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2024 | OriginalPaper | Chapter

5. Driving Financial Inclusion Through Frugal Innovation to Achieve UN SDG Target 8.10

Author : Kerry Slade

Published in: Financial Inclusion

Publisher: Springer Nature Switzerland

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Abstract

Traditional banking solutions have not succeeded in creating financial inclusion for the unbanked. Mobile money services, through which telecommunications companies offer financial services through a mobile phone number, increase the accessibility of financial services. For that reason, the proportion of adults with mobile money accounts is one indicator of success for Sustainable Development Goal Target 8.10, which seeks to “strengthen the capacity of domestic financial institutions to encourage and expand access to banking, insurance and financial services for all.” M-Pesa is the world’s first mobile money service, which was born of frugal innovation and increased financial inclusion in East Africa.

Through a case study M-Pesa in Kenya, this chapter demonstrates how approaching financial inclusion from the perspective of frugal innovation generates high-value solutions to help meet Sustainable Development Goals (SDG) 8 and Target 8.10. Frugal innovation, an innovation management mindset that reduces complexity and resource use, subverts the traditional model and trades highly structured and expensive research and development for flexible and inclusive adaptation. As efforts to develop more inclusive financial systems increase, the discipline can be transformational for both developing and developed markets.

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previous chapter “Financial Inclusion Reduces Inequality and Poverty”: Myth or Reality?

next chapter The Benefits and Costs of Fintech

“Reverse innovation” involves solutions originating in emerging markets that adapted from those fitting developed markets (Khan,2016).

Only some agree that M-Pesa has been a resounding success in creating inclusion. Meagher rightly points out that Safaricom, “having benefited from extensive informal innovation and the use of a low-cost, informal business infrastructure, [] proceeded to centralize control over the management of the system and the distribution of gains.” (2017, p. 28). One way it did so was to consolidate its dealers from hundreds to approximately 10, each supervised at least 2000 sub-agents. Sub-agents received lower commissions, while wealth became more concentrated at the top (Meagher, 2017). The underpayment of valuable agents in this manner, who provide a crucial component of continuity and flexibility for BOP customers, is different from the values-based approach to frugal innovation advanced in this chapter.

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Title: Driving Financial Inclusion Through Frugal Innovation to Achieve UN SDG Target 8.10
Author: Kerry Slade
Publisher: Springer Nature Switzerland
Book: Financial Inclusion
Print ISBN: 978-3-031-68802-7

Electronic ISBN: 978-3-031-68803-4

Copyright Year: 2024
DOI: https://doi.org/10.1007/978-3-031-68803-4_5

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