Financial Inclusion and Institutional Voids: Are Digital Platforms a Solution?

“What drives development” has long been a fundamental question for many scholars and policymakers. One consensus reached is that financial inclusion – access to and use of formal financial services by all members of an economy – is a central tenet of development [1]. It facilitates efficient allocation of productive resources by reducing the volume of money outside the banking sector, i.e. by shrinking the informal sector [2]. Conversely, exclusion from the formal financial system reinforces social inequalities and deepens poverty.

However, the World Bank’s (2017) Global Findex Database indicates that about 1.7 billion adults across the world are still unbanked and therefore they are excluded from the formal financial system (see figure below). Evidence further indicates that almost all the unbanked population lives in developing countries and nearly half of these live in just seven countries: Bangladesh, China, India, Indonesia, Mexico, Nigeria and Pakistan.

But why are developing countries the home for the unbanked? In order to answer this question, we first need to address the cause of market failures leading to exclusion in emerging markets; namely institutional voids.

Globally, 1.7 billion adults lack an account [Source: Global Findex database [1]. Note: Data are not displayed for economies where the share of adults without an account is 5 percent or less.

Institutional theory suggests that institutions shape the conditions that drive socio-economic development and the particular rules that actors follow within a given context [3]. As Scott (1995) points out, institutions are socially constructed and embedded structures that provide the rules and frameworks upon which societies operate. If these institutions are absent or weak, it can create institutional voids that impact economic growth and development [4,5].

Therefore, while every economy should have a range of institutions (e.g. payment processing systems, contract enforcement, etc.) to support financial inclusion, many developing countries fall short. Thus, it is lack of, or weak institutional frameworks, i.e. institutional voids, in developing countries that differentiate them to a great degree from developed countries. The presence of institutional voids is apparent in the inefficiency of the formal financial systems to provide appropriate services, quality of institutions and legal origins [6]. Such institutional voids cause buyers and sellers to experience information asymmetries and uncertainty, thus creating serious operating challenges and higher transaction costs (i.e. the cost of capital) in emerging markets. All these act to constrain financial inclusion, and in effect hamper prosperity and wealth creation.

Digital platforms, which have rapidly grown in number and reach in developing countries, have the potential to generate social and economic value by filling the voids and thus building well-functioning markets. For instance, digital platforms for financial services can enable individuals and businesses to more easily reach and find previously hard-to-locate financial services. They also have the potential to facilitate the accumulation of capital by lowering search and transaction costs, reducing information asymmetries and thus fostering trust between parties [7].

Despite this recognition, however, the linkage between digital platforms and institutional voids in these contexts remains significantly underexplored. Apart from a few studies (e.g. [7]) that explored the importance of digital platforms in institutional development and capacity building in developing countries, the focus of the literature on digital platforms in emerging and transitioning economies has been mainly on the general functioning of digital platforms (e.g. business strategy, platform governance and consumer behaviour) [8]. Therefore, we need more research to better understand how digital platforms could help alleviate the negative impact of institutional voids in developing countries, such as in the banking and financial system.

References

[1] World Bank Group (2017). The Global Findex Database, Measuring Financial Inclusion and the Fintech Revolution. World Bank, Washington, DC.

[2] Sarma, M. & Pais, J. (2011). Financial inclusion and development. Journal of International Development, 23(5), 613-628.

[3] Acemoglu, D. & Robinson, J.A. (2012). Why Nations Fail: The Origins of Power, Prosperity, and Poverty. Crown Books.

[4] Scott, W. R. (1995). Institutions and Organizations. Thousand Oaks, CA: Sage.

[5] Khanna, T., & Palepu, K. (2010). Winning in Emerging Markets. Harvard: Harvard Business Press.

[6] Zins, A. & Weill, L. (2016). The determinants of financial inclusion in Africa. Review of Development Finance, 6(1), 46-57.

[7] Drouillard, M. (2016). Addressing voids: How digital start-ups in Kenya create market infrastructure. In B. Ndemo & T. Weiss (Eds.), Digital Kenya: An Entrepreneurial Revolution in the Making(pp. 97–131). London: Palgrave Macmillan UK.

[8] Koskinen, K., Bonina, C., & Eaton, B. (2018).Digital Platforms in the Global South: Foundations and Research Agenda, Working Paper no.8Manchester, UK: Centre for Development Informatics, University of Manchester.

Big Data and Healthcare in the Global South

The global healthcare landscape is changing. Healthcare services are becoming ever more digitised with the adoption of new technologies and electronic health records. This development typically generates enormous amounts of data which, if utilised effectively, have the potential to improve healthcare services and reduce costs.

The potential of big data in healthcare

Decision making in medicine relies heavily on data from different sources, such as research and clinical data, rather than only based on individuals’ training and professional knowledge. Historically, healthcare organisations have often based their understanding of information on an incomplete grasp of reality on the ground, which could lead to poor health outcomes. This issue has recently become more manageable with the advent of big data technologies.

