A few days ago, I was asked about financial
inclusion, and I wanted to share the notes I made on the subject.
The
first question that came to mind was: what is
financial inclusion? or rather what do we mean by financial inclusion? Is it:
- Having a current account and a debit
card?
- Having access to credit?
- Making sure that everybody knows how to
manage their finances?
The second
question was, why is it that large parts of the population, in certain
countries, and a total of 2.5 billion people globally, are excluded from the
financial system?
- Is it because they do not have physical
access to a bank?
- Is it because the banks do not consider
them as a risk free and profitable customer?
- Is it because people don’t trust banks?
- Is it because people work in the informal
economy and, thus, would not enter into a banking relationship that could
attract the attention of the tax authorities?
(I should also mention that the issue of
financial inclusion is not confined to those countries that have a large
percentage of their populations living below the poverty line. It is an issue
that also affects the US, as I read in a 2016 article published by the White House.)
The third
question was, what do the different players want to achieve with increasing
financial inclusion of the world population?
- Is it a genuine desire to include
everybody in the financial system so that they have access to credit and a
secure way to conduct their finances?
- Is it a genuine desire on behalf of governments
to equip their citizens with the financial education necessary to make informed
financial decisions, participate in the productive economy and, thus,
contribute to their countries economic growth?
- Is it just a means for banks to rein in
more customers and make more profits?
I suppose that the answer to all of the
above questions is: Yes, or rather, that the answer is a mixture of all of the
above, depending on who is answering.
Notwithstanding the above questions, and
the objectives/reasons of the different actors, what appears to be true is that
technological innovation and, more specifically, innovation in mobile
communications coupled with the development of FinTechs that are challenging
traditional banks, are playing a crucial role in financial inclusion by
providing Mobile Financial Services at lower costs to consumers.
Having said that, the price of accessing
mobile communications could present a problem for low-income groups, that could
be augmented if they live in regions where cell phone coverage may be an issue.
