A Digital Pathway to Financial Inclusion

17 Pages Posted: 11 Dec 2012

See all articles by Daniel Radcliffe

Daniel Radcliffe

Bill and Melinda Gates Foundation

Rodger Voorhies

Bill and Melinda Gates Foundation

Date Written: December 11, 2012


Payments are the connective tissue of an economic system. They enable people to buy goods, purchase water and electricity, and send money to friends, family, and business partners. They enable governments to collect taxes and disburse social payments. And they enable suppliers to collect payments from buyers. When these transactions are costly and inconvenient, economic activity is impeded.

Wealthy households live their financial lives embedded in a digital financial system which “greases the wheels” of their economic activity by making it cheap and easy for them send and receive payments. Their money sits in a virtual account as ones and zeroes on a server where it can be transferred with the click of a button. In contrast, 2.5 billion people – most of them poor – are cut off from that system. They store and transfer value through physical assets, such as cash, jewelry, or livestock.

We describe how the cash-digital divide creates stark inequities in the financial lives of poor households. We depict what digital financial inclusion would look like and present a growing body of evidence which suggests that connecting poor people to an integrated digital financial system will generate sizable welfare benefits. We argue that countries will not bridge the cash-digital divide in one giant leap. Instead, they will likely pass through four stages of market development along the pathway to an inclusive digital economy. The commercial assets required to navigate this pathway vary across the four stages. Financial regulations and business models must therefore be calibrated to harness those assets at each stage.

Keywords: financial inclusion, mobile money, mobile banking, digital payments

JEL Classification: O31, O20, O16

Suggested Citation

Radcliffe, Daniel and Voorhies, Rodger, A Digital Pathway to Financial Inclusion (December 11, 2012). Available at SSRN: https://ssrn.com/abstract=2186926 or http://dx.doi.org/10.2139/ssrn.2186926

Daniel Radcliffe (Contact Author)

Bill and Melinda Gates Foundation ( email )

P.O. Box 23350
Seattle, WA 98102
United States

Rodger Voorhies

Bill and Melinda Gates Foundation ( email )

P.O. Box 23350
Seattle, WA 98102
United States

Register to save articles to
your library


Paper statistics

Abstract Views
PlumX Metrics

Under construction: SSRN citations will be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information