Last week the World Bank released The Global Findex Database – Measuring Financial Inclusion Around the World – Policy Research Paper. The Global Findex data was collected by the World Bank and Gallup World Poll, and was financed by the Bill & Melinda Gates Foundation. The data is based on interviews with 150,000 adults (aged 15+) in over 140 countries, and gives us a unique global insight into the state of financial inclusion around the world.
But sometimes the data and statistics can be mind boggling, and you can get lost in the details of the numbers. So in this post I thought I would take a step back and share why financial inclusion is important. Without this understanding, and maybe its stating the obvious, the various statistics start to become almost meaningless and we forget the underlying importance of financial inclusion. So, in no particular order….
The Importance of Financial Inclusion…
1. Access to financial services enables the poorest and most vulnerable in society to step out of poverty and reduces the inequality in society
2. Financial inclusion not only helps individuals and families, but collectively it develops entire communities and can help drive economic growth
3. Financial inclusion is about enabling and empowering people and communities:
- Enabling people to have the ability and tools to manage and save their money
- Empowering people with the skills and knowledge to make the right financial decisions
4. Participation within the financial system leads to all kinds of individual benefits, including:
- Ability to start and grow a business, which gives people an opportunity through micro-financing schemes for example to better long term prospects
- Being able to pay for an education for children, which in turn enables a new generation of educated and informed individuals
- The ability to handle uncertainties that require ad hoc and unexpected payments or ‘financial shocks’
5. Financial inclusion through access to an account, savings and a payment system (whatever that maybe) enables potential and empowers men, women and whole communities. This in turn promotes:
- Investment within the community, provides jobs and again research shows that employment boosts status, income and ones outlook on life. Collectively this helps to invigorate economies.
- Equality both within the community and within families
Now clearly one channel that is enabling financial inclusion is mobile money. I don’t want to get into that too much, because with that we get into the realms of mechanisms that enable financial inclusion. That said I do want to mention that because globally many people have a mobile device, mobile money quickly and easily enables many people to brought into the ‘main economy’ and gives them the ability to make payments in a simple, affordable and secure manner. This is why there is so much focus on mobile payments. Clearly this report, the Gates Letter and an increasing appetite in the industry to develop mobile payments solutions will ensure that financial inclusion remains firmly in the spotlight.
I hope this post gives you some perspective on the focus on and for financial inclusion. I’d love to hear your thoughts and comments on this post below…
- Empowerment through financial inclusion
- The importance of financial inclusion in light of the recent financial crisis
- Economic Secretary on financial inclusion