On Harnessing the Potential of Financial Inclusion: The Case of “Mobile Payments”

Enabling financial inclusion through regulations

This paper highlights the need for policies that permit experimentation with various business models, in order to harness the potential of financial inclusion. It analyzes the business model of M-PESA, a mobile phone based financial service in Kenya.

The paper demonstrates how information and communication technology has made it possible to provide basic services to the poor at affordable prices. It discusses the need for regulatory interventions in the financial services sector. The paper proposes a framework for financial inclusion based on four “building blocks” of banking, namely:

  • Exchange of different forms of money;
  • Safe-keeping of money;
  • Transfer of money to other locations;
  • Investment of money.

The paper concludes by suggesting that regulations should be designed by type of service, and that they should take systemic dimensions into account. It states that basic payment services such as M-PESA may be the most important financial service for the poor.

About this Publication

By Dittus, P. & Klein, M.