Financial Inclusion, a definition

Today, around 2.5 billion people worldwide have no access to financial services, meaning they have no access to savings, credit, insurance, remittances, or payment methods.

In a globally integrated world, financial access is not an option but an indispensable prerequisite. Indeed, financial access facilitates day-to-day living and helps families and businesses plan for everything, from long-term goals to unexpected emergencies.

So what is Financial Inclusion?
We could stick to the Work Bank definition, Simple, Straightforward. “Financial Inclusion means that individuals and businesses have access to useful and affordable financialproducts and services that meet their needs – transactions, payments, savings, credit, and insurance – deliveredresponsibly and sustainably.1”

That being said, this definition opens a whole other door for many additional concepts:
● What is a useful financial product?
● What is an affordable financial product?

● What does it mean to deliver this financial product responsibly and sustainably?

InFiNe.lu, the Luxembourg inclusive finance network, has the particularity to gather an extensive range of expertise characterised by the diversity of its members from the public or the private sector.

In this article, we will dive deep into the different meanings and realities behind Financial Inclusion. This exercise will continue throughout the year with the support of InFiNe members, with the launch of a Financial Inclusion Dictionary in the upcoming weeks.

● Financial Inclusion, transformative for people.
Millions and millions of people worldwide have no access to any financial services, including banking. This means that it is harder for them to save, to borrow, to send money or to get insurance. Financial Inclusion has been shown to reduce poverty and improve lives, especially those of poorer women or people living in rural areas. As stated by Leora Klapper, Lead Economist in the Finance and Private Sector Research Team of the Development Research Group at the World Bank, financial means, for instance, that women have a safe place to keep their money outside their homes. And research has proven that when a woman gets a banking account: “she builds savings, spends more on a children’s education, invests in business opportunities.²” In other words, financial Inclusion for people leads to transformational change, including economic development, a more equitable society, and more security. Growing out of the microcredit concept in the 70s, Financial Inclusion is now “an important part of the global development agenda, with a wide range of actors recognizing it as an enabler of everything from agricultural development to education to humanitarian responses.³”

● Financial Inclusion, transformative for businesses.
If Financial Inclusion has the power to empower people and give them access to the services they need in terms of payments, savings, credit, and insurance, Financial Inclusion is also transformative for businesses leading to economic growth. Globally, the Micro, small, and medium enterprises (MSMEs) represent “about 90 percent of businesses and more than 50 percent of employment.” Offering legit and easy access to financial services to MSMEs in emerging and developing economies means guaranteeing economic diversification, helping increase economic growth and job creation, and social and financial stability.