Ms El-Zoghbi and Ms Michaels explore the role of digital platforms in supporting financial inclusion and livelihoods. Their background research indicates that such platforms have transformed some economies significantly by (1) helping businesses recover from the early stages of the COVID-19 pandemic; and (2) providing employment opportunities for disadvantaged populations such as youth, women and rural residents. In particular, e-commerce, gig working, social media and agricultural platforms have been found to improve the livelihoods of low-income consumers as well as increase the strength of micro-, small and medium-sized enterprises. The Egyptian “social commerce” startup Brimore, for example, gives micro- and small enterprises “access to nationwide distribution through its network of freelancers, enabling social sellers in Egypt to start and grow their businesses with zero initial capital.”
Once people have used digital platforms for non-financial services, it is a smaller leap for them to adopt digital finance. However, while platforms have supported financial inclusion – including via increased usage of digital payments – the transition for many low-income users to formal financial services has remained challenging. For example, many microentrepreneurs who have begun using social media for marketing still revert to cash to collect payment. This, the authors argue, shows the need for more education and support as well as better designed services for disadvantaged populations to reap the benefits of digital financial services. In particular, providers could focus more on providing “onboarding support, multiple payment options, building trust in the platform, tiered formalization and transaction limits, business upskilling, and greater bank involvement… and collaboration with non-banking financial institutions.” As digital platforms expand, governments and other stakeholders must be wary of the formation of “monopolies and oligopolies.” Strategies for doing this, however, remain beyond the scope of this paper.
This is a summary of a paper by Mayada El-Zoghbi and Loretta Michaels, published by the Center for Financial Inclusion at Accion, April 2022, 16 pages, available at https://www.findevgateway.org/paper/2022/04/platforms-livelihoods-and-inclusive-finance
By Sheen Gupta, Research Associate
Additional Resources
Center for Financial Inclusion homepage
https://www.centerforfinancialinclusion.org/
Accion homepage
https://www.accion.org/
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