A State-led Model of Financial Inclusion Through Mobile Services

Financial inclusion spurs economic development, and digital mobile devices are considered an efficient tool for incorporating an unbanked population into the financial market. Despite this, close to 2 billion adults worldwide remain unbanked, as business models of digital financial services for the bottom of the pyramid have not proliferated. This article argues that the state may play a crucial role: acting as a catalyst to advance financial inclusion of the poor. We analyze how a conditional cash transfer (CCT) program may be an effective platform to achieve this. We offer evidence and analyze a pilot project through which beneficiaries of the CCT program in Mexico (Prospera) were migrated from a system of cash transfers to the use of digital transfers. The results show that a digital transfer platform may indeed be effective if governments integrate diverse public entities into the mobile money ecosystem and if they promote market competition in service delivery.