Financial inclusion ensures that everyone benefits from banking services and helps to eradicate poverty and reduce inequality. It is an impossible economic development if there are people who still do not have access to efficient financial services.
What is financial inclusion?
Financial Inclusion ensures that everyone has access to basic and efficient financial products and services. That is, they must have a bank account, make payments by credit card, ask for a loan, and receive advice. It is therefore an essential tool to eradicate poverty and to fight against inequality.
The great challenge of the entities and institutions is to reach developing countries that cannot enjoy these services, such as some areas of Africa and Asia. In these cases, it is possible that the inhabitants of certain places in these continents live very far from the main populations and have no way to move to where the bank branches are located.
For example, in Kenya only 20% of the adult population had a bank account in 2006. As a consequence of the lack of ATMs, people began exchanging prepaid phone cards for cash. In 2007, M-Pesa was launched, a system of monetary transfers using mobile phones that allowed sending money and offered a safe method to save it. Six years later, 67% of Kenyans had access to some kind of financial services.
Is Financial Inclusion Important?
Financial inclusion is synonymous with progress and allows the population to cope with times of economic crisis, health problems, unemployment, and entrepreneurship. In addition, it helps women to become more independent and have an active role in the evolution of society in less developed countries, providing a way for financial life to not be controlled solely by men.
In the Western countries, financial inclusion allows people to create enterprises and make their businesses grow, buy a home, or finance a car.
Moreover, technological development has changed the way to access and make use of financial services. Today, almost everything works through smartphones. We have banking applications that only work if you have an account. Those who do not have access to these products are at risk of being excluded from the digital economy sector.
Finally, financial inclusion provides people with freedom and autonomy to manage their money and, above all, their lives. This is something that helps them to have more confidence when it comes to making decisions and being more independent from day to day.
What are the Most Advanced Countries on the Basis of Financial Inclusion Issues?
Aware of the great influence they have on the progress of society, financial inclusion must be one of the priorities of business entities.
Banco Santander places it among its main goals. For this reason, it counts on financial inclusion through the emission of microcredits around all the American continent. In total, 1,700 million people around the world do not rely on access to banking services, including 200 million in Latin-America. These are some of its projects in the continent.
Financial Inclusion in Mexico
The business entity headed by Ana Botín offers the possibility to carry out basic transactions through more than 19,000 commercial terminals such as Oxxo, Eleven, etc.
In addition, in 2017, it launched Tuiio, a program of financial inclusion aimed at promoting a social impact in the community. Specifically, products and services are offered specially designed for the low-income population and who do not have access to banking services.
The goal is for these people to have the opportunity to start small businesses. Therefore, there are loans of 400 euros on average that are granted to groups formed by at least 8 small entrepreneurs. 91% of the aid is for women. The goal is to finance almost 300,000 people within the next 4 years.
The Global Plan of Action 2030 seeks to reduce poverty and inequality considerably. This also aims for everyone to have access to the most basic financial services
Financial Inclusion in Brazil
Santander is considered a leading bank in the country among private business entities in terms of supplying microcredits aimed primarily at people without access to the formal financial system. And it does this through its Prospera program, created in 2002.
These loans of 600 euros on average are granted to solidarity groups made up of 3 or 4 small entrepreneurs like artisans, seamstresses or owners of food stores in Brazil. It should be noted that 65% of microcredits are destined to female heads of households.
The initiative has helped the growth of more than 600,000 small businesses in the country. A large part of the success lies in the fact that a team of Credit Agents accompanies and guides the entrepreneurs during an agreed period of time with Banco Santander.
According to Icex, in 2017 the entity headed by Ana Botín granted loans through this program valued in 198 million euros, almost 33% more than the previous year.
Financial Inclusion as Calibrator for Diminishing Poverty
It is estimated that around the world there are 1,700 million people excluded from the financial system.
Financial Inclusion gives the ability to save, empower women, help to undertake, increase consumption and investment. Much of the most serious problems in developing countries could be solved through financial inclusion.
The Global Plan of Action 2030 seeks to reduce poverty and inequality considerably. This also aims for everyone to have access to the most basic financial services.
The most financially excluded countries are Bangladesh, Ghana, India, Nigeria, and Uganda. However, little by little they begin to appreciate positive changes in their different situations, although there is still a long way to go.
Financial inclusion to promote the sustainable development
Financial Inclusion directly influences 7 of the 17 Sustainable Development Goals proposed by the United Nations organization.
Access to financial services balances consumption patterns, makes costs better planned, addresses health risks, or helps increase investments.
At the macroeconomic level, financial inclusion generates benefits such as increasing the economy, the reduction of risks and bank costs, job creation, financial stability, and the stimulus of economic activity. As for the micro dimension, as it said, the people included in the system have greater opportunities to get out of poverty and are less likely to fall into it.
The ever-increasing boost of financial inclusion and the mobile banking revolution (which promises to evolve further) will be key to helping to meet the UN’s sustainable development goals.