Bill and Melinda Gates Foundation
The Bill and Melinda Gates Foundation are spearheading a campaign for a $255 financial inclusion fund. So far France and the UK have pledged $45m. The Gates Foundation stated they will invest a further $73m if other G7 countries fill in the gap.
Aims of the Financial Inclusion Fund
The $255m financial inclusion initiative will be focused on increasing access to digital financial services in the developing world. This will be primarily aimed at women. Furthermore, they will aim to create digital identification systems so that everyone can have access to other services such as registering for a doctor. This was one of the main reasons why the UK recently decided to back the fund. The UK stated that it would support digital identification schemes in India.
The funds will be used to aid governments – mainly in South Asia and Africa – to promote the competition of mobile-money services, strengthen financial regulations and to implement digital identity schemes. Research suggests that poor households save their money in physical assets, such as livestock or jewellery. However, these are not reliable methods. Animals die and jewellery can get stolen – often these physical assets do not increase in value but instead lose it. Furthermore, to send money to family, those without a bank account must use couriers or friends who carry cash by bus – this is inefficient, expensive and insecure.
“The mobile phone and the digital bank account give us opportunities we just did not have a decade ago.” – Melinda Gates
M-Pesa’s Positive Impact
In 2007 M-pesa launched their Mobile banking service in Kenya, it has had an unprecedented adoption rate. In less than two years since its inception, M-Pesa became the leading money transfer method with over 50 percent market share. The emergence of M-Pesa as the dominant money transfer mechanism has virtually eliminated the use of post office products, bus companies and formal channels such as Western Union and banks. Between 2016-2017 nearly half (48.76%) of Kenya’s GDP was processed using M-Pesa’s service – that’s around €29bn.
M-Pesa’s service is more efficient, safer (PIN security) and cheaper than alternatives. As a result of its adoption many positives have been created. Millions of people have been given access to the formal financial system. Crime has been reduced in an otherwise cash-based society. Thousands of jobs have been created, this has all given a boost to Kenya’s economy.
Melinda Gates stated that “We know from good research that when a woman has her own digital financial bank account. She often moves from the informal farming sector to the formal entrepreneurial sector. When they have assets in their hands, women often invest differently from their husbands. They invest in health and their kids’ education.” By pushing for the growth of digital banking – with a focus on the adoption by women – these are the types of positive impact that the Gates’ $255 financial inclusion fund is aiming for.