The Mojaloop moment: Expanding financial inclusion

From Rwanda to the Philippines, new payment platforms powered by the foundation-supported Mojaloop software are on the cusp of providing millions with the many benefits of digital payments.

Whether we’re paying the rent, receiving a paycheck, splitting the cost of a meal, or simply buying a coffee, people in much of the world take digital banking for granted. Everything is handled with a card swipe or a mobile banking app, and cash transactions are rarely involved. The number of people in low- and middle-income countries that still do not have access to a digital financial account.

But while the use of digital financial services has exploded over the past decade, 1.4 billion people around the world, and nearly one in three adults in low- and middle-income countries, still do not have access to a digital financial account. All of their transactions must be handled in person, using cash or through barter, adding extra hardships for families already living in or near poverty.

Without a digital account, getting paid and paying bills can often involve traveling long distances, which can be especially difficult for women caring for small children. In many countries, women also cannot easily access cash, hindering them from job or business opportunities. It’s also harder to save and impossible to earn interest. And when a catastrophe like COVID-19 hits, people without digital financial services—usually the families most in need of help—have a harder time receiving direct aid from the government or from friends or family.

Evaluating at a global scale

A 2023 United Nations analysis found that building digital public infrastructure (DPI) in low- and middle-income countries to provide currently unbanked individuals with digital payment, money transfer, and credit services could speed up GDP growth in those countries by 20% to 33%. Up to 730 million more people could access digital payments, 16 to 19 million more small businesses could obtain credit to help them grow, and direct benefit transfers would increase by US$17 billion to US$21 billion, or US$80 to US$100 per household.

Given these outsized benefits, extending digital financial services to everyone should be a no-brainer. But commercial banks don’t operate as charities: Every transaction they’re involved with must be profitable, and there’s not much profit in reaching those living on less than US$2 a day.

Several years ago, to help close this gap, the Bill & Melinda Gates Foundation began funding the creation of free, open-source, and interoperable “digital public goods” that any country or entity could use to bring more citizens into the circle of financial inclusion. These open-source technologies give countries new options for building out their DPI in a way that ensures national sovereignty over the data and systems and for giving all citizens access to safe, secure digital financial services.

In steps Mojaloop

Among these goods is Mojaloop, an open-source software solution that enables governments and financial enterprises users to launch and maintain an inclusive instant payment system (IIPS)—a system that allows anyone with a mobile phone to access digital financial services and the opportunity to participate in the digital economy.

Eight years after the Mojaloop project launched, and four years after the Mojaloop Foundation was created to support adoption of the software, I’m delighted to say that innovators around the world are taking advantage of this exciting new technology. In Rwanda, the Philippines, and elsewhere, Mojaloop deployments will soon extend the benefits of digital financial services to millions more people.

Mojaloop builds digital payment bridges across Africa

While Rwanda and Higala are leading the way, other Mojaloop deployments are also in the works. After a successful proof-of-concept implementation last year in the Malawi-Zambia trade corridor, the Common Market for Eastern and Southern Africa (COMESA) is piloting a Mojaloop-backed IIPS for small and medium-sized enterprises in eight of its member states: Egypt, Ethiopia, Kenya, Malawi, Mauritius, Rwanda, Uganda, and Zambia. Once the COMESA Digital Retail Payments Platform is up and running later next year, it will complement existing payment systems in these countries by enabling instant cross-currency transactions between sellers and buyers, supporting the micro and small merchants doing business along the border between COMESA countries. By connecting domestic digital payment systems, it will provide a payment bridge between markets. COMESA’s six Francophone member countries have also expressed interest in joining the system.

Tanzania, a member of the East African Community and the Southern African Development Community and a former COMESA member, was the first to adapt Mojaloop and other open-source software and techniques to create a national payment system, the Tanzania Instant Payment System. Mexico and Myanmar are using Mojaloop to build their own inclusive instant payment systems, and new proof-of-concept implementations have been launched in South Sudan, Kenya, and Burundi.

As Umunyana and Plaza note, one of the great things about an open-source system like Mojaloop is that everyone learns from each rollout. As more countries launch efforts to build their own IIPSs, they will have more best practices and software add-ons to draw on in adapting Mojaloop for their own purposes. With every launch, the community grows, the software improves, and it becomes that much easier to reach every person with digital payments. As the circle of financial inclusion expands, everyone will feel the benefits.

by Miller Abel

Principal Technologist, Inclusive Financial Systems, Gates Foundation.