[BLOG] Covid-19: a driving force for digital financial inclusion

[BLOG] Covid-19: a driving force for digital financial inclusion


Vincent van Dugteren

04 September | 2020

By Vincent van Dugteren, Global Financial Inclusion Sector Specialist

For many years the transition from bricks-and-mortar banking and cash-based financial services to a cashless and digital environment has been looming around the world. We’ve seen financial technology (fintech) institutions entering the financial inclusion space providing services such as payments, savings, credit, insurance, and infrastructure (see for example the 2019 overview of 50 inclusive fintechs by MIX). In order to stay relevant, existing financial institutions are increasingly looking to digitise their operations and implement digital financial services in order to serve existing clients in new ways or to tap into new segments.

At Oikocredit, we have been investing in financial inclusion for decades (we list over 350 of our partners in this sector on our website), and in recent years we have also made loans and equity investments to technology-driven financial services providers.

The trends behind the drive to digital finance

So far, a number of key trends have been driving the increased adoption of digital financial services.

  • Increasing availability of mobile devices. As of July 2020, GSMA, the global association of mobile network operators, reports 5.1 billion unique mobile subscribers.
  • Increasing internet connectivity around the world. However, specifically, Africa is still lagging behind with about 40% of the population having access to the internet, compared to 60% globally. This didn’t stop Kenya’s M-Pesa from becoming one of the world’s most successful mobile payments systems (as explained in this Harvard Business School case study), running on simple ‘feature’ phones that do not require internet access.
  • Increasing availability of off-the-shelf digital solutions for financial institutions, such as software and services are built and delivered usually from a third party vendor. However, implementing these solutions in a coherent fashion is a major challenge and requires not just acquiring and implementing technology, but also having the organisational set-up and flexibility to deal with change. 

Oikocredit survey: digital transformation is key priority for partners

When, at the end of 2019, we asked our financial inclusion partners about their plans for digitalisation, 96% of respondents rated digital transformation as a key priority. The most important opportunities identified were: increased efficiencies, increase of outreach or expansion into new markets, and improving the customer experience. On the other side of the coin, many financial institutions see several challenges to making a successful digital transition, including difficulties in setting up the digital infrastructure and securing enough budget for that; creating the appropriate organisational culture for change; questions of how to educate clients on using digital financial services and how to develop high-quality digital products and services.

Covid-19 is accelerating transformation

And now on top of this, the Covid-19 pandemic is shaking up the financial inclusion environment. The European Microfinance Platform recently published their Covid-19 themed Financial Inclusion Compass survey. Among the many challenges facing clients and financial service providers, it’s clear that an expansion of digital financial services should be part of the solution. As digital communication tools have become more popular due to social distancing, so have digital payments. Early in the coronavirus crisis, the governments of Kenya and Ghana encouraged a reduction in the fees on mobile money transfers to let more people move away from cash.

Going forward, digital loan applications, signatures, disbursements and repayments (i.e. going cashless and paperless) will limit the need for microfinance clients to physically present themselves at group meetings or at a branch or agent of their financial services provider. Still, a microfinance institution (MFI) might not be able to offer this yet, nor might all clients have a digital account or know how to operate it. Financial institutions that already had solid plans for digitalisation will have an incentive now to accelerate these plans, to ensure they can stay in touch with clients and keep services running even when physical client meetings are no longer feasible.

Hear directly from our partners

 To get a better idea of how our financial inclusion partners have been deploying digital solutions in times of Covid-19, several of our colleagues recently conducted video interviews with partner CEOs, highlights of which can be seen in the following videos.

Optima, a financier of small to medium enterprises in El Salvador.


ProMujer, focused on women-owned enterprises in Argentina.


Casa do Micro Crédito, an MFI in Brazil.


Banco da Familia, an MFI in Brazil.


To provide support to our partners in these challenging times, Oikocredit has launched several initiatives, such as the coronavirus solidarity fund, as well as a toolkit with resources to help partners build resilience.

Furthermore, we are exploring opportunities to support financial inclusion partners with their efforts to digitise, and we welcome ideas and proposals from our partners around the theme of digital transformation.

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