For many years only wealthy individuals procured formal forms of credit. Poor people were forced to rely on informal financial services.
Financial inclusion is about providing households with a full suite of services that include savings, credit, insurance, and payments. This suite allows households to manage their risk, build resilience, and expand their economic opportunities.
Access to Documents
A fundamental goal of financial inclusion is to make sure that people can use official documents to access services. This is often difficult, especially for people living in rural areas or tribal villages, where it can be expensive and time consuming to travel to the nearest city to get identity documents like passports or driving licenses. This also impedes financial inclusion because such documents are necessary to open bank accounts and apply for loans.
As a result, many governments, development and aid agencies, and private-sector companies have focused on providing these documents to improve financial inclusion. For example, the World Bank’s Universal Financial Access 2020 initiative targeted ensuring that all adults had access to transaction accounts. This is a valuable first step toward broader financial inclusion because transaction accounts are the gateway to other services like credit and savings, and can be used to store money and send or receive payments.
However, focusing on the supply side of this equation can lead to the neglect of equally important issues such as the quality of digital services and the reliability of digital channels. For instance, a focus on scaling access to DFS without addressing security and transparency can undermine trust in digital platforms and limit the reach of these services.소액결제 현금화
In addition, DFS can exacerbate exclusion when it is introduced into fragile formal financial systems that have been compromised by private-sector capture or poor governance. In such systems, increasing the number of participants in DFS without addressing systemic risks simply spreads risk and exposes vulnerable populations to greater harm when financial shocks occur.
Despite these challenges, much progress has been made in expanding access to financial services, with the number of formally included individuals rising rapidly. Nevertheless, there is still work to be done as billions of people remain excluded from the benefits of formal financial services.
To address this gap, we need to focus on a holistic approach to financial inclusion. This includes establishing an environment where a variety of digital services providers can compete on a level playing field, and consumers can be protected by essential regulations that cover issues such as agent licensing, know-your-customer rules, and cyber crime prevention. It is also vital to promote financial education and literacy for all groups of people, enabling them to assess their options and decide which services are right for them.
Access to Credit
The global push to expand financial inclusion has led to remarkable progress. Three years ago, 2.5 billion adults were unbanked. Today, 62 percent of adult world citizens have an account. But despite the gains, there are perpetual headwinds to full inclusion. Some of these are structural in nature, including poverty, lack of awareness, and distrust in formal systems. Others are cultural, such as gender and racial inequalities. And finally, a persistent geographic divide can undermine efforts.
To help overcome these barriers, countries need to create a robust digital infrastructure that supports payment inclusion. And it’s important for providers to have a variety of delivery channels that reach rural communities where traditional banks cannot. In many cases, this means partnering with telecommunication providers and retailers to offer products and services that can be accessed through mobile phones or internet connections.
But financial inclusion is about more than just transaction accounts. It’s also about access to credit, savings, and insurance. And these are often more difficult to provide to low-income consumers, especially those living in marginalized communities.
A key challenge here is the “location gap,” where consumers live too far away from a bank branch to qualify for traditional services. But a robust financial ecosystem that includes nongovernmental organizations, e-commerce firms, FinTechs, and retailers can close this gap. In addition, a robust digital identification system can make it easier for consumers to establish their identity, making it more likely that they’ll be able to open an account.
Similarly, providing access to affordable short-term small-dollar credit can open up new opportunities for consumers, allowing them to invest in their own futures and boost consumption. But again, a robust financial system needs to ensure that this credit is provided responsibly and at reasonable costs. This is why ECLAC sees financial inclusion as a policy for productive insertion: It’s about empowering individuals to invest in their own livelihoods, not just enabling them to consume more.
There are other issues where broader access to financial services can cause problems. For example, if a bank lowers screening standards to expand lending, it can have negative consequences for both consumers and the stability of the financial system. That’s why it’s critical to ensure that all players in the financial sector are aware of and committed to promoting inclusive growth.
Access to Savings
Financial inclusion is the effort to provide access to banking and other financial services for all people in a society. It involves spreading financial literacy or education to make people aware of financial solutions that are available to them. It also involves developing formal and systematic credit avenues for poor people to help them get out of the vicious cycle of borrowing money from unlicensed and rich moneylenders. This includes the provision of credit cards to help them build a credit history and eventually grow into a lender themselves.
Payment inclusion is the ability of consumers to use safe, affordable, and convenient digital or traditional payment products to transact for their daily needs. This type of access is critical for financial inclusion because it allows consumers to manage their finances more efficiently and effectively than using cash or paper-based services.
Banks can be a powerful catalyst for financial inclusion by providing low-cost and convenient access to finance. They can achieve this by offering branchless banking, leveraging agent networks and mobile money platforms, and lowering the costs of transactions through automation. These innovations can be especially useful in addressing the location gap by providing services to those who are too far from banks or have difficulty traveling long distances.
Aside from opening a savings account, financial inclusion also involves ensuring that the poor have access to affordable credit. Credit can be used to purchase consumer goods and services, as well as to finance small businesses. It can be a powerful economic enabler for the poor and a crucial factor in poverty reduction and shared prosperity. However, access to credit is limited for the poor due to a lack of collateral and a low credit score.
Another barrier is the lack of access to government-approved documents, such as IDs, passports, and employment documentation. Without these documents, it is impossible for the poor to open a bank account or apply for a loan. This is why governmental agencies and non-governmental organizations are dedicated to improving people’s access to these documents.
Access to Insurance
Financial inclusion is when individuals and businesses have access to useful and affordable financial services that meet their needs – transactions, payments, savings, credit and insurance – delivered in a responsible and sustainable way. It is an enabler for seven of the 17 Sustainable Development Goals, and a major priority for global development funders.
This is a complex question that depends on multiple factors, including availability of products, the ability to manage those products effectively, and the willingness of consumers and communities to use them. It also includes the extent to which those who use a service are able to benefit from it in terms of improved income and better living conditions. The underlying principle is that the provision of financial inclusion has a multiplier effect on overall economic growth and poverty reduction.
While great strides have been made in achieving financial inclusion, some households are still excluded from the formal financial system, especially in the most remote and rural areas. This can be due to a lack of infrastructure and geographic barriers but it may also be the result of policies that restrict access, such as strict KYC regulations.
Providing access to transaction accounts is essential for driving financial inclusion and should be a key target for governments, mobile network operators and private providers. This will help to open the door for access to other services such as credit, savings and insurance. In many cases this can be achieved through digital channels, although to build trust and confidence in the new clients, it will probably be necessary to have a hybrid model that uses both "bricks and clicks" - a small number of no-frills branches and kiosks supplemented by correspondent agents offering standard products.
It might seem counterintuitive that financial exclusion is more prevalent in households with members who have long standing illnesses. However, this is a result of the fact that these households tend to have less disposable income and are therefore less likely to be able to pay for services. The good news is that technology and cost-cutting innovation can push out the viability frontier, which will make it possible to serve more households. Households that remain beyond the frontier, however, will require ongoing subsidies to serve them.