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2019 | OriginalPaper | Chapter

6. The Concept of Financial Inclusion

Author : Sunduzwayo Madise

Published in: The Regulation of Mobile Money

Publisher: Springer International Publishing

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Abstract

This chapter discusses the concept of financial inclusion. Financial exclusion usually affects people on the margins of society, especially in sub-Saharan Africa. Financial exclusion is a manifestation of social exclusion. The chapter, however, argues that financial inclusion as a concept suffers from being associated with the formal financial system. Using the study of a local village bank, it calls for a redefinition of the concept to reflect local contexts existing in most parts of sub-Saharan Africa. In most parts of sub-Saharan Africa, which are not served by banks or other financial services providers, because of the proliferation of mobile phones, mobile money may provide the important interlink between the informal and formal financial system and be a driver towards attaining financial inclusion.

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Mandira Sarma and Jesim Pais (2011) ‘Financial Inclusion and Development’ 23 Journal of International Development 613, p. 614, http://onlinelibrary.wiley.com/doi/10.1002/jid.1698/pdf. 20 April 2018.

Ibid., p. 626.

Kevin Donovan (2012) ‘Mobile Money for Financial Inclusion’ in Information and Communications for Development 2012 (World Bank, Washington, DC), p. 62.

Ibid.

Mas and Radcliffe (2011), p. 172.

Michael Chibba (2009) ‘Financial Inclusion, Poverty Reduction and the Millennium Development Goals’ 21 (2) The European Journal of Development Research 213, pp. 214–6, https://doi.org/10.1057/ejdr.2008.17. 20 April 2018.

Ibid., p. 213.

Asli Demirguc-Kunt and Leora Klapper (2012) Measuring Financial Inclusion: The Global Findex Database (Policy Research Working Papers, The World Bank), p. 2, https://laomfa.org/wp-content/uploads/formidable/7/Measuring-Financial-Inclusion_The-World-Bank-2010.pdf. 20 April 2018.

Ibid., p. 3.

Ibid.

Ibid., p. 26.

CPSS (2012), p. 33.

Donovan (2012), p. 71.

S Mahendra Dev (2006) ‘Financial Inclusion: Issues and Challenges’ 41 (41) Economic and Political Weekly 4310, p. 4310, http://www.jstor.org/stable/4418799. 20 April 2018.

Interview at Reserve Bank of Malaŵi (RBM) MicroFinance Division on 19 August 2015.

Ibid.

Dev (2006), p. 4310.

Rakesh Mohan (2008) ‘Economic Growth, Financial Deepening and Financial Inclusion’ in Manoranjan Sharma (ed) Dynamics of Indian Banking: Views and Vistas (Atlantic Publishers, New Delhi), p. 100.

Franklin Allen and others (2012) The Foundations of Financial Inclusion (Policy Research Working Papers, The World Bank), http://documents.worldbank.org/curated/en/348241468329061640/pdf/wps6290.pdf. 20 April 2018.

Mohan (2008), pp. 101–2.

Ibid., p. 116.

Sarma and Pais (2011), p. 619.

Allen and others (2012), p. 1.

Claire Luke (2015) ‘Critique of Microfinance Raises Questions about Efficacy, Donor Support of the Industry’ (Devex Impact), https://www.devex.com/news/critique-of-microfinance-raises-questions-about-efficacy-donor-support-of-the-industry-85617. 20 April 2018.

Ibid.

Ibid., referring to Esther Duflo of the Abdul Latif Jameel Poverty Action Lab.

Dittus and Klein (2011), p. 3.

Ibid., pp. 3–4.

Di Castri (2013), p. 7.

A confirmation of the misunderstanding that mobile money is a component of microfinance.

RBM (2015), p. 14.

RBM (2008), p. 6.

Dermish et al. (2012), p. 4.

Di Castri (2013), p. 8.

RBM MicroFinance Division (2015).

