This must be attributed to Lawrence
Yanovitch who spoke about it at the work-session that I attended at the
WEF. I thought that it is a great framework for financial inclusion that I had to document it. (I have elaborated a bit on it myself). When we think of mechanisms to bring the
underbanked into the banking system common wisdom usually dictated the implementation of micro lending. Mobile payments is now also something to be considered, but do we do this in conjunction with
micro lending or not. And what about platforms for saving? How do they fit into this puzzle. So Lawrence suggested a sequence for financial inclusion:
- The first component that must be provided is an effective payment system that can now be deployed by means of mobile technology. This payment system must be secure, easy to use and enable payments over a distance (money remittance). The system should support the needs of the subscriber to such a degree that a large percentage of the cash be taken up into the system.
- This is then a logical transition to savings. With cash having been turned into electronic value, it will be easier to start offering savings products based on regular payments. These products should typically be targeted savings products with a monthly installment. Credit risk does not exist as it is a savings product, but the discipline of the subscriber to meet his/her monthly installments will be important.
- The behaviour of a subscriber (and the history) with regards to payments and savings will provide mechanisms to start scoring credit, making the introduction of lending products easier.
So the sequence is: teach them to pay electronically, then to save and then offer them loans.
This must be attributed to Lawrence Yanovitch who spoke about it at the work-session that I attended at the WEF. I thought that it is a great framework for financial inclusion that I had to document it. (I have elaborated a bit on it myself). When we think of mechanisms to bring the underbanked into the banking system common wisdom usually dictated the implementation of micro lending. Mobile payments is now also something to be considered, but do we do this in conjunction with micro lending or not. And what about platforms for saving? How do they fit into this puzzle. So Lawrence suggested a sequence for financial inclusion: