Innovation and financial inclusion: A review of the literature

Abstract

Financial innovation is a major driver of financial inclusion, and
its relationship with inequalities in income and opportunities
raises some important policy questions. This review covers the
following areas of financial inclusion: savings; microinsurance;
payments; banking services for the excluded poor; financial
literacy; and consumer protection. The review shows that increasing
financial inclusion should go beyond the traditional banking
sector. This is because mobile network operators have, in most
cases, initiated mobile money services, although this is not within
the mandate for which they were initially licensed. This has aided
the provision of financial services to the majority without bank
accounts. There is now competition between commercial banks and
mobile network operators, especially when the latter expand
financial products on their networks. Partnerships should be
established between and among commercial banks as well as between
mobile network operators providing mobile money services to fast
track interoperability. In most cases, the appropriate
institutional and regulatory framework was absent at the inception
of mobile money services. Therefore, there is a need for an
institutional framework composed of regulators of
telecommunications; for mobile network operators as well as central
banks to expand financial inclusion without compromising the
strategies aimed at eliminating contemporary global challenges such
as money laundering.