What Is Financial Inclusion?

It is not a secret that essential financial services enable people to pay for their needs, fund their financial priorities, and even start their respective businesses. But at the same time, approximately two billion qualified adults around the world don’t have access to these platforms.


The goal of financial inclusion is to ensure that people will have seamless access to the financial services they need. With the improving technology that we have, it is possible to implement a myriad of strategies that would extend these financial tools to whoever needs them. 

What Is Financial Inclusion?

In a nutshell, financial inclusion is a global financial objective that wants to ensure that people and businesses have access to various financial services. These services may vary from simple transactions to complicated ones. Classic examples would be access to checking accounts with the inclusion of added tools such as insurance and credit card. 


There are various ways on how to describe financial inclusion. However, one of the most sensible descriptions was given by Dan Schulman, PayPal’s CEO. According to him, financial inclusion should provide universal access to all the digital forms of financial systems. He also emphasized the importance of secure and safe transactions in improving the efficiency of operations of businesses and consumers. Furthermore, Schulman said that financial inclusion requires inexpensive means to participate in the economy, which, in turn, would allow people to get affordable loans and community help. 

How Does Financial Inclusion Work?

Financial inclusion is the process by which people who don’t have an account with a bank or credit union are able to get access to financial services. It is not the same as universal banking, which would be a system where everyone has an account with the same bank. In financial inclusion, there are many different types of financial services, from credit and debit cards to savings and loans.


Most of the time, the target of financial inclusion is those individuals who belong to the category of financially excluded. Typically, these are the people who are in the marginalized sectors, low-income regions, and developing countries. Interestingly, a major chunk of these individuals is women. 


One can understand financial inclusion better if one can take a look at the problems that this concept is trying to address. 


  • No access to bank accounts – Individuals who don’t have even a single bank account may rely on alternative platforms to sustain their financial needs. Most of the time, these alternatives have higher fees and interests, given that they are not regulated by any institutions. Moreover, they don’t provide consumer protection such as deposit insurance. The lack of a bank account will push people to undergo rigorous procedures of paying bills and doing other financial transactions. Access to technology will let them do these things conveniently minus the high cost. 


  • Limited to no access to credit – People who have high credit scores have no problems when it comes to borrowing money or applying for credit cards. That’s why it is essential for people to maintain a good to excellent credit score to ensure their access to more financial opportunities. However, it is notable that a lot of people have bad or limited credit. Other countries don’t even implement this system. If you can’t access loans from regulated financial institutions, you’ll have no other choice but to rely on those predatory lenders. They tend to charge high fees and rates. 


  • Informal economy – Countries, especially those developing ones, always have cash as the primary financial tool. While there’s nothing wrong with this, it is still risky. After all, it prevents businesses in those areas from implementing electronic or plastic methods of payments. They tend to store cash, which is prone to a myriad of dangers (such as theft). Furthermore, it causes difficulties for businesses to expand because they don’t have enough assets. 


There are a number of groups these days that are promoting the implementation of financial inclusion throughout various sectors of society. For instance, the G20 committed in 2017 to promulgate worldwide adherence to financial inclusion. Meanwhile, the World Bank and the International Finance Corporation launched the “Universal Financial Access 2020” in 2018. The latter is an operation that would help a billion people to have access to basic transaction accounts.


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