From the start of the outbreak, digital finance providers were seen as a solution to some of the effects of COVID-19. Mobile money providers potentially offer a safer alternative to cash and some governments immediately turned to digital solutions to distribute much needed cash relief. That digital providers offered creative solutions under pressure is laudable, but perhaps not surprising, as most digital services are born from an opportunity to improve a dysfunctional system.
While digital financial services have undoubtedly supported many households during the pandemic, they still do not reach many households, especially the poorest, even in the countries with the highest rates of penetration. The barriers to entry to the digital finance world— a phone, electricity, literacy, numeracy, and cash—cannot be ignored. So, as governments and other institutions rely on digital solutions to fight the pandemic, both virological and economic, they need to think critically about who is left out of those solutions, in order to avoid exacerbating inequality and contributing to financial re-exclusion.
On June 26th, we hosted a webinar on digital finance during the pandemic. In closing, our moderator Tim Ogden asked panelists to share one thing they were most encouraged by, and one thing they were most worried about. Here are their answers.
Gregory Chen, CGAP
I am encouraged by: The crisis is accelerating needed investment in digital
“Some of the investment that countries have made in building a more responsible DFS system are starting to show their colors and prove themselves. I think it’s also accelerating some of the needed changes in countries that have perhaps not invested sufficiently before. ”
I am concerned about: Growing the digital divide
“I think while we might include more people, we might also raise a higher barrier for those who are left out. Digital cuts two ways— it does allow us to reach more people and solve all sorts of problems for them. But we’re left with a moat around our larger castle, and getting inside is a harder leap. We have to acknowledge the duality of the transformation that’s underway.”
Tamara Cook, FSD Kenya
I am encouraged by: The crisis is a chance to make finance work better for the poor
“The hope that I have is that we can use this opportunity to actually figure out how finance matters and change the way finance works, so that it will work better for the people that we care about. This is particularly important for vulnerable groups such as low-income people, women and the youth.”
I am concerned about: Getting people more credit is a short-term solution; we need long-term thinking
“My worry is that, at least in Kenya, there are a lot of conversations around getting more credit to people because they’re having problems. I’m afraid that’s a short-term solution, what we need to be thinking about are what are the longer term solutions that will allow people to not only maintain and be resilient, but build back in a different way, and how can finance be a part of that.”
Salah Goss, Mastercard
I am encouraged by: New ways of doing public-private partnerships
“Public-private partnerships have been done in a way that I haven’t seen before, in terms of overcoming a lot of the lost-in-translation hurdles for public and private sector partners to work together, and work in a way that really brings private sector assets to bear. I’ve also seen FinTech and other companies really combining assets to solve problems quickly.”
I am concerned about: We lose focus on the customer-first mindset
“When you’re trying to do something quickly, or when you have short-term thinking, it risks having technology that divides rather than unites. So, we have to keep customer needs and put the customer at the center in mind even as we try to do things quickly.”
Moonmoon Shehrin, BRAC
I am encouraged by: We can bring a lot of clients to digital more quickly than without the crisis
“The silver lining in this unprecedented disaster is that it allowed for faster implementation of digital financial interventions. Clients that are taking up digital transactions now, we hope will be more likely to use more digital products and services in the near future.”
I am concerned about: Ensuring policy and regulation catch up with the changes
“What I’m worried about is that with many MFIs entering the digital space, there is a need for policy regulation. In order to best serve our clients, it will be important to work with the regulatory bodies on policies relating to cash-in-cash-out limits, and end-user convenience.”
Graham Wright, MSC
I’m encouraged by: The Covid-19 crisis catalyzing change
“We are seeing rapid progress toward digitization, not just of government systems, for example India’s “enabling triangle”, but also of financial institutions. This could lead to significantly enhanced quality, responsiveness and personalization of products and services for the poor, and link these to other digitized services for agriculture, education, health, etc. But we will need to think much broader than just payments, while focusing firmly on the challenges and concerns that accompany this profound shift in ways of working.”
I’m Concerned About: Consumer exclusion and protection
“Many poor people, particularly the most vulnerable and women, do not have access to SIMs or feature phones, much less smartphones – or even 3G signals. We will need to develop systems that allow the potentially excluded to access the enhanced digital services, such as those provided by the Kenya Equity Bank. In addition, many poor people do not have digital capability and we will need to address this, as well as all the privacy and protection issues (particularly in the context of digital credit) that all of us are grappling with right now.”
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Thank you again to our panelists and everyone who attended the webinar. If you couldn’t join us live on, you can watch a recording of the webinar here.