Over lunch, Daily Moonitor’s Deogratius Wamala hears Joseph Lutwama, the director of research and insights at FSD Uganda, outline his vision for Africa’s Fintechs, questioning the microfinance mindset on the continent while pointing out that the real challenge of financial inclusion is dysfunctional markets.
For many years, people trying to make Africa more financially inclusive have believed in the power of ‘micro’-microloans, microinsurance, and microsavings. These small financial products are meant to help people with little money gain access to the financial system. The idea sounds good, and in the beginning, everyone-from aid agencies to fintech start-ups-got excited. But over time, a problem becomes clear. The idea of ‘micro’ is turning into a trap, a cycle that keeps people small instead of helping them grow.
‘Designing the perfect product for the poor,’ says Joseph Lutwama, the director of research and insights at FSD Uganda, ‘does not make poverty disappear, it simply creates a sustainable mechanism for managing it.’ What he means is that financial products for poor people often help them survive, but not thrive. A small loan might keep a market stall running, but it rarely helps it become a supermarket. These products help people get by, not get ahead.
‘If I design an investment product that allows you to invest Shs500,’ he illustrates, ‘it’s not about having the Shs500, it’s about whether there’s value in that transaction at all.’
And the numbers back him up. In Uganda, where the average income is still below $3 (Shs10,400) a day, the average microloan size is less than Shs400,000 (around $115).
Most borrowers use the money for short-term needs – school fees, food, or medical bills – not to build long-term businesses.
The return, both for the customer and the lender, stays painfully small. Across the continent, microfinance institutions face the same struggle. According to the World Bank, only about one in five microfinance institutions in sub-Saharan Africa can cover their costs without donor support.
Once that support ends, many simply close. In Kenya, where mobile money has transformed payments, studies show that most digital loans go toward consumption rather than investment. The effect is to smooth poverty, not solve it.
Lutwama sees this pattern repeating everywhere. ‘Even the institutions that design for the last mile,’ he says, ‘find it difficult to earn anything substantial in yield.’
The truth is, the model is running out of steam. What started as a bold experiment to lift millions out of poverty has, in many places, become a delicate balancing act of grants, subsidies, and good intentions.
Lutwama’s point is not that helping poor people is wrong, it’s that the approach itself must change. Instead of asking how to design smaller and smaller products for the poor, he says we should be asking a bigger question: why are so many people stuck in small markets to begin with?
Poverty, as Lutwama has come to understand, is not just about having little money, it is about being part of an economy that does not work. When markets are weak, fragmented, or disconnected, even the smartest microfinance product cannot make them strong. And so, the focus begins to shift. The real question is no longer how we build better microloans but how we build better markets, places where people can trade, grow, and create value that lasts.
The platform strategy
This is where Lutwama introduces what he calls ‘the platform strategy.’
It marks a turning point, a move away from designing standalone financial products toward building entire ecosystems where money and value can circulate freely. At the heart of this idea is a simple truth: money thrives only where life and trade are happening. Financial systems cannot grow in isolation, they grow in markets that are active, connected, and alive.
Money, after all, is not wealth in itself, it is a medium of exchange. It moves only when people are buying, selling, and investing.
In communities where people merely survive rather than trade, money stands still, and financial institutions can offer little to those whose economies do not move. Lutwama’s message is clear: to make finance sustainable, Africa must first make its markets work.
‘The real challenge of financial inclusion,’ Lutwama says, ‘is not financial illiteracy, it’s dysfunctional markets.’ And in Uganda, as in much of sub-Saharan Africa, those dysfunctional markets are everywhere.
Millions of people still work in what economists call subsistence economies, where families produce just enough to live on and very little to sell.
When there’s no real market, there’s no steady flow of trade, no reliable prices, and no clear link between producers and buyers. In rural trading centres, for example, a farmer might harvest beans or maize but struggle to find a buyer at the right time or the right price. In cities, small shop owners may have customers but lack suppliers they can depend on. Transactions happen, but they are slow, uncertain, and often invisible to the larger economy. These are not true markets, they are isolated islands of effort, disconnected from the wider flow of value.