RBM (2013) National Payment Systems Annual Report 2012 (Reserve Bank of Malawi), p. 11, http://www.rbm.mw/documents/payment_systems/payment%20systems%20annual%20report%202012.pdf. 10 February 2014. It may be argued that at the end of 2014, an evaluation can be undertaken to see if this rather ambitious target has been achieved.

Finscope (2014), p. 19.

Ibid.

RBM (2013), pp. 11–2.

Anon (2010) ‘Mobile Cellular Subscriptions (per 100 People) in Malawi’ (Trading Economics), http://www.tradingeconomics.com/malawi/mobile-cellular-subscriptions-per-100-people-wb-data.html. 11 March 2018.

Lancaster (2015).

Finscope (2014), p. 2.

Mbekeani (2015).

MACRA (2015).

Interview with Andrew Nyirenda Malawi Communications Regulatory Authority (3 August 2015).

Ibid.

Computed using the data provided by MACRA and the two mobile money service providers.

Mkoloma (2015).

Reserve Bank of Malaŵi (2018) ‘Monthly National Payment System Report, May 2018’ Issue 5 Vol 6, https://www.rbm.mw/PaymentSystems/GetContentFile/?ContentID=26223. 2 December 2018.

Ibid.

Mbekeani (2015).

Ibid.

Mkoloma (2015).

Ibid.

Dittus and Klein (2011), p. 7.

Ibid., p. 8.

Ibid., p. 11.

RBM HQ (2015).

Ibid.

RBM (2013), pp. 11–2.

NSO (2009) 2008 Population and Housing Census (Malawi Government [National Statistics Office], Zomba), http://www.mw.one.un.org/wp-content/uploads/2014/04/Malawi-Population-and-Housing-Census-Preliminary-Report-2008.pdf. 29 April 2018.

Anon (2016) ‘Malawi Unemployment Rate 2005–2016’ (Trading Economics), http://www.tradingeconomics.com/malawi/unemployment-rate. 4 May 2018.

In the 2008 census, 41% of women were illiterate. 36% of the population was illiterate—(2009) 2008 Population and Housing Census (Malawi Government [National Statistics Office], Zomba), p. 14.

Anon (2014) ‘Malawi Unemployment Rate’ (Trading Economics), http://www.tradingeconomics.com/malawi/unemployment-rate. 28 May 2018.

Anon (2013) ‘Malawian Snapshot: 2013 Quarter 2’ (KPMG, Malawi), p. 1, https://www.kpmg.com/Africa/en/KPMG-in-Africa/Documents/2013%20African%20Country%20Reports/KPMG_Malawi%202013Q2.pdf. 13 September 2018.

Ngwu (2015), p. 313.

Kihagi (2013).

Although the total number of mobile phones indicates saturation, it must be borne in mind that most users have both a TNM and Airtel phone. Therefore, the actual number of people with mobile phones may be much less.

Alexander Borda-Rodriguez and Sara Vicari (2014) ‘Rural Co-operative Resilience: The Case of Malawi’ 2 (1) Journal of Co-operative Organization and Management 43, p. 4, http://oro.open.ac.uk/40390/1/Rural%20co-operative%20resilience%20The%20case%20of%20Malawi.pdf. 13 December 2018.

Chitemwano is a Tumbuka name meaning Love. Tumbuka is a language largely spoken in north Malaŵi.

Personal observation and views from Interview with Chitemwano Club Chairperson; NyaMoyo (10 August 2015). Munthali Village is situated in an area called Madise, in the District of Mzimba, in the Northern part of Malaŵi. Madise is the author’s rural home.

Finscope (2014), p. 2.

RBM MicroFinance Division (2015).

Ibid.

Business Groups Incorporation Act (Papua New Guinea, 1974), http://www.paclii.org/pg/legis/consol_act/bgia1974365/. 21 July 2018.

RBM HQ (2015).

Ibid.

Hernando de Soto (2001) The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else (Black Swan, London), p. 6.

Ibid.

Ngwu (2015), p. 316.

Dev (2006), p. 4313.

Ibid.

A town in the southern part of Malaŵi.

RBM MicroFinance Division (2015).