Big data comprises unstructured and structured data from clinical, financial and operational systems, and data from public health records and social media that goes beyond the health organisations’ walls. Big data, therefore, can support more insightful analysis and enable evidence-based medicine by making data transparent and usable at much broader verities, much larger volumes and higher velocities than was ever available to healthcare organisations [1].

Using big data, healthcare providers can, for example, manage population health by identifying patients at high-risk during disease outbreaks and then take preventive actions. In one case, Google used data from user search histories to track the spread of influenza around the world in near real time (see figure below).

Google Flu Trends correlated with influenza outbreak[2]

Big data can also be used for identifying procedures and treatments that are costly or delivering insignificant benefits. For example, one healthcare centre in the USA has been using clinical data to bring to light costly procedures and other treatments. This helped it to reduce and identify unnecessary procedures and duplicate tests. In essence, big data not only helped to improve high standards of patient care but also helped to reduce the costs of healthcare [3].

Medical big data in the global south

The potential healthcare benefits of big data are exciting. However, it can offer the most significant potential rewards for developing countries. While global healthcare is facing challenges to improve health outcomes and to reduce costs, these issues can be severe in developing countries.

Lack of sufficient resources, poor use of existing funds, poverty, and lack of managerial and related capabilities are the main differences between developing and developed countries. This means health inequality is more pronounced in the global south. Equally, mortality and birth rates are relatively high in developing countries as compared to developed countries, which have better-resourced facilities [4].

Given improvements in the quality and quantity of clinical data, the quality of care can be improved. In the global south in particular, where health is more a question of access to primary healthcare than a question of individual lifestyle, big data can play a prominent role in improving the use of scarce resources.

How is medical big data utilised in the global south?

To investigate this key question, I analysed the introduction of Electronic Health Records (EHR), known as SEPAS, in Iranian hospitals. SEPAS is a large-scale project which aims to build a nationally integrated system of EHR for Iranian citizens. Over the last decade, Iran has progressed from having no EHR to 82% EHR coverage for its citizens [5].

EHR is one of the most widespread applications of medical big data in healthcare. In effect, SEPAS is built with the aim to harness data and extract value from it and to make real-time and patient-centred information available to authorised users.

However, the analysis of SEPAS revealed that medical big data is not utilised to its full potential in the Iranian healthcare industry. If the big data system is to be successful, the harnessed data should inform decision-making processes and drive actionable results.

Currently, data is gathered effectively in Iranian public hospitals, meaning that the raw and unstructured data is mined and classified to create a clean set of data ready for analysis. This data is also transferred into summarised and digestible information and reports, confirming that real potential value can be extracted from the data.

In spite of this, the benefit of big data is not yet realised in guiding clinical decisions and actions in Iranian healthcare. SEPAS is only being used in hospitals by IT staff and health information managers who work with data and see the reports from the system. However, the reports and insights are not often sent to clinicians and little effort is made by management to extract lessons from some potentially important streams of big data.

Limited utilisation of medical big data in developing countries has also been reported in other studies. For example, a recent study in Saudi Arabia [6] reported the low number of e-health initiatives. This suggests the utilisation of big data faces more challenges in these countries.

Although this study cannot claim to have given a complete picture of the utilisation of medical big data in the global south, some light has been shed on the topic. While there is no doubt that medical big data could have a significant impact on the improvement of healthcare in the global south, there is still much work to be done. Healthcare policymakers in developing countries, and in Iran in particular, need to reinforce the importance of medical big data in hospitals and ensure that it is embedded in practice. To do this, the barriers to effective datafication should be first investigated in this context.

References

[1] Kuo, M.H., Sahama, T., Kushniruk, A.W., Borycki, E.M. and Grunwell, D.K. (2014). Health big data analytics: current perspectives, challenges and potential solutions. International Journal of Big Data Intelligence, 1(1-2), 114-126.

[2] Dugas, A.F., Hsieh, Y.H., Levin, S.R., Pines, J.M., Mareiniss, D.P., Mohareb, A., Gaydos, C.A., Perl, T.M. and Rothman, R.E. (2012). Google Flu Trends: correlation with emergency department influenza rates and crowding metrics. Clinical infectious diseases, 54(4), 463-469.

[3] Allouche G. (2013). Can Big Data Save Health Care? Available at: https://www.techopedia.com/2/29792/trends/big-data/can-big-data-save-health-care (Accessed: August 2018).

[4] Shah A. (2011). Healthcare around the World. Global Issues. Available at: http://www.globalissues.org/article/774/health-care-around-the-world (Accessed: August 2018).

[5] Financial Tribune (2017). E-Health File for 66m Iranians. Available at: https://financialtribune.com/articles/people/64502/e-health-files-for-66m-iranians (Accessed: August 2018).

[6] Alsulame K, Khalifa M, Househ M. (2016). E-Health Status in Saudi Arabia: A Review of Current Literature. Health Policy and Technology, 5(2), 204-210.