To Lutwama, the answer does not lie in another mobile app, another savings group, or another micro-insurance product. Those may help for a while, but they do not fix the deeper problem, disconnection. What is needed, he says, is connectivity, real, systemic connectivity that links people, information, and value across the chain.
‘If we can solve the challenge of dysfunctional markets in Africa,’ he explains, ‘we go a long way in addressing the sustainability challenge in financial inclusion.’
That means building platforms – not just digital ones, but social and economic ones too – where farmers, traders, lenders, and buyers can meet, trade, and trust each other. It’s about turning scattered bits of activity into functioning markets, where value can move freely. And when markets begin to work, money follows naturally.
Fintech’s true calling?
In Lutwama’s view, fintechs – the fast-moving technology start-ups building financial apps and platforms – are at a crossroads. Many are racing to become the next digital bank, offering loans, wallets, and payments. But he believes their real power lies elsewhere.
‘Your best case is not becoming another financial institution,’ he says. ‘Your best case is building viable and vibrant digital marketplaces.’
This, he explains, is what will make the biggest difference. Fintechs can use their technology not just to lend, but to link – connecting people who have goods, services, or skills with those who need them. Instead of competing with banks, they can help fix the broken links in local economies. When technology makes it easier for a farmer to find a buyer, a shopkeeper to restock goods, or a small business to accept digital payments, money starts to move.
That movement creates trust, growth, and opportunity – the real building blocks of financial inclusion. Without transparency, there is no trust. Without trust, there are no transactions. And without transactions, there is no movement of money, no growth of business, and no chance of real financial inclusion. This is where fintechs – those technology-driven companies – can play a powerful role.
By connecting smallholder farmers to buyers, linking insurers to accurate weather and risk data, or giving small business owners access to real-time prices and delivery options, fintechs can change entire market systems. For example, digital platforms like Hello Tractor in Nigeria let farmers rent tractors on demand, while apps like M-Farm in Kenya help farmers see market prices instantly so they don’t get cheated by middlemen.
These may look like small innovations, but they build trust and open up trade – and once trade starts moving, money follows. As Lutwama puts it, ‘Money flows where economic activity is vibrant. Financial services concentrate where there is life.’ In other words, finance is not the starting point, it’s the result.
When people connect, exchange, and trust each other, financial services naturally grow around that energy. And that, he argues, is what true inclusion looks like, not charity, but participation.
From subsidies to sustainability
For decades, efforts to expand financial inclusion across Africa have relied on donor funding and government subsidies.
These funds have kept many programs alive in places where serving poor customers doesn’t make financial sense for most banks or insurers. The support has been well-intentioned – and often essential. But Lutwama believes this model has a weak point. ‘The moment the subsidy ends,’ he says, ‘so does the product.’
It’s a hard truth. Many financial products that thrive under donor funding collapse once the money runs out. Without continuous support, the numbers simply don’t add up – the costs of reaching remote customers remain high, while the returns stay small. Across the continent, this story repeats itself. Projects that start with great energy often fade away once external funding stops. The challenge, Lutwama says, is not the lack of good ideas, it’s the lack of sustainability.
Lutwama gives the example of the African Insurance Consortium, where studies show that most smallholder farmers cannot afford insurance premiums on their own. Without subsidies, very few buy coverage. The result is predictable: when droughts or floods hit, farmers lose everything, and insurers retreat from those markets. The system resets to zero.
But Lutwama is quick to say these programmes are not failures, they are incomplete. They help people in the short term but do not build long-term strength. True sustainability, he argues, requires more than generosity; it requires functioning markets where people can earn, trade, and save from their own income, not from someone else’s grant. His challenge is not to give up on inclusion, but to reimagine it.
‘Financial inclusion should not remain a social project driven by donors; it should become an economic reality driven by value and activity. If fintechs and innovators can spark trade where it has gone quiet – if they can help people move from subsistence to real exchange – then finance will follow naturally, just as water flows downhill,’ he notes.
Because when people start trading, the money always finds its way.