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On Harnessing the Potential of Financial Inclusion

25 Pages Posted: 8 Jun 2011 Last revised: 15 May 2014

Peter Dittus

Bank for International Settlements (BIS)

Michael U. Klein

Frankfurt School of Finance and Management; Johns Hopkins University - Paul H. Nitze School of Advanced International Studies (SAIS)

Date Written: May 1, 2011

Abstract

The development of information and communications technology is opening up the opportunity for providing essential financial services to most people. Indeed, many mobile money or branchless banking schemes are currently spreading across the world. However, these schemes can only be sustainable if they are built on a commercially viable business model. In this respect, the jury is still out. The paper describes one commercially viable initiative in more detail, M-PESA in Kenya, and analyses in detail the transactions involved. It argues that in order to harness the potential of financial inclusion it is vital to permit experimentation with different business models. Regulation is therefore required that enables such experimentation by being calibrated to the type of service offered, but which can be tightened if and when such schemes become bigger with the potential to impact financial stability: risk-proportionate regulation by service type.

Keywords: financial intermediaries, payments, regulation

JEL Classification: G210, G280

Suggested Citation

Dittus, Peter and Klein, Michael U., On Harnessing the Potential of Financial Inclusion (May 1, 2011). BIS Working Paper No. 347. Available at SSRN: https://ssrn.com/abstract=1859412 or http://dx.doi.org/10.2139/ssrn.1859412

Peter Dittus (Contact Author)

Bank for International Settlements (BIS) ( email )

CH-4002 Basel, Basel-Stadt
Switzerland
41 61 280 9249 (Phone)
41 61 280 9100 (Fax)

Michael U. Klein

Frankfurt School of Finance and Management ( email )

Frankfurt
Germany

Johns Hopkins University - Paul H. Nitze School of Advanced International Studies (SAIS) ( email )

1740 Massachusetts Avenue NW
Washington, DC 20036-1984
United States

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