Digital Financial Services: Providing a “Ladder” Out of Poverty or Creating “Financial Exclusion”?
MicroCapital reports on the lively debate at the EMW 2016 Closing Plenary, 'Digital finance: Full inclusion or empty promise':
At Friday's closing session of European Microfinance Week, representatives of Luxembourg-based MyBucks, US-based Opportunity International and India-based MicroSave argued about the risks and rewards of digital finance services. Vicki Escarra, the CEO of Opportunity International, said, "What we've done over the past five years to get to very rural areas is to use these digital channels.... To focus on women in Africa – not just women, but women living in rural areas – is very, very important."
MyBucks CEO Dave van Niekerk said, "What digital financial services allow us to do is deliver the full suite of products.... We were asking poor people to run the marathon out of poverty on one leg, credit.... It's not just about credit. It's about transparency and customer experience.... It's more than just a delivery channel; it's a whole approach." Ms Escarra agreed, "It's not one size fits all. It's that suite of services that provides a ladder for people in poverty."
Graham Wright, the Managing Director of MicroSave, said, "72 percent of electronic payments are person-to-person.... Let's not pretend it's financial inclusion." He said that most digital loans are for about a month at annualized rates of 49 percent to over 600 percent. "They just started offering loan rates of 9 percent per month in East Africa...." He also reported that hundreds of thousands of people are getting blacklisted for unpaid loans of under USD 2. "This is creating financial exclusion."
Read the full report here