In interviews, both Airtel Money and TNM Mpamba outlined new products. However, an undertaking was made that these would not be released as they were still considered company secrets. Interestingly, both operators seem to be operating on a similar wavelength with regard to the scope of the new services.

Mbekeani (2015).

100

RBM HQ (2015).

101

To poor families and girl-headed households.

102

Mkoloma (2015).

See similar views expressed by Di Castri (2013), p. 8.

103

Financial Sector Development Strategy: 2010–2015 (2015).

104

That is the straight-line distance. The actually travelling distance is most likely much higher because of bad terrain and road network—‘Distance from Galasi Madise to Mzuzu’, http://malawi.places-in-the-world.com/929816-925475-distance-from-galasi-madise-to-mzuzu.html. 16 December 2018.

105

Interview with Theodose Twea Pensioner (19 August 2015).

Ahmed Dermish, Joel Phiri and Caitlin Sanford (2012) Mapping the Retail Payment Services Landscape Malawi (FinMark Trust), http://www.finmark.org.za/wp-content/uploads/pubs/Rep_RPS_landscape_Malawi_2012.pdf. 10 February 2018.

Alexander Borda-Rodriguez and Sara Vicari (2014) ‘Rural Co-operative Resilience: The Case of Malawi’ 2 (1) Journal of Co-operative Organization and Management 43, http://oro.open.ac.uk/40390/1/Rural%20co-operative%20resilience%20The%20case%20of%20Malawi.pdf. 13 December 2018.

Anon (2013) ‘Malawian Snapshot: 2013 Quarter 2’ (KPMG, Malawi), https://www.kpmg.com/Africa/en/KPMG-in-Africa/Documents/2013%20African%20Country%20Reports/KPMG_Malawi%202013Q2.pdf. 13 September 2018.

Anon (2014) ‘Malawi Unemployment Rate’ (Trading Economics), http://www.tradingeconomics.com/malawi/unemployment-rate. 28 May 2018.

Anon (2016) ‘Malawi Unemployment Rate 2005–2016’ (Trading Economics), http://www.tradingeconomics.com/malawi/unemployment-rate. 4 May 2018.

Asli Demirguc-Kunt and Leora Klapper (2012) Measuring Financial Inclusion: The Global Findex Database (Policy Research Working Papers, The World Bank), https://laomfa.org/wp-content/uploads/formidable/7/Measuring-Financial-Inclusion_The-World-Bank-2010.pdf. 20 April 2018.

Business Groups Incorporation Act (Papua New Guinea, 1974), http://www.paclii.org/pg/legis/consol_act/bgia1974365/. 21 July 2018.

Claire Luke (2015) ‘Critique of Microfinance Raises Questions about Efficacy, Donor Support of the Industry’ Devex Impact, https://www.devex.com/news/critique-of-microfinance-raises-questions-about-efficacy-donor-support-of-the-industry-85617. 20 April 2018.

CPSS (2012) Innovations in Retail Payments (Bank for International Settlements [Committee on Payment and Settlement Systems], Basel, Switzerland), http://www.bis.org/cpmi/publ/d102.pdf. 20 February 2018.

Financial Sector Development Strategy: 2010–2015 (2015) (Government of Malaŵi), http://www.finance.gov.mw/fspu/index.php/financial-sector-laws/strategy-documents/55-malawi-financial-sector-development-strategy-2010-2015/file. 21 December 2018.

Finscope (2014) FinScope Consumer Survey Malawi 2014 (Finmark Trust, Midrand, Johannesburg), http://www.finmark.org.za/wp-content/uploads/2016/08/FS-Malawi-2014-Launch-presentation.pdf. 5 May 2017.

Francis N. Ngwu (2015) ‘Promoting Formal Financial Inclusion in Africa: As Institutional Re-examination of the Policies with a Case Study of Nigeria’ 16 (4) 306 Journal of Banking Regulation, http://link.springer.com/article/10.1057/jbr.2014.13. 15 December 2018.

