Across East Africa, something wonderful is happening. Technology is monetising people’s lives especially in the rural areas, at a rate totally unheard of before the coming of the mobile phone. When someone uses their phone to either send or receive money, the networks are happy, the banks are happy and the customer is happy. More important financial inclusion is expanding which is always good for an economy, because it also encourages savings. Now cross-border mobile money services are helping to rapidly demystify the whole concept of regional trade.
With greater financial inclusion comes more business and consequently general prosperity. The East African Community governments should also be commended for encouraging financial inclusion. According to the World Bank, an estimated two billion working-age adults – more than half of the world’s total adult population – do not have an account at a formal financial institution. Financial inclusion efforts ensure that all households and businesses, regardless of income level, have access to and can effectively use the appropriate financial services they need to improve their lives. Currently, the world’s poor live and work in what is known as the informal economy.
Even though they have little money, they still save, borrow and manage day-to-day expenses. However, without access to a bank, savings account, debit card, insurance, or line of credit, for example, they must rely on informal means of managing money. This includes family and friends, cash-on-hand, pawn-brokers, moneylenders, or keeping it under the mattress. Sometimes these choices are insufficient, risky, expensive, and unpredictable. The advantages of financial inclusion are numerous. You can make day-to-day transactions, including sending and receiving money; safeguard savings, which can help households manage cash flow spikes, smooth consumption and build working capital.
The other advantage it can help to finance small businesses or microenterprises, helping owners invest in assets and grow their businesses; You can also plan better and pay for recurring expenses, such as school fees; mitigate shocks and manage expenses related to unexpected events such as medical emergencies, a death in the family, theft, or natural disasters; and mprove overall welfare. The benefits of financial inclusion are not only significant for individuals but for economies as well. Financial inclusion is linked to a country’s economic and social development, and plays a role in reducing extreme poverty. Recent research shows that financial inclusion is not only positively correlated with growth and employment, but it is generally believed to causally impact growth.
The World Bank says the richest 20% of adults in developing countries are more than twice as likely to have a formal account as the poorest 20%. Yet, while the poor don’t have the same access to financial products as wealthier individuals, their need for financial services may be even greater. Over the past several decades, different types of financial-services providers have offered new possibilities for the financially excluded. Such providers include non-government organizations, cooperatives, community-based development institutions, commercial and state banks, insurance and credit-card companies, telecommunications and wire services, post offices, and other businesses that provide point-of-sale (POS) access. New business models and providers have, in many cases, become viable due to technological breakthroughs, including and especially the worldwide spread of mobile phones. Therefore more financial inclusion in East African can only be a good thing.
Source: All Africa

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