Digital Currencies and the Future of Microfinance

In Kenya, the introduction of M-Pesa represented a revolution: originally intended to facilitate the sending of money, its success and the possibility of extending its use to all manner of usages opened a new chapter in the inclusion of populations that had previously been financially excluded. The experience was copied internationally. Large popular masses are gaining access to an ever broader range of financial services, resulting in a positive, albeit reduced, impact. This financial inclusion via mobile phones has transformed microfinance institutions into agents of telephone companies.

One of the benefits of this financial inclusion has been the possibility of taking out loans simply and rapidly, using software contained in the phone. The consequence of this facility has been that very poor people have taken on excessive debt, creating a drawback to the benefits of this inclusion.

So, while financial inclusion via mobile phones has succeeded in reducing poverty, it has also led to the opposite result in many cases.