Henry Lancaster (2015) ‘Malawi—Telecoms, Mobile and Broadband—Statistics and Analyses’ (Paul Budde Communication Pty Ltd), https://www.budde.com.au/Research/Malawi-Telecoms-Mobile-and-Broadband-Statistics-and-Analyses. 11 October 2018.

Hernando de Soto (2001) The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else (Black Swan, London).

Ignacio Mas and Daniel Radcliffe (2011) ‘Mobile Payments Go Viral: M-PESA in Kenya’ 32 The Capco Institute Journal of Financial Transformation 169, http://www.capco.com/sites/all/files/journal-32_article-16.pdf. 15 December 2018.

Interview with Webster Mbekeani Head, Mobile Money Division, TNM (20 August 2015).

Interview with Bigboy Mkoloma Product and Development Manager, Airtel Money (7 August 2015).

Kevin Donovan (2012) ‘Mobile Money for Financial Inclusion’ in Information and Communications for Development 2012 (World Bank, Washington DC).

MACRA (2015) Subscriber Trends 2000–2014 (Malaŵi Communications Regulator Authority).

Mandira Sarma and Jesim Pais (2011) ‘Financial Inclusion and Development’ 23 Journal of International Development 613, http://onlinelibrary.wiley.com/doi/10.1002/jid.1698/pdf. 20 April 2018.

Michael Chibba (2009) ‘Financial Inclusion, Poverty Reduction and the Millennium Development Goals’ 21 (2) The European Journal of Development Research 213, https://doi.org/10.1057/ejdr.2008.17. 20 April 2018.

Peter Dittus and Michael Klein (2011) On Harnessing the Potential of Financial Inclusion (BIS Working Papers No. 347, Bank of International Settlements, Basel), http://www.bis.org/publ/work347.pdf. 20 February 2018.

Rakesh Mohan (2008) ‘Economic Growth, Financial Deepening and Financial Inclusion’ in Manoranjan Sharma (ed) Dynamics of Indian Banking: Views and Vistas (Atlantic Publishers, New Delhi).

RBM (2008) Malawi National Payment System Vision Strategy Framework for the Period 2009–2013 (Reserve Bank of Malawi), http://www.rbm.mw/documents/payment_systems/NPS%20Vision%20%20Strategy%20Framework%20December%202008%20Final.pdf. 10 February 2018.

RBM (2013) National Payment Systems Annual Report 2012 (Reserve Bank of Malawi), http://www.rbm.mw/documents/payment_systems/payment%20systems%20annual%20report%202012.pdf. 10 February 2014.

RBM (2015) Financial and Economic Review (Reserve Bank of Malawi), https://www.rbm.mw/Home/GetContentFile?ContentID=7492. 14 December 2018.

RBM (2018) ‘Monthly National Payment System Report, May 2018’ Issue 5 Vol 6 (Reserve Bank of Malaŵi), https://www.rbm.mw/PaymentSystems/GetContentFile/?ContentID=26223. 2 December 2018.

S Mahendra Dev (2006) ‘Financial Inclusion: Issues and Challenges’ 41 (41) Economic and Political Weekly 4310, http://www.jstor.org/stable/4418799. 20 April 2018.

Selipha Kihagi (2013) ‘Malawians to Pay for Fuel Services Using Airtel Money’ (HumanIPO), http://www.humanipo.com/news/36717/malawians-to-pay-for-fuel-services-using-airtel-money/. 12 March 2018.

Simone Di Castri (2013) Mobile Money: Enabling Regulatory Solutions (GSMA, London), http://www.gsma.com/publicpolicy/wp-content/uploads/2013/02/GSMA2013_Report_Mobilelectronicmoney-EnablingRegulatorySolutions.pdf. 20 February 2018.

Title: The Concept of Financial Inclusion
Author: Sunduzwayo Madise
Publisher: Springer International Publishing
Book: The Regulation of Mobile Money
Print ISBN: 978-3-030-13830-1

Electronic ISBN: 978-3-030-13831-8

Copyright Year: 2019
DOI: https://doi.org/10.1007/978-3-030-13831-8_6

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