Social innovation a solution for financial inclusion

Introduction Comment by Mobolaji Ibitoye Adebayo: I think it would be helpful for you to outline your argument and use the outline to write an introduction that reads a bit like an abstract of the paper. That way the reader understands what your point is and where you are going with the paper. As it currently stands it’s not until page 3 that you mention Africa, and moving beyond that page it seems that Africa is the focus/point of the paper.

Financial inclusion involves initiatives that provide available, accessible and affordable financial services to all members of a population. With innovative technology and social trends, every person in a given population has the chance to access and make use of financial services. The accessibility of financial services to all people results in economic growth across the populace. Social innovation is one of the ways that financial inclusion can be achieved. Social innovation refers to social enterprise, entrepreneurship and technological innovations which result in social benefits, corporate social responsibility and open innovation. Comment by Mobolaji Ibitoye Adebayo: Actually not sure that this whole piece is necessary Comment by Microsoft Office User: Not sure what you mean by this

Financial Inclusion

The financial growth of a country, region or continent is dependent on several factors. One such factor is a shared prosperity of the people in the region. While a small percentage of the population may control the larger portion of the economy, as seen in most countries, financial inclusion is based on general population prosperity (Redford, D. 2017, 34). In the past, great financial wealth was reserved for a select few in the population. Such people controlled the economy. Only they were allowed to access financial services like banking, loans, and insurance. The majority of the population had no access to such services. The informal financial methods used were not enough to bring about much change in the society. Economic growth for the majority was limited. A need arose for financial inclusion when it was evident that a country cannot be economically strong when the major part of its population lived in poverty. Since, even in poverty, people still worked to make a living, financial inclusion was predicted to improve the economic status of the poor. Providing people with affordable financial services was the irrefutable way to go. Accessible and affordable financial services were likely to fuel economic growth in a largely untapped way. At the time, the activity might have seemed a loss to many financial service providers. The risk was in providing services to a population that had very low and unreliable income, was remotely located and had little to no financial literacy. Comment by Mobolaji Ibitoye Adebayo: Based on or is the basis of? Comment by Microsoft Office User: Please use numbered citations insteadAlso, unless you’re using direct quotes from the sources (in which case you need to add “” around the quoted text), you do not need to include the page number in your citation. Comment by Mobolaji Ibitoye Adebayo: I’d use a different word here Comment by Mobolaji Ibitoye Adebayo: majority

Financial inclusion of the majority of the population has been on a steady rise over the past 30 years. For economic growth to be sustainable and regular, inclusion is inevitable. An untapped potential in even greater economic growth was evidenced in the economically marginalized population. In the past, the majority of the population had to work extra hard to achieve a fraction of what the rich had. Although an average economic growth trend may have been seen, the financial gap between the rich and the poor was massive. However, since the 1970s, when microcredit was born, the capacity for economic growth has been availed to most people in developed countries. Comment by Mobolaji Ibitoye Adebayo: necessary might be a better word here Comment by Mobolaji Ibitoye Adebayo: I don’t’ think this is the right word Comment by Mobolaji Ibitoye Adebayo: Comment by Mobolaji Ibitoye Adebayo: You just went from talking about the poor majority in most countries to discussing devel

Currently, countries that practice financial inclusion have experienced great economic growth. Greater wealth distribution is also evidenced, with the majority of the people having an ability to live above the poverty threshold. Entrepreneurship has thrived as more people have access to financial services that enable them to build successful businesses (Redford, D. 2017, 26). More people can now afford insurance, have household savings and a regular source of income, sometimes even more than one. The wealth gap has greatly reduced, with the birth of middle-class income earners. Middle-class income has enabled people to more easily cross the bridge to wealth, unlike the in decades past. Comment by Mobolaji Ibitoye Adebayo: Has it really though??

Small and micro enterprises (SMEs) have been in existence since time immemorial. There have always been people who provide goods and services at a small scale in exchange for money. However, SMEs have proliferated and become more formal in the last three decades. With the advent of financial inclusion, formal financial services have seen to the growth and expansion of small businesses. Upscale financial service providers that serve the wealthy are still in existence. However, other service providers have cropped up that have the less financially advantaged as their primary clients (Macchiavello, E. 2017, 12). The ease with which the majority of the population can now access formal financial services has played a great role in SME proliferation.

As recently as the 1990s, Africa was still lagging behind other continents as far as financial inclusion was concerned. Many people had no access to formal financial services. Africa's economy largely depends on farming and horticulture. Large-scale farming is mainly done by the few wealthy individuals who own large portions of land. However, the majority of the population in farming practice it on a small scale. Most farming takes place in the rural areas. Formal financial services had yet to reach these areas, where a great proportion of the population reside. Those with some financial literacy had to travel miles to access these services in an urban center. Still, such areas were grossly underserved. Comment by Mobolaji Ibitoye Adebayo: There’s a mix of past and present tense in this paragraph. Not exactly sure if you mean all of this was in the past or if it is still true in the present. Comment by Mobolaji Ibitoye Adebayo:

Limited financial literacy meant that not many people knew they required formal financial services. People, therefore, seldom sought such services since they did not know about them and were doing fine without them. However, there is great potential for growth in farming and other sectors contributing to SME in Africa. Although strides have been made since the 1990s that have seen to better economic growth in such areas, more still needs to be done (Redford, D. 2017, 42). Basic financial education has increased the need for formal financial services in many countries in Africa. Sustainable economic growth is evidenced by the equitable provision of financial services. Comment by Mobolaji Ibitoye Adebayo: How? Comment by Mobolaji Ibitoye Adebayo: How?

The future of financial inclusion in Africa lies in the greater accessibility of financial services to the most remote of populations. Such inclusion not only uplifts the economic status of marginalized populations but also allows them a chance to contribute to the national economic growth. Provision of microcredit facilities and services inspire the growth of SMEs. An extension of financial institutions to rural settings in Africa is paramount to their economic growth. Accessibility of formal financial services to poor people with a potential of financial growth is a huge contributor to financial inclusion in Africa. Increasing financial literacy in the poor populations also plays a major role in their financial inclusion. Comment by Mobolaji Ibitoye Adebayo: Is or will be? Comment by Mobolaji Ibitoye Adebayo: Plays or will play?

Social Innovation in Africa

Social innovation is currently the greatest avenue for financial inclusion in Africa. Social innovation encompasses entrepreneurial, economic and technological innovations that benefit the society. Such innovations inspire and encourage the growth of the society by providing easy means for them to achieve this. Social innovations also follow the needs of the society by identifying them and providing ways to counter them. Most of the time, such innovations are created to alleviate a social discomfort or suffering at the least possible cost to the society (Seelos. C. & Mair, J. 2017, 32). Social innovations lead to the transformation of the society through empowerment, capacity building and the development of new, affordable, convenient products and services. Comment by Mobolaji Ibitoye Adebayo: Address might be a better word here

The proliferation of social innovation for financial inclusion in Africa started in the late 1990s to the early 2000s. At that time in Africa, financial services, business growth, and insurance were largely reserved for the rich. For a person to open a bank account, one required an existing account holder to act as a referee/guarantor. Opening a bank account was a tedious affair. When one got past that hurdle, they were met by bank charges that sometimes exceeded their income. Bank loans were inaccessible to the majority of the society. Financial services were a burden to the poor, who preferred to do without them. Insurance services were reserved for the rich who could afford to pay a large yearly premium. The need for financial inclusion of the poor majority of the population led to innovations that supplied this need. Comment by Mobolaji Ibitoye Adebayo: Wrong word choice

In a global policy forum held in Mexico in 2011, the Maya Declaration was made. This declaration committed member states to adopt measures leading to the financial inclusion of all segments of their populations, for greater economic growth. Several African nations, through their central banks, made a commitment to enact the Maya Declaration Policy. This included Burundi, Ethiopia, Kenya, Malawi, Nigeria, Rwanda, Tanzania, Uganda, and Zambia (Earne, J. Et al. 2013, 16). Others have since followed suit. The Maya Declaration committed the governments to enact policies that empowered financially marginalized populations. Such empowerment would lead to the transformation of their populations' financial abilities and enhance economic growth.

Since 2011, many financial institutions have come up that provide affordable financial services to their societies. Governments in Africa began by registering savings and credit cooperations (SACCOs) that provided affordable savings and microcredit services. However, with the sheer numbers of low-income people, it was a challenge to serve their needs without bank accounts (Seelos. C. & Mair, J. 2017, 49). Microfinance institutions were then born which provided a broader range of services than SACCOs. People could now access loans of as low as $1 at very low interest rates. Saving an equally low amount of money was made possible. Such microfinance institutions later grew to become full-fledged banking institutions, serving the society across the board.

Banking Services Comment by Mobolaji Ibitoye Adebayo: Guessing this is an example of a social innovation success? If so label it as such. Or if you plan to highlight examples of successes in different sectors/services then you can mention that above so this heading doesn’t come out of left field

Kenya's Equity Bank Ltd is a success story of a people's bank. Starting off as a microfinance institution in 1984, Equity Bank Ltd became a registered bank whose focus was financial inclusion. A majority of the Kenyan people were low-income earners who had few financial services available to them. Equity Bank Ltd saw the niche and quickly took up the opportunity (Ndemo, B. & Weiss, T. 2016, 21). Opening a bank account was made easy, with the only requirement being a national identity card. Advertisements were made all over the country that anyone could now have a bank account and access financial services like microcredit, savings, and financial advice. Bank charges were at a bare minimum, with some of the services offered for free. Comment by Mobolaji Ibitoye Adebayo: When?

Equity Bank Ltd currently boasts almost 50% of active bank accounts in Kenya, most of which are owned by low-income earners in remote, rural and semi-urban areas. The introduction of agency banking expanded Equity Bank Ltd.'s reach further into unchartered territories. The bank has also opened branches in numerous African countries, making it the largest, most recognized bank in Kenya and the East and Central Africa Region. Equity Bank Ltd.'s success story hinges greatly on the risk it took in creating financial inclusion opportunities for the majority, low income earning part of the population.

Most African banks currently run agencies in their countries. Apart from creating employment and an opportunity for investment, agency banking services enable clients to access simple banking services without necessarily going to a banking hall. One of the greatest advantages of agency banking was the minimization of long queues that had plagued banking halls following an increase in the client base. The efficiency of banking services like withdrawal, deposit, and account opening was made easier. Banks also found a way to reach remote areas of their regions without necessarily investing in building or renting huge spaces to create banking halls.

Digital Financial Services

Digital Financial Services (DFS) have taken African countries by storm in their quest for financial inclusion. Mobile money has enabled people from all walks of life to easily send and receive cash. Ghana is an example of a nation that is making tremendous strides as far as DFS is concerned. Mobile phone service providers have brought in an innovative avenue to the achievement of financial inclusion (Seelos. C. & Mair, J. 2017, 66). By 2016, researchers estimated Africans with mobile money accounts at more than 100 million. Affordability of mobile phones and digital communication was the foundation on which mobile money was laid. DFS have offered services such as savings, credit and insurance services, giving access to people who could otherwise not reach them. Comment by Mobolaji Ibitoye Adebayo: Awkwardly phrased

M-PESA from Kenya's largest mobile phone service provider, Safaricom, is another great example of a successful DFS. M-PESA, launched a decade ago, and pioneered mobile money services in Kenya. Currently, other platforms have joined the bandwagon, serving more than 30 million people. Kenyan mobile money platforms have enabled transactions to happen across the country, causing businesses to thrive and improving the economic status of its people. Financial institutions have collaborated with the mobile phone service providers to give access to financial services (Ndemo, B. & Weiss, T. 2016, 58). This trend is seen across the continent, with people slowly moving towards cashless transactions and unsecured, short-term loans.

In the recent years, banks and private credit companies have made credit services available at the touch of a button. Digital loans have increased the chance of financial inclusion by easily availing low amounts of unsecured loans. Using mobile applications or mobile phone service providers as a platform, registration for these credit services have been exceedingly simplified. SME owners and the populace in general therefore have access to borrowed money that they pay back after a specified period. Although some of the interest rates charged are high, the easy and convenient availability of the loans makes up for that weakness.

The best, most effective social innovations are the ones that serve the society at their most convenient and least cost. Social innovations should satisfy a need in the community. Financial inclusion is a need as far as personal development and a country's economic growth are concerned. The majority of the population in any society is made up of economically challenged people. Most of the time, these people have economic activities they carry out. The lack of affordable and efficient financial services hinders their activities from growth. With financial inclusion fueled by social innovation, such small income activities can easily be turned into a life-sustaining and economically upright ventures.

A symbiotic collaboration between financial service providers and non-financial social services results in affordable and efficient financial inclusion innovations. Banks working together with mobile service providers avail simple, affordable and efficient financial services at the touch of a button. With the advent of mobile phone technology, more than 70% of the population in Africa own mobile phones (Macchiavello, E. 2017, 37). This includes people in marginalized areas and low-income earners. Connecting mobile service providers and financial institutions works to provide all mobile device owners with financial services at their convenience. Low-income earners can, therefore, open bank accounts, contribute to their savings accounts, and pay health insurance premiums in affordable installments.

Africa has made tremendous strides in financial inclusion efforts. The growth of SMEs in number and stature is a testament to this fact. Although much still needs to be achieved, the track record is encouraging. People are coming up with innovative ways to grow financially. Such innovations, when recognized and invested in, bring about social and economic change in a country. Inclusive economic growth involves impartiality in the distribution of wealth. Economies where the wealth gap is minimized record higher economic growth rates than others. In such nations, people living below the poverty threshold are few and even those are well taken care of by their governments.

African nations that committed themselves to the Maya Declaration Policy have continued to work towards the financial inclusion of their people. Affordability of financial services is just as important as accessibility and convenience. When financial services are affordable, people find it in their favor to take advantage of them (Earne, J. Et al. 2013, 25). Financial service providers also challenge small business owners to dare taking the risks of expanding their businesses. Business ideas have grown into conglomerates through affordable financial services and sound financial advice from their service providers. Since 2011, business owners in Africa have increased by 65%, indicating a potential for business growth in the continent.

Conclusion

Social innovation is one of the ways that financial inclusion can be achieved. Financial inclusion in Africa has lagged behind other continents. However, great strides have been made in the 2000s. Financial institutions that started with the low-income earners in mind have grown into recognized banks. Equity Bank Ltd is a great example of a financial service provider that ran with the idea of financial inclusion. Agency banking is a social innovation that brought financial services closer to the people. The ease of acquiring and operating financial services has grown the confidence that people have in taking advantage of these services. Low-income earners and populations in marginalized areas of the African continent now enjoy affordable financial services.

Social innovations are innovations made for the benefit of the society. Social innovation is one of the great ways that financial inclusion can be achieved. In the recent past, innovations have come up that make the lives of Africans that much more affordable. Nations have also experienced economic growth as a direct effect of social innovations. DFS provision has brought financial services to people's hands. More than 70% of Africa's population own mobile phone devices. With the availability of a mobile phone, people can now open bank accounts, and access affordable loans and insurance services. Such innovations drive the economic growth of societies and the continent at large. Comment by Mobolaji Ibitoye Adebayo: A repeat of the first sentence in this paragraph

Financial inclusion in Africa has a long way to go. However, with the strides made so far, great hope lies ahead. The social innovations that continue to be introduced to the African continent have shaped the economic growth of its member countries. Strong economies begin from the society and the hard work of its people. Enabling the success of the people's efforts through financial inclusion is a major step in achieving economic growth. Social innovations such as DFS, agent banking, and unsecured, short-term digital loans have played a great role in facilitating financial inclusion in Africa.

References

EARNE, J., LEDGERWOOD, J., & NELSON, C. (2013). The new microfinance handbook: a financial market system

MACCHIAVELLO, E. (2017). Microfinance and financial inclusion: the challenge of regulating alternative forms of finance.

NDEMO, B., & WEISS, T. (2016). Digital Kenya: an Entrepreneurial Revolution in the Making. London, Palgrave Macmillan

REDFORD, D. T. (2017). Developing Africa's financial services: the importance of high-impact entrepreneurship.

SEELOS, C., & MAIR, J. (2017). Innovation and scaling for impact: how effective social enterprises do it.