Bridging the digital divide for inclusive financial empowerment

For decades, microfinance struggled to reach scale due to the supply-side barriers of high costs relative to small loan sizes and high credit risk uncertainty.

Then came mobile technology and advanced data analytics, promising a revolution. Both delivered, contributing to halving financial exclusion in developing economies in a decade.

But hold the applause – a staggering 1.4 billion adults remain financially excluded.

A new set of barriers, this time on the demand side, has left many behind. Limited access to smartphones and internet connectivity, low digital literacy and mistrust in technology has created a digital divide that is disproportionately affecting women, people with low education levels and those with the fewest resources. In a financial services landscape that is increasingly digital, these groups are now more likely to be left behind than ever before. And even for those who have been ‘reached’, the promises of financial inclusion – security, opportunity and peace of mind – often remain unfulfilled.

At VisionFund International (VFI), a global network of 25 microfinance institutions (MFIs), we believe in a future where financial inclusion doesn’t leave anyone behind. A future where financial inclusion brings families and children out of poverty. For good. Here’s how we’re making it happen.

High-touch and high-tech

To address the demand and supply side barriers of financial inclusion, we champion a hybrid approach that is ‘high-touch’ for clients and high-tech for staff. This is an approach where technology is used to enhance contact between client and provider, not replace it.

Field officers meet clients face-to-face in their homes and communities to build their trust, understand their needs and provide access to people who are digitally disconnected. This l approach also allows for flexibility in the screening process which fully digital onboarding models lack.

The trade-off? Cost efficiency. To address this, we equip field officers with high-tech digital onboarding tools that, where possible, are integrated with third party Know Your Customer platforms, credit reporting service providers and in-house decision-making software. Always looking to improve, we are exploring the use of generative AI co-pilots for field officers and underwriters to not only increase efficiency, but also to improve accuracy and enhance customer experience.

While this division of labour between touch and tech may not achieve the cost-efficiency of a fully digital onboarding model, the productivity gains it creates allows VFI to deliver more of what the fully digital models do not, and that is financial inclusion for the digitally excluded.

Bridging the digital divide

Once clients are onboarded, we provide them with digital literacy training tailored to their readiness, which we deliver in local languages and formats. This training equips people with the skills and confidence to enter the digital financial landscape and navigate it safely and effectively.

We have supported thousands of ‘new-to-digital’ clients to make their first digital payment, download and use their first mobile banking app and submit their first online account application. By bridging the digital divide, our clients unlock financial products and services that build financial resilience, while we gain operational efficiency and insights that help us to develop more data-driven solutions.

Focusing on generating client value, not technological hype

Reaching the financially excluded and building their capability to engage in the digital financial services landscape is crucial. But if the services don’t bring them value, we’ll be back to a supply-side barrier.

A key reason why digital financial services often don’t bring value is that the provider has been caught up in the hype of a new technology without considering if it solves a pressing need or problem. A hammer gets implemented without a nail.

To avoid this, our operational teams lead our digitalisation efforts. They understand the needs of our clients and can ensure technology functions as a problem-solver, not a solution in search of a problem.

For example, millions of village savings groups struggle with record keeping, savings goals and connecting to financial services. In response, VisionFund and World Vision are rolling out DreamSave, a mobile app that addresses these issues and accelerates the digitalisation of these groups, giving members easier access to microloans and microinsurance.

Building an ecosystem of inclusion through partnerships

Application Programming Interfaces (APIs), the digital bridges that enable applications to communicate and securely share data, have unlocked a new era of collaboration. No longer do MFIs need to operate in silos.

Through APIs we are integrating with partners across the microfinance value chain from fintech partners, which can provide things like chat-based onboarding and digital signature verification, to more traditional partners like mobile money and credit scoring providers. By combining the unique capabilities of each partner, these API-powered partnerships are delivering financial services that are more accessible and impactful.

VisionFund strives to lift families out of poverty through the power of financial inclusion. By embracing a human-centred approach that bridges the digital divide, empowers clients and fosters impactful partnerships, we’re ensuring financial inclusion reaches not just the many, but the last billion.