Today, worldwide account ownership has reached 76% of adults (aged 15+)—and 71% of people in developing countries, according to the 2021 World Bank Global Findex. Financial exclusion remains greatest among traditionally underserved groups, including the poor, women, smallholder farmers, and micro-, small and medium-sized enterprises (MSMEs).
This exclusion hampers people’s ability to earn, protect themselves in times of crisis, and to build financial health and resilience. Further, 131 million (SME Finance Forum) MSMEs in emerging markets alone lack access to finance, limiting their ability to grow and thrive.
Affordable access and usage of quality financial services helps families and small business owners generate income, manage irregular cash flow, invest in opportunities, and work their way out of poverty. Financial inclusion can empower people and communities to meet basic needs, such as nutritious food, clean water, housing, education, and healthcare. Financial inclusion also has a critical role in the efforts to help people prepare for, respond to and recover from crises, such as the COVID-19 pandemic, inflation, or economic and climate shocks.
However, financial inclusion goes beyond just having access or usage to financial services but considers quality. A focus on quality means that financial services are responsive and responsible, meeting customers’ needs and capacities, safe and customer-friendly, and lead to positive outcomes.
Financial inclusion is therefore an enabler and accelerator of broad-based economic growth and resilience, improved financial health, job creation and development. An inclusive financial system is essential infrastructure in every country.
Around the world, there is more attention than ever to the ways access to financial services accelerates progress toward development. This has spurred a wave of high-level commitments by governments, international agencies, the private sector, and others to make the vision of financial inclusion a reality.
G20 leaders recognized financial inclusion as a cross-cutting issue for development and economic system stability and included it in work plans. Additionally, financial inclusion is referenced in the targets of eight of the 17 UN Sustainable Development Goals (SDGs). And, since 2010, more than 50 countries have launched and started to implement (or are currently developing) a national financial inclusion strategy (NFIS). An important step on the global level was to convene financial standard-setting bodies (SSBs) at the Bank of International Settlements (BIS) in Basel to include financial inclusion in their work.
Financial Inclusion is Possible
Policymakers and regulators are increasingly working toward promoting regulations that take advantage of new technologies to expand access and usage to underserved segments while ensuring that consumer protection, fair competition, as well as stability and integrity of the financial sector, are critical.
A series of innovations are making it possible to provide low-cost and convenient financial services to all those who need them. Mobile phones, digital finance and fintech are offering many exciting and promising innovations to enable positive change for the underserved. E-money has included millions of people into the formal financial system over the last decade, for example. Financial products for agriculture, health insurance, and other areas are inspiring scalable solutions through careful designs that meet client needs within their local contexts.
But with innovation, notably tech-enabled solutions, there is a need for it to occur in an environment where opportunities are harnessed, while attendant risks are properly managed, leading to positive outcomes. Governments are encouraging this and other new models through policies that promote innovation, partnership, and responsible finance. At the same time, new data efforts are enabling countries and service providers to know more about unbanked markets and client needs, and to measure progress against nationally determined targets.
The Path Ahead
For the whole digital system to work sustainably and equitably, governments and the private sector need to put in place key digital public goods, such as connectivity, cybersecurity, data privacy, digital ID, and physical infrastructure, among others. These help people enter and participate in the formal digital economy in a safe manner.Women’s financial inclusion will also be a keystone issue over this decade as the world looks to close the gender gap. Serving the women’s market represents an incredible opportunity—from a business perspective as well to include women economically, helping to empower them.
Women’s financial inclusion will also be a keystone issue over the next decade as the world looks to close the gender gap. Serving the women’s market represents an incredible opportunity—from a business perspective as well as a way to include women economically, helping to empower them.
The importance of financial health has also become particularly evident during the financial and economic impact caused by the COVID-19 pandemic, as well as more frequent climate-related shocks, such as droughts or flooding. These types of events not only expose the vulnerability of those who are excluded from the financial system but also the need to ensure that those who are included can benefit from using financial services. As a result, there is a need to work toward financial health in the context of promoting financial inclusion, including to help people and small businesses build resilience to shock events as well as to seize new economic opportunities.
Through strategic and sustained advocacy, the UNSGSA encourages cooperation and commitment from political leaders, regulators, global standard setters, civil society, the private sector, and, most importantly, those currently outside the financial system, to break down barriers and build a more inclusive future.