Why financial inclusion is the key to a thriving digital economy

The World Bank estimates that 1.4 billion people worldwide are unbanked. While the GSMA estimates that 345 million of the 400 million micro-enterprises in emerging markets are informal, highlighting a significant gap in the global financial landscape.

This lack of access to financial resources creates a major hurdle, especially for citizens and microentrepreneurs who are the lifeblood of developing economies. These people drive development, create employment opportunities and often improve the quality of life across their communities.

According to the UN, micro, small and medium enterprises (MSMEs) account for 90% of businesses, more than 70% of employment and 50% of GDP worldwide. It’s essential for them, therefore, to have access to the resources and tools they need to expand operations and manage bigger product orders and growing demand.

By leveraging digital technologies, fintech solutions can provide a sustainable means for unbanked and underserved populations to contribute to the global economy. This transformative promise is becoming a reality as innovative solutions break down barriers and drive financial inclusion at an unprecedented scale.

Telcos and technology companies are in a unique position to accelerate financial inclusion and create a more equitable financial system. Thus, they have a shared responsibility to bridge the access gap by leveraging their strengths in digital infrastructure, network connectivity, cross-border capabilities and customer reach.

Providing accessible and affordable connectivity to bridge the digital divide starts with network infrastructure. In this regard, e& recently pledged $6 billion to provide accessible and affordable network connectivity and digital services to 16 countries across the Middle East, Africa and Asia between 2024 and 2026.

The company will accelerate technology adoption in developed economies, like the United Arab Emirates and the Kingdom of Saudi Arabia, by pioneering cutting-edge innovations and expanding the application of AI, while also investing in building networks of the future to increase fibre penetration and fast mobile network speeds. This will enable affordable connectivity in emerging economies, expand network coverage and increase speed and access for individuals in areas where it’s limited or expensive. In developing economies, e&’s infrastructure investments, including the expansion of wireless broadband and fibre penetration, will bridge the digital divide and uplift communities.

In Pakistan, e& has brought fibre broadband to over one million homes and will add millions more in the next three to five years. Following a spectrum acquisition in 2021, its 4G mobile network is available to 28 million subscribers in Pakistan, serving as a crucial enabler for essential digital services and integrating communities into the digital economy.

Ultimately, e& aims to facilitate the widespread adoption of digital services, ensuring that essential services, such as mobile financial solutions and education, reach those in underserved regions, thereby bridging the digital divide and promoting sustainable development. Through connectivity, access to financial inclusion is becoming a universal possibility, with the next frontier lying in fintech innovation.

In Pakistan, where 79% of the population lacks access to financial services, e&’s subsidiary, U Bank, is working to change this. In the past five years, it has grown its loan portfolio by five times, serving more than 400,000 loan clients through more than 300 branches in mostly rural areas. The beneficiaries are the previously excluded Pakistanis who can now build a brighter future through access to microloans, savings products and digital financial services.

One beneficiary is Roohi Asif, a widow from Karachi. After her husband's passing, she struggled to afford a home while financing her children’s education. U Bank advised her about the Tankhwa loan, which she applied for and received approval for. Tankhwa is a loan facility tailored to provide salaried individuals with access to emergency funds, helping them navigate unforeseen circumstances. This loan helped Asif secure a home and repay comfortably, serving as a crucial financial lifeline during a challenging period.

In Egypt, e& and The Sovereign Fund of Egypt (TSFE) launched Erada Microfinance to provide MSMEs with access to a wide range of financial services. In addition to its digital payment and microfinance solutions, Erada invests in financial education programmes to enhance customers' understanding of financial services and improve their digital literacy.

Erada also offers training sessions, workshops and educational materials that help individuals navigate platforms and make informed financial decisions. This is crucial, considering Erada provides microloans and credit facilities to individuals who have limited or no previous access to traditional banking services. So far, Erada has disbursed a total of EGP 1.3 billion in loans to 41,000 clients, with 75% residing in rural areas and 25% in urban areas. The average loan size is EGP 25,000 (approximately $520).

Building trust with communities is vital for the success of digital financial inclusion. To foster trust, it is essential to adopt a localized approach, communicating in the local language and using simple terminology. Transparent pricing, reliable support and partnerships with local institutions are also crucial. By prioritizing these measures, digital financial inclusion initiatives can drive sustainable growth and ensure that the benefits of financial services reach underserved populations.

The true purpose of financial inclusion lies in its ability to empower individuals and businesses, foster economic growth, reduce poverty and promote social equality. By leveraging telecom infrastructure and customer insights, financial products can be tailored to fit the circumstances of individuals in underserved communities, creating a data-rich ecosystem that informs future financial products and services. This trajectory embodies the evolving dynamic of financial services, where convenience, empowerment and economic growth converge to rewrite the rules of inclusion, ultimately creating a more equitable and prosperous future.