By Emma Caroe
What is fintech?
“Fintech”, an abbreviation of financial technology, denotes the use of digital and online technologies to support financial activities. This can range from banking to investment to insurance, but in its simplest form, fintech involves the provision of basic financial services – a payments system, savings deposit, access to credit – via a mobile phone. For example, M-Pesa, a product of Kenyan company Safaricom, provides a mobile-phone-based means of money transfer. Launched in 2011, M-Pesa has quickly become Africa’s largest fintech platform with over 51 million users in seven countries. Alongside M-Pesa, Safaricom also provides M-Shwari, a savings and loan service, and Fuliza, an M-Pesa overdraft service.
Fintech and financial inclusion
Fintech initiatives in Africa are promoted as a tool for poverty reduction through financial inclusion. Advocates present this inclusion as a way to address the inequalities of existing financial systems in Africa. However, those inequalities evolved from colonial-era structures designed to serve foreign interests while excluding local populations. For example, the Credit to Natives (Restriction) Ordinance of 1931 in East Africa explicitly discouraged lending to Africans (Rodney 2012[1972]:210). The legacy of this exclusion persisted into the twentieth century, leaving large segments of the population “unbanked”—lacking the collateral, credit history, or income stability required to access formal financial services (Natile 2020:2). Simply put before we can speak of “financial inclusion”, we have to talk about colonial exclusion.
So-called “Financial inclusion” is framed as a solution to inequality that has colonial origin. Yet ignoring this context, many of its proponents argue that fin-tech makes financial services more accessible and affordable. This, they claim, is key to achieving development goals like poverty reduction, gender equality, and sustainable economic growth. However, decolonial thinkers argue that this agenda is based on an individualistic philosophy which largely prioritises self-help and entrepreneurship, placing the responsibility on individuals to use financial tools to lift themselves out of poverty, rather than addressing the deeper structural issues that create economic exclusion in the first place.
New financial technologies are at the heart of the financial inclusion agenda, offering digital services that anyone with a mobile phone can access. This is seen as a way to bypass the weak financial infrastructure in many African countries, a process often called “leapfrogging” (Bernards 2022:157). Advocates claim that fintech-driven inclusion brings multiple benefits that support development for the following reasons. First, mobile money reduces transaction costs, making payments easier and enabling trade and financial support among families and communities. Second, it may strengthen informal safety nets by improving how people share financial risks. Third, mobile money provides a secure way to save, helping individuals prepare for financial shocks. Lastly, many fintech platforms offer quick access to credit, which is supposed to help low-income entrepreneurs invest in businesses and grow their incomes. These claims seem to be backed by research: Suri and Jack (2016) found that M-Pesa helped lift 194,000 Kenyan households out of poverty, with particularly strong benefits for women-led households.
However, some scholars challenge the idea that fintech helps reduce poverty. Bateman et al. (2019) argue that claims of increased income and jobs ignore business failures and market disruptions. Critics also point to a bigger issue: fintech allows corporations to profit from poverty, leading to rising debt in countries like Kenya. This reflects a wider pattern where fintech, like the financial sector as a whole, prioritises profit over real economic improvement. That’s why some would argue that there is an extractivist dynamic at work within fintech, and the financial sector more broadly.
Financial extractivism
Extractivism is both a set of practices and a mode of thought, and is a concept traditionally used in reference to natural resource extraction. Extraction itself, the process of removing materials from the earth in order to put them to human use, is relatively neutral: all living species make use of the world around them. Extractivism, however, is fuelled by a mindset that “opens the whole world to human exploitation, justifying taking with too little regard for the environmental and social consequences” (Nicholson 2021:190). The practices that result are destructive and unsustainable, depleting the Earth’s resources and destroying its systems, while also often having devastating social effects on local communities.
Such logics and practices can arguably be observed in the financial sector. “Poverty finance” refers to “the business of extending financial services to those traditionally excluded from the mainstream financial system” (Rankin 2013:547). While framed by mainstream advocates in terms of life-enhancing financial inclusion, poverty finance in practice creates new markets for excess capital to flow into. This ongoing push to find new areas for profit is a key feature of extractivism. In this way, financial inclusion transforms poverty itself into a business, continuing a long colonial and postcolonial history of wealth transfer from the global South to the global North.
Seen from this perspective, Fintech can be seen as a modern, digital extension of the long colonial history of financial extraction that targets people in poverty. Fintech companies have been described as finding ways to turn unstable and low incomes into corporate profits (Donovan and Park 2022:1072). One way they do this is by charging extremely high fees for digital loans. For example, M-Shwari’s monthly 7.5% fee equals a 90% annual interest rate, Fuliza’s fees amount to 148.5%, and loans from Tala can have annual rates over 200%. Like other forms of extractivism, this kind of lending causes harm—contributing to rising and dangerous levels of debt in Kenya, where fintech use is especially common. At the same time, companies like Safaricom, which runs some of these services, became hugely profitable, earning $747 million in 2019–20 and ranking among the world’s most profitable firms by the late 2010s.
Are fintech companies really the solutions to poverty they claim to be? Critics argue that the inclusion of poor populations in the financial sector has actually served to generate ever greater corporate profits at the expense of millions of individuals becoming trapped in debt. The non-reciprocal, destructive patterns of value extraction in the fintech sector mirror those of natural resource extraction in the raw material sector. Fintech is a form of financial extractivism.
References
Bateman, Milford, Maren Duvendack, and Nicholas Loubere. 2019. ‘Is Fin-Tech the New Panacea for Poverty Alleviation and Local Development? Contesting Suri and Jack’s M-Pesa Findings Published in Science’. Review of African Political Economy 46 (161).
Bernards, Nick. 2022. A Critical History of Poverty Finance: Colonial Roots and Neoliberal Failures. London: Pluto Press.
Donovan, Kevin P., and Emma Park. 2022. ‘Knowledge/Seizure: Debt and Data in Kenya’s Zero Balance Economy’. Antipode 54 (4): 1063–85.
Natile, Serena. 2020. The Exclusionary Politics of Digital Financial Inclusion: Mobile Money, Gendered Walls. 1st ed. Abingdon, Oxon; New York, NY: Routledge, 2020.
Nicholson, Simon. ‘Carbon Removal and the Dangers of Extractivism’. In Our Extractive Age: Expressions of Violence and Resistance, by Judith Shapiro and John-Andrew McNeish, 1st ed., 176–88. London: Routledge.
Rankin, Katharine N. 2013. ‘A Critical Geography of Poverty Finance’. Third World Quarterly 34 (4): 547–68.
Rodney, Walter. 2012 [1972]. How Europe Underdeveloped Africa. Baltimore, MD: Black Classic Press.
Suri, Tavneet, and William Jack. 2016. ‘The Long-Run Poverty and Gender Impacts of Mobile Money’. Science 354 (6317): 1288–92.
