with 2 children under the age of 5 who has to stay in the house
What do you think? How do you balance people and profit?