Many people around the world still lack access to formal financial services. These services can help them overcome shocks and reach their goals. This includes savings, loans, and insurance.
Financial inclusion is a goal for many businesses, as it offers opportunities for social impact and profitable growth. But how can businesses achieve these goals?
Credit unions
Financial inclusion means that people and businesses have access to, and are empowered to use, formal financial services that are tailored to their needs at a cost affordable to them and sustainable for providers. These include payments, savings, credit and insurance. It also includes having a safe place to keep money and manage household finances. For example, women who have accounts are more likely to save and build wealth. They are also more able to invest in their own business, send remittances home to their families and weather financial shocks like medical expenses or natural disasters.
A growing body of research shows that financial inclusion has a direct impact on poverty alleviation, resilience in times of crisis and other measures of human progress. In addition, it can help companies achieve their goals for societal impact and profitable shareholder value. Credit unions can play a role in this effort by leveraging their assets, such as ATMs, artificial intelligence and mobile apps.
Branchless banking
Financial inclusion is a global trend that empowers people to manage their financial lives better. It is facilitated by many forces, including new digital technologies and changes in national policy. These new tools are removing barriers that once kept people from accessing the banking and mobile money services they need. But even with these advances, the world’s poorest remain underserved.
Among these barriers, the lack of government identification is a significant impediment to financial inclusion. In fact, the majority of unbanked adults in Sub-Saharan Africa report that this is their main reason for not having a bank account.
Fortunately, this barrier can be overcome by leveraging branchless banking, a technology that allows banks to offer services outside traditional bank premises. These services are delivered through agents, called business correspondents, who charge a small commission value for each customer onboarding, transaction or deposit. Moreover, these agents can be accessed by customers through mobile apps or USSD channels.
Peer-to-peer lending
Financial inclusion is the process of providing people with access to formal financial services, including payments, savings, credit and insurance. These services help people build livelihoods and prepare for future financial needs such as education, health and housing. Moreover, they can also help people weather economic shocks and achieve long-term goals.
A growing number of fintech companies are enabling people to access financial services through digital channels. These include mobile money platforms, digital bank accounts, robo-advisors, and peer-to-peer lending (P2P). Peer-to-peer lenders provide solutions that banks may be too expensive or slow to offer, such as real estate development loans and invoice financing for small businesses.
Currently, 1.7 billion adults lack access to financial services. This is a global crisis, and it affects women disproportionately. Global inequality is one of the most significant challenges in our time, and financial inclusion is a powerful way to bridge these divides. It can also boost the economy, especially in emerging economies.
Insurance
Financial inclusion is a global initiative to make everyday financial services available to more people at reasonable costs. Its benefits include poverty alleviation and economic growth. This includes savings mechanisms, credit, payments, and insurance. It also addresses gender gaps and promotes sustainable business models for small businesses.
The development of fintech and digital innovations has made it easier for many formerly excluded populations to access banking and other financial services. These innovations reduce transaction costs and provide new channels for customer acquisition. They also enable cross selling, a strategy that increases sales by offering additional products to existing clients.
Kenya, for example, has achieved remarkable progress in extending access to financial services with its M-Pesa mobile money system. M-Pesa enables mobile payment and banking through a network of telecom subscribers. It has helped millions of people move out of cash-only transactions. M-Pesa has been hailed as one of the most successful examples of financial inclusion.