The term "financial inclusion" has gained importance since the early 2000s, a result of identifying financial exclusion and it is a direct correlation to poverty according to the World Bank.[12] The United Nations defines the goals[13] of financial inclusion as follows:
Former United Nations Secretary-General Kofi Annan, on 29 December 2003, said: "The stark reality is that most poor people in the world still lack access to sustainable financial services, whether it is savings, credit or insurance. The great challenge is to address the constraints that exclude people from full participation in the financial sector. Together, we can build inclusive financial sectors that help people improve their lives."
In 2009, former United Nations Secretary-General Ban Ki-moon appointed Queen Máxima of the Netherlands as the United Nations Secretary-General's Special Advocate for Inclusive Finance for Development (UNSGSA), housed in the United Nations Development Programme (UNDP). As the UN Secretary-General's Special Advocate, Queen Máxima is a leading global voice on advancing universal access to and responsible usage of affordable, effective and safe financial services.
Since 2011, more than 1.2 billion people have gained access to financial services—and therefore have a better chance to transform their lives. Leading up to the adoption of the Sustainable Development Goals (SDGs) in 2015, the UNSGSA and UN member-state partners worked to ensure financial inclusion's strong presence within the agenda. As a result, financial inclusion is now referenced in seven of the 17 goals as a key enabler for fulfilling the SDGs, and the General Assembly has passed a resolution stressing its importance.
Over the last five years financial inclusion has made strong strides forward: 515 million more people gained access to financial services between 2014 and 2017;[14] 50+ countries have adopted financial inclusion plans and strategies; the major global regulators—the standard-setting bodies (SSBs)—now regularly meet for the purpose of addressing financial inclusion; and, growing research is showing strong links between financial inclusion and major development goals.[15]
Measurement of Financial Inclusion[edit]
Several surveys and datasets have worked to measure various aspects of financial inclusion including access and usage of financial services.[14][16][17] Some sources, such as the World Bank's Global Findex database or the Gates foundation's Financial Inclusion Tracker Surveys are household surveys attempting to measure usage of financial services from the consumer's perspective.[14] Other data sources like the International Monetary Fund's Financial Access Surveys focus more on the firm side, measuring the supply of financial institutions in a country.[16] Still others focus more on the regulatory environment for financial access, such as the GSMA's Mobile Money Regulatory Index, or the World Bank's, now defunct, Doing Business Report.[17][18]
These data have been used in a range of ways, from donor organizations, such as the Millennium Challenge Corporation incentivizing country governments to do more to improve financial inclusion, to individual countries better understanding where they need to target interventions.[19][20] The United Nations uses two of these indicators (from Findex and the Financial Access Surveys) to measure Sustainable Development Goal 8.10.[21]
Initiatives by country[edit]
Financial inclusion in the Philippines[edit]
Four million unbanked Filipinos are seen to benefit from the nascent credit scoring industry, a development that is seen to serve the people that is classified at the bottom of the economy an easy access to credit once the service is available to the public. Marlo R. Cruz, president and chief executive officer of CIBI Information, Inc. (CIBI) as one of the accredited credit bureaus in the Philippines, highlighted that this is expected to unlock much economic potential in sectors of the economy that are crucial for inclusive growth.[22]
As per Cruz, "Many people still do not realize that the value of having a credit opportunity is synonymous to generating financial power. Creditworthiness is the same as to owning a keycard that can be used in navigating to the society of better possibilities."[23]
The Bangko Sentral ng Pilipinas (BSP) reports on Financial Inclusion Initiatives and Financial Inclusion in the Philippines summarizes the country's accomplishments and significant milestones in financial inclusion. These reports show that 4 out of 10 Filipinos saved money in 2015 (up from 2 out of 10 in 2009). Among Filipino adults, 24.5% never saved and only 31.3% (up from 26.6%) have an account at a formal financial institution. The lack of enough money was cited as the main reason for not having a bank account.[24] While there has been significant progress, much more must be done.
As an emerging country with a sizeable number of people living in poverty, access to financial services is an important challenge. Based on a March 18, 2016, report from the Philippine Statistics Authority, the country's 2015 poverty incidence (the proportion of people below the poverty line versus the total population) is at 26.3% while the subsistence incidence (the proportion of Filipinos in extreme or subsistence poverty) is at 12.1%. This means that there are around 26 million Filipinos who are still living below the poverty line.
Digital financial inclusion[edit]
Technology-enabled innovations represent an opportunity to promote financial inclusion. Inclusive digital financial services refer to mobile money, online accounts, electronic payments, insurance and credit, combinations of them and newer financial technology (fintech) apps, which can reach people who were formerly excluded. For example, digital financial services can provide low-income households with access to affordable and convenient tools that can help increase their economic opportunities or access to credit.[81]
There is evidence that digital financial services can empower women to earn more and build assets, helping address that 35% of women worldwide—approximately 980 million—remain excluded from the formal financial system.[82] Digital financial services have been shown to help give women greater control over their own finances, including safe, convenient, and discreet access to banking accounts.[83] This greater financial power can increase gender equality and economic growth.[84] Bannik (2023) further expounds on the importance of technology in inclusivity in developing countries.[85]
Tracking financial inclusion through budget analysis[edit]
While financial inclusion is an important issue, it may also be interesting to assess whether such inclusion as earmarked in policies are actually reaching the common beneficiaries. Since the 1990s, there has been serious efforts both in the government agencies and in the civil society to monitor the fund flow process and to track the outcome of public expenditure through budget tracking. Organizations like International Budget Partnership (IBP) are undertaking global surveys in more than 100 countries to study the openness (transparency) in budget making process.[86] There are various tools used by different civil society groups to track public expenditure. Such tools may include performance monitoring of public services, social audit and public accountability surveys. In India, the institutionalization of Right to information (RTI) has been a supporting tool for activists and citizen groups for budget tracking and advocacy for social inclusion.[86]
Financial inclusion and bank stability[edit]
The theoretical and empirical evidence on the link between financial inclusion and bank stability are limited. Banking literature indicates several potential channels through which financial inclusion may influence bank stability. A recent study appeared in Journal Economic Behavior & Organization[87] a robust positive association between financial inclusion and bank stability. The authors show that the positive association is more pronounced with those banks that have higher retail deposit funding share and lower marginal costs of providing banking services; and also, with those that operate in countries with stronger institutional quality.
Evidence on the effectiveness of financial inclusion interventions[edit]
Results from research on the effectiveness of financial inclusion programs to improve economic, social, behavioral and gender-related outcomes in low- and middle-income countries have been mixed and programs to improve access to financial services often have small or inconsistent effects on income, health, and other social outcomes. Programs geared toward savings opportunities have had small but more consistently positive effects, and fewer risks, than credit-oriented programs.[88]