Oswell you make a very compelling case. I have been in the Fintec industry serving the mass market retail in emerging markets for 20 years. Before that I was a practitioner in the credit union and micro banking industries. I have seen the effect of technology on reducing the basic costs of every kind of financial transaction. Costs for the consumer (as in your example) are very real and technology has crushed costs for the consumer and the financial intermediary alike. What perhaps deserves some scrutiny is the argument that some FIs make that markets are self-correcting and that competitive forces through the use of technology will drive down price; profits then being maintained by scale. What seems more often than not to be happening is the technology is used to reduce the cost of intermediation and the transaction cost for the consumer, but not proportional to the savings on both sides of the transaction. Inefficient intermediation, or cross subsidy within a multi-purpose intermediary means that prices in the market remain high. Transactional savings gained by efficient use of technology in single purpose financial institutions that target the working poor are protected from passing on the savings through dysfunctional markets and a lack of consumer awareness. Prices of financial products remain high while for some focused commercial microfinance costs plummet. Except in the case of cooperatives this translates to profit for the equity holders. This formula has created a window for professional retail banking to exact very high profits from serving the poor, without the effect of a force of competition adjusting price.
Regards,
Murray Gardiner
From: MicrofinancePractice@yahoogroups.com [mailto:MicrofinancePractice@yahoogroups.com]
Sent: Monday, March 7, 2016 4:10 PM
To: MicrofinancePractice@yahoogroups.com
Subject: [MFP] Re: Is financial inclusion really good for the poor?
Quite interesting views on financial inclusion. I guess its easier to critic and proffer an academic view based on analysis of other academic papers with little effort to establish the real impact on the ground. I also think its not correct to generalise financial inclusion with credit. Financial Inclusion looks at a whole range of financial services including local money transfer, savings, micro insurance etc. Drawing a conclusion based on a single part of the financial inclusion agenda is in my view, surely missing the real issue at hand.
Today I and other millions of citizens of the developing world, where the real poor are, have witnessed the real benefits of some of the changes financial inclusion has brought to the poor. I don't need a researcher to convince me that the benefits enunciated by those on the ground are a fallacy.
I am a development finance practitioner who has lived among the so called poor not as a visitor but as one of them. The benefits of financial inclusion are so evident to see that one may not even have to rely on some studies or research to see the impact.
Today I am able to send my mother inlaw in some remote village her monthly support through my phone, and she also access it through her phone, without traveling to the next post office or town, (saving on productive time and transport cost) but from the nearest agent, less than 3km away from her home. Before the 'fintech revolution', it would take days for her to get the much needed money for her daily use and upkeep. She had no access to a bank, as no bank would want to open a branch in some remote villages. Today she still doesnt need to open a bank account but thanks to some microfinance that linked with MNOs, she enrolled on the mobile money platform. Her money is kept on her phone, no risk of theft or rats destroying her savings, its all on the phone. She withdraws when she wants to. The local shop owner who used to give her goods on credit plus interest no longer charges an interest as she now buys on cash. The good shop owner is also now liquid and can stock relevant goods in that remote shop by simply calling the wholesaler, pay through mobile money and wholesaler delivers. I believe my mother in-law represents millions of beneficiaries of financial inclusion world over. She doesn't borrow from the microfinance because she has no business, if she had one, m pretty sire she would borrow, now that more people are liquid in the village, thanks to inflows through transfers, and significant savings brought about by the microfinance company in partnership. This is not a cooked up case but is exactly what is on the ground.
It is my opinion that researchers looking for evidence should go on the ground, and talk to the beneficiaries than rely on other financial inclusionists who also could be biased in their approach.
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Posted by: Murray Gardiner <mgardiner@temenos.com>
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