Fintech is about changing lives, building a brighter future for all

Historically, traditional financial institutions have excluded a significant portion of the world’s population—52 per cent to be precise.

This global majority, predominantly found in emerging markets, typically earns their income through informal economies. Without tangible financial records, they are often barred from accessing essential financial services, such as credit from legacy financial institutions, making financial well-being a distant dream for many.

Despite these barriers, the potential within this global majority is immense, and its impact is increasingly evident. It is time to recognise and harness this potential to create a more equitable society.

Fintech companies such as Tala are stepping into this void, leveraging technology to provide financial services to those marginalised by legacy financial players. Tala, for instance, utilises AI and big data analytics to generate credit scores for millions of users based on alternative data, bypassing the need for traditional credit history.

By analysing alternative data, it can assess creditworthiness in ways that traditional financial players cannot. This approach not only broadens access to credit but also equips individuals with the financial tools they need to improve their lives.

One of the most significant impacts of fintech credit providers is their ability to empower underserved communities. Access to credit can be transformative for individuals and small businesses. It can mean the difference between a subsistence existence and the ability to invest
in education, healthcare, and entrepreneurial ventures.

With access to microloans, entrepreneurs can start or expand businesses, create jobs, and stimulate local economies. This ripple effect can lead to increased economic stability and prosperity for entire communities.

The benefits of financial inclusion extend beyond individual empowerment. When more people have access to financial services, the overall economy benefits. Increased financial inclusion can lead to higher savings rates, greater investment in education and health, and more robust
economic growth.

A study by the International Monetary Fund found that financial inclusion is associated with higher GDP growth rates, particularly in developing economies. By providing credit and financial services to the underserved, fintech companies are not just helping individuals; they are
contributing to the economic development of entire nations.

While the promise of fintech is immense, challenges need to be addressed. Regulatory frameworks in many countries are not yet fully equipped to handle the rapid advancements in fintech, and there is a need for policies that balance innovation with consumer protection.

Additionally, ensuring that fintech solutions are accessible to all, including those in remote areas with limited internet access, remains a critical challenge.

Affordable services

However, these challenges also present opportunities for collaboration between governments, financial institutions, and fintech companies. By working together, stakeholders can create an enabling environment that fosters innovation while ensuring the benefits of financial inclusion
reach the most marginalised populations.

As we look to the next decade, it is clear that fintech credit providers have a crucial role in achieving financial security for the underserved global majority. By leveraging technology to provide accessible and affordable financial services, these companies are breaking down barriers and creating opportunities for millions of people worldwide.

The journey towards financial inclusion is a long one, but with the right support and commitment, fintech can help us get there. The transformative power of fintech cannot be overstated. By empowering individuals with access to credit and financial services, companies like Tala are paving the way for a more inclusive and equitable world.
 - The writer is Head of Growth and Strategy, Tala-Kenya.