When "Developing" Countries Lead: How the Global South Outpaces Canada and the EU on Banking Access for Entrepreneurs
A legal policy analysis revealing how supposed "third world" nations have built better financial inclusion frameworks than their wealthy counterparts
The regulatory geography of financial inclusion reveals an uncomfortable truth for wealthy nations: when it comes to ensuring banking access for low-income entrepreneurs and micro-enterprises, countries like India, Kenya, and Brazil have implemented more innovative, effective, and comprehensive solutions than Canada and the European Union.
The Innovation Gap
While Canada and the EU have focused primarily on consumer banking rights—leaving micro-enterprises in regulatory limbo between consumer protections and full commercial banking requirements—countries traditionally labeled as "developing" have built entirely new regulatory frameworks specifically designed for financial inclusion.
India's Revolutionary Scale
India's Business Correspondent (BC) model, launched in 2006, now reaches vast rural populations via distributed agents and is structurally designed to extend services and credit to the underserved 1 2. The model enables doorstep banking and supports microcredit workflows by collecting KYC, facilitating account openings, and maintaining digital records 2.
Kenya's Mobile Money Revolution
Kenya's M-Pesa has transformed payments and savings for households and micro-enterprises alike, achieving national-scale usage and high transaction volumes through mobile channels 3 4. Its regulatory pathway prioritized inclusion and practical risk protections to enable rapid adoption 4.
Brazil's Correspondent Banking Success
Brazil pioneered large-scale correspondent/agent banking through partnerships among banks, retailers, and technology providers—dramatically expanding points of service and enabling millions of new accounts, especially outside major metros 5.
The Wealthy World's Blind Spot
Canada’s consumer banking protections explicitly focus on natural persons using personal accounts, leaving micro-enterprises without equivalent access guarantees—and subject to full commercial onboarding and monitoring standards 6. In the EU, the Payment Accounts Directive improves consumer access but does not directly secure basic accounts for businesses; implementation gaps and de-risking have continued to impede inclusion outcomes 7 8.
Why the Global South Succeeded
1. Necessity-Driven Innovation Beyond Traditional Banking
India’s BC architecture treats micro-entrepreneurs as participants in the formal financial system, with agent workflows that support microloans and ongoing engagement (rather than one-off onboarding) 1 2. Kenya’s M-Pesa allowed rural workers and informal traders to transact and save using basic phones—bypassing branch and card infrastructure entirely 3 4. Brazil’s agent networks embedded access in everyday retail environments, collapsing distance and formality barriers 5.
2. Regulatory Boldness That Transcends Traditional Categories
Kenyan authorities enabled an e-money model with consumer protections tailored to mobile flows—rather than forcing mobile money into legacy bank categories 4. India broadened who could serve as BCs (beyond NGOs/MFIs) to include individuals and small businesses, creating dense last-mile reach 1. Brazil formalized correspondent banking relationships so banks could extend regulated services via retail partners at scale 5.
3. Technology-First Infrastructure That Ignores Traditional Boundaries
India integrated payments with digital identity and public rails to enable direct benefit transfers and streamlined onboarding for low-income households and micro-entrepreneurs 2. Kenya’s mobile ecosystem offers payments, savings, credit, and insurance through phones—treating access as a utility rather than a premium product 3. Brazil’s correspondent stack coordinates banks and retailers with technology providers to deliver regulated functionality through familiar local touchpoints 5.
The Wealthy World’s Blind Spot (Revisited)
Even where consumer access has improved, “de-risking” and documentation practices can still exclude small firms. Recent UK policy efforts highlight a trend toward safeguarding access for legitimate users against blanket debanking 10.
The Path Forward
Lessons for Canada and the EU include: creating fit-for-purpose regulatory categories for micro-enterprises; embracing agent-based and mobile distribution; aligning AML/KYC proportionality with inclusion goals; and measuring outcomes beyond account openings to ongoing usage and resilience 7 8.
Conclusion: Leadership from Unexpected Places
Comparative research shows that digital financial inclusion can materially improve the ease of doing business for micro-enterprises when infrastructure and rules are designed for their realities—not retrofitted from consumer or corporate paradigms 9. Countries that re-imagined the stack—from identity to agents to mobile money—now outperform wealthy nations’ incrementalism on inclusion.