Including Africa: Beyond Microfinance

This paper examines the current state of financial inclusion in Africa. It introduces and discusses the impact of innovations in mass banking and mobile banking.

The paper addresses the debate between advocates of pro-poor microfinance and commercial microfinance. It traces the evolution of microfinance and inclusive financial systems, and highlights the need to think beyond traditional microfinance models. Formal financial institutions find it hard to adapt to the African experience, resulting in high financial exclusion levels. The paper discusses new developments in mass banking and mobile banking in Africa. These include:

• New-style banks that meet needs of lower-income customers;
• Large incumbent banks diversifying into lower-income markets;
• M-Pesa and other mobile banking services.

The paper points out gaps in supply of financial services to the near-poor in Africa, who have access to basic transactional services. It highlights the need for innovative financial services to support sectors such as small and medium enterprises, housing and agriculture.