Responsible Finance Forum

Digital Financial Services and Risk Management Handbook

Lesley Denyes and Susie Lonie
27 September 2016
Source:  IFC
 Mastercard Foundation

The last decade has seen a wave of innovative financial services aimed at serving the unbanked populations in emerging markets. Low-income individuals, microentrepreneurs and rural populations that were previously left out of the market due to the high costs of physical expansion are now accessing financial services through mobile phones and networks of agents acting as representatives of financial service providers. This has resulted in a remarkably rapid increase in financial inclusion in some countries. In other markets adoption has been slower and the results are less catalytic, but all markets are growing and are expected to continue to do so as services and products develop. It is expected that the expansion of digital financial services will make an important contribution towards the goal of reaching universal financial access by 2020.

However, with the many opportunities provided by ground-breaking technology and innovative business operations also come new risks. The risks related to implementing digital financial services extend far beyond operational and technical risks. In order for the financial inclusion industry to be able to capitalize fully on the benefits of digital financial services, it is important that the accompanying risks are understood and adequately addressed. In this fast evolving field, it has become apparent that what matters to one provider matters to all as large cases of fraud, for example, affect not just consumer trust in one provider but in the market and promise of digital financial inclusion as a whole.

The Partnership for Financial Inclusion is a joint initiative of IFC and the MasterCard Foundation to expand microfinance and advance digital financial services in Sub-Saharan Africa. Through the interactions with clients of the program as well as the broader industry in the region and beyond, we identified a need for a handbook on how best to handle risk management for digital financial services.  <Read the Handbook>