Financial Inclusion is where individuals and businesses have access to useful and affordable financial products and services that meet their needs that are delivered in a responsible and sustainable way. it is defined as the availability and equality of opportunities to access financial services. it strives to address and proffer solutions to the constraints that exclude people from participating in the financial sector. It is also called inclusive financing.
Historical Overview of Financial Inclusion
financial inclusion was coined by former Reserve Bank of India (RBI) governor YV Reddy in 2005. It was over a chance conversation with him a few months ago that I discovered RBI’s original description for this effort was actually financial exclusion.
it has gained importance since the early 2000s. The United Nations defines the goals of financial inclusion as follows
- Access at a reasonable cost for all households to a full range of financial services, including savings or deposit services, payment, and transfer services, credit and insurance.
- Sound and safe institutions governed by clear regulation and industry performance standards.
- Financial and institutional sustainability, to ensure continuity and certainty of investment.
- Competition to ensure choice and affordability for clients.
Unlocking Public and Private Finance for The Poor(UNCDF) an organization invests in savings-led financial inclusion. UNCDF’s second major area of expertise financial inclusion traces its roots to the late 1990s when it’s work at the local level often included support for microcredit institutions. Over the following years, UNCDF moved towards the broader concept of microfinance, promoting access to a variety of financial services, especially savings, based on the evidence that savings were actually much more in demand especially from the most vulnerable segments of societies. it established itself as a leader in that field.
In 2005, UNCDF made a strategic shift to focus its interventions on financial inclusion more broadly. The new approach is supporting a market development approach to make financial sectors more inclusive. It was designed to create enabling environments for a wide range of retail financial service providers and to address gaps in the policy, legal, and regulatory constraints that prevent a financial sector from being inclusive. UNCDF has been continuously assessed and recognized as a leader in the SmartAid Index by the Consultative Group to Assist the Poor (CGAP) since 2007. The SmartAid Index measures an organization’s effectiveness in supporting financial inclusion.
In partnership with the National Bank for Agriculture and Rural Development, the UN aims to increase financial inclusion of the poor by developing appropriate financial products for them and increasing awareness on available financial services strengthening financial literacy, particularly among women. The UN’s financial inclusion product is financed by the United Nations Development Programme.
Countries with financial inclusion
- The Philippines.