Giving Compass' Take:

• Stanford Social Innovation Review explores whether affordable financial products such as mobile money have a measurable impact on people living in poverty around the world.

• The upshot is that customer-centric approaches show promise, but more data is needed to see whether fintech actually improves the lives of the poor. We must continue to improve our tracking methods.

• Here are four key opportunities for inclusive fintech in the U.S.

Several years ago, a senior person at a large foundation (let’s call him Fred) asked us if we thought financial inclusion—creating and supporting financial products and services designed for low-income communities—really made a difference to the poor.

Donors, financial providers, researchers, and consultants are trying to decide which way to turn next. The field started with microcredit, then developed a range of financial tools, including insurance and savings products. But at what point can the financial inclusion field declare victory? Thanks largely to the spread of mobile money, the number of adults without a formal account decreased from 2.5 billion to 2 billion between 2011 and 2014, and the latest Findex survey for 2017 (which will be released later this year) will likely show further progress. But if people aren’t using these accounts, then we can surmise they aren’t having any impact at all.

While access to financial services has grown impressively across a range of countries, evidence that it’s improving the lives of the poor has been less clear.

But perhaps we’re doing financial inclusion a disservice by thinking about one-to-one impact—the idea that a financial tool alleviates poverty. There are good reasons for changing our focus. First, impacts from financial services can happen very slowly and usually result from sustained use of a financial service over time—impatient observers likely won’t see much impact. A second reason is conceptual: Digital finance has myriad, interwoven effects on people’s lives.

A financial decision like taking a loan has consequences on livelihoods (Will the loan for buying fertilizer work, or will the crop fail?), stress (Does the loan carry a sense of pride or create anxiety?), time management (Is the borrower now obligated to attend meetings?), and risks (Will the borrower be able to pay it back?).

Read the full article about financial inclusion efforts alleviate poverty by Daryl Collins and Amolo Ng'weno at the Stanford Social Innovation Review.