Opinion: Reaching the world’s unbanked

There is no shortage of theories on how to spur financial inclusion. With 1.7 billion people living without access to basic financial services such as small loans and savings accounts, efforts to reach the world’s unbanked have received significant, and merited, attention. But what we’ve discovered through our work on the ground in emerging markets is that increasing access to finance alone isn’t sufficient.

Globally, 1.1 billion people have no electricity and 4 million die each year because of household air pollution from inefficient fuels. Pair this with few opportunities to access loans and build credit, and unbanked communities are routinely prevented from making important investments in their family’s health and economic well-being.

Here, we see an opportunity. Moving forward, there is profound potential to deliver those services through mechanisms that will also increase financial inclusion. By leveraging innovative payment technologies, we can both ensure that necessities are affordable and extend crucial financial tools to the world’s unbanked.

As partners, we are approaching this challenge from both sides of the equation. One of us leads BrightLife — a social enterprise born out of the microfinance pioneer FINCA International — which distributes clean energy products such as solar home systems, solar lanterns, and cookstoves to off-grid customers in Uganda. The other co-founded Solaris Offgrid, a company that provides pay-as-you-go solutions, like PaygOps, a SaaS lease management system, which allows customers to pay for these energy products over time using their mobile phones, making energy access affordable and convenient. PaygOps gives a point of financial connection to previously unbanked families while unlocking the scale-up barriers of last-mile distributors in off-grid solar, like BrightLife.

Based on our work, we’ve learned that providing these essential services through a pay-go model has the dual benefit of integrating and accustoming customers to an array of financial services. While seemingly simple, these transactions become the basis for sustained financial relationships with otherwise financially excluded customers.

Specifically, pay-go platforms enable unbanked and under-banked customers to build credit. Data and insights on payment history help social enterprises and financial service providers better understand customers and their needs. This, in turn, enables enterprises to both improve their services and build customer credit profiles. In our case, these profiles are used to transition low-income customers to FINCA Uganda, a local microfinance institution, unlocking credit and savings services without customers ever needing to step into a traditional bank.

By developing these connections with customers, pay-go and mobile money technologies can potentially bridge the gap to more impactful financial services. Partnerships that marry basic services, pay-go technologies, and more traditional microfinance and banking institutions can supply customers with the essentials for a thriving family, while also sowing the seeds of financial inclusion.

No matter where you live, people need access to necessities that are quality and affordable, such as responsible finance and clean energy. Not only do these services ensure better health outcomes for individuals and communities alike, but they also create the foundations for economic growth and upward mobility.

Our approach, using basic services as a pathway to financial inclusion, has the potential to transform both poverty alleviation efforts and the meaning of a bank in off-grid communities. And as increasing numbers of financial technology products enter emerging markets, it’s important to consider how best to leverage their innovations and insights to expand the scope of financial inclusion in the process.