What Is Financial Inclusion?
Financial inclusion refers to efforts to make financial products and services
accessible and affordable to all individuals and businesses, regardless of
their personal net worth or company size. Financial inclusion strives to
remove the barriers that exclude people from participating in the financial
sector and using these services to improve their lives. It is also called
inclusive finance.
KEY TAKEAWAYS
Financial inclusion is an effort to make financial services available to
more of the world's population at a reasonable cost.
Financial inclusion may refer to geographical regions, consumers of a
specific gender, consumers of a specific age, or other marginalized
groups.
Financial inclusion may lead to greater overall innovation, economic
growth, and consumer knowledge.
Advancements in fintech, such as digital transactions, are making
financial inclusion easier to achieve.
Importance of Financial Inclusion
There are very broad and general reasons why financial inclusion is
important. Some of the key reasons include:
Financial inclusion reduces poverty and inequality. Financial
inclusion provides opportunities for marginalized and low-income
individuals to access formal financial services, such as savings, credit,
and insurance. By empowering them with the tools to manage their
finances and invest in income-generating activities, financial inclusion
can help lift people out of poverty and reduce economic disparities.
Financial inclusion promotes economic growth. A general argument
is that when more people have access to financial services, they can
participate actively in the economy. Increased financial inclusion leads
to higher levels of savings, investment, and entrepreneurship, fostering
economic growth and stability in both local communities and national
economies.
Financial inclusion promotes small businesses. Small businesses
often face challenges in accessing credit from traditional banking
sources. Financial inclusion through innovative lending models and
online platforms can provide much-needed funding for entrepreneurs to
grow their businesses.
Financial inclusion empowers otherwise marginalized
demographics. For example, financial inclusion initiatives targeted at
women can promote gender equality and women's economic
empowerment. By providing access to financial services, women gain
more control over their finances, which can lead to improved
educational opportunities, better health outcomes, and increased
decision-making power within households.
Financial inclusion promotes innovation. Financial inclusion drives
innovation in the financial sector, leading to the development of new
technologies and fintech solutions that cater to the needs of
underserved populations. These innovations can benefit the broader
financial ecosystem and lead to advancements in financial services.
Financial inclusion may foster digital inclusion. As technology plays
a significant role in financial inclusion, promoting access to digital
financial services also contributes to digital inclusion, ensuring that
more people can participate in the digital economy.
Financial Inclusion and Technology
There are countless ways technology can and is playing a major role in
enhancing financial inclusion. Here are some ways we can use modern
innovations to better serve the world with financial services.
Mobile Banking
Mobile banking applications offer a wide range of services, including checking
account balances, transferring funds, paying bills, and even applying for
loans. These apps are user-friendly and accessible 24/7, enabling individuals
to conduct financial transactions conveniently from their smartphones, without
the need to visit physical bank branches.
Digital Payments
In 2021, the FDIC found 46.4% of all U.S. households were using nonbank
online payment services.3 Online payment systems provide various options
for making cashless transactions. Mobile wallets allow users to store funds
digitally and make payments using their mobile phones, while contactless
payment methods such as Near Field Communication (NFCs) and QR codes
enable swift and secure payments in physical retail settings. Both solutions
reduce the risk of theft or loss associated with carrying cash.
Agent Banking
Agent banking models use technology to equip banking agents with mobile
devices and software. Agents act as intermediaries, representing financial
institutions in remote areas where brick-and-mortar branches are impractical.
They offer services such as account opening, deposits, withdrawals, and fund
transfers to individuals who may not have easy access to traditional banks.
Online Lending Platforms
Fintech lending platforms connect borrowers and lenders directly through
online platforms. Borrowers can apply for loans, and lenders can assess their
creditworthiness based on data analytics and alternative credit scoring.
Financial Education Apps
Financial education apps and online platforms offer interactive and engaging
content to improve financial literacy. Users can access educational modules,
budgeting tools, and investment insights to enhance their understanding of
financial concepts and make better financial decisions. Consider how Mint by
Intuit had been downloaded over 10 million times from the Google Play store
