As the world signals a potential recession, now more than ever small investments in inclusive financial infrastructure will potentially go a long way for migrant workers, small businesses and sole proprietors supporting families within emerging nations and across international borders. According to the McKinsey Global Institute, 1.4 billion people around the world face a host of challenges in moving currency in a safe, secure and traceable manner within their digital economy due to the lack of an inclusive, interoperable, digital payment platform.

This is especially true among South East Asian corridors and in much of Sub-Saharan Africa, where unbanked adults cited the absence of local financial institutions and insufficient documentation as among the primary reasons they did not have a savings or checking account.  While domestically mobile money offers some transaction products, these underbanked individuals can expect to pay high fees for in-country loans and banking transactions and anywhere from $12 to $15 for every $100 they move across borders, significantly more than the three percent transaction fee recommended in the United Nations’ Sustainable Development Goals (SDGs).

Named after the Swahili word for “one,” the Mojaloop open-source software project was established in 2017 by the Bill & Melinda Gates Foundation to address the lack of guaranteed inclusiveness and interoperability within nations’ payment systems to allow all citizens to fully engage in the global economy, whether that be in-country transactions, government-to-person payments or cross-border payments.

According to a McKinsey report, if digital financial services were inclusive and interoperable using a simple mobile phone, then the 1.4 billion financially excluded citizens could finally connect to their nation’s digital economy. Inclusive interoperability would then result in $3.7 trillion being added to emerging economies by 2025. That’s the equivalent of adding another Germany to the world economy.

One of the biggest impediments to resolving this issue is that many payment providers struggle with the high cost of creating no-fee or low-fee payment systems that interoperate with others.  Digital public goods, like Mojaloop open-source software, enable countries and regions to build an affordable, instant payment system that creates an inclusive interoperable hub of different types of digital financial service providers – large and small – that reduces the cost of low-value, high-volume payments.

What would that look like for the small business owner? Imagine a shopkeeper in Kenya who sends her earnings to support her family in Uganda. At the beginning of the day, she requests a small loan from her mobile money account, and the money arrives from a connected village bank or microfinance institution. Because she is using an inclusive interoperable system, after buying her stock for the day and selling her wares, she is able to reduce the cost and fees of converting her cash to digital money. As a result, she is able to repay the loan through her mobile account, and before the day is out, she has repaid that loan while earning a profit she can send home.

That instant loan represents a trade in action; it’s that access to liquidity that makes the economy work because the mobile money company and the bank are well-connected as a bilateral link. That's the importance of collaboration between different players because the mobile money company had the strength of the agent network to serve the shopkeeper locally, while the bank had the strength and immediacy of digital, cross-border credit services.  However, these bilateral arrangements limit choice compared to a truly interoperable system between mobile money, banks and microfinance.

That’s why digital public goods, like Mojaloop, can be used by central banks to create interoperable, cross-border, and instant government-to-person payment systems that could pull entire populations out of poverty. According to the 2021 Financial Inclusion Global Findex Report that the World Bank issued in June 2022, "Governments, private employers, and financial service providers – including fintech – could help expand financial access and usage among the unbanked by lowering barriers and improving infrastructure.” With most citizens already owning a simple mobile phone, the act of building and deploying mobile-first instant payments systems designed with financial inclusion in mind could provide the multi-trillion-dollar “informal economy” with a direct pathway into the digital financial sector.