This is either because people can’t afford it, because financial service offerings are too far away, because people don’t have the correct documentation, because of religion, or because people don’t always trust financial service providers.
However, it isn’t a universal problem – some people are more vulnerable to financial exclusion than others. Women, rural and remote populations are all more vulnerable to being excluded from financial services.
To address this issue, companies and governments around the world are developing financial inclusion plans. These plans give people access to financial services, due to a shift developing around the world towards having more compassion for people facing financial difficulties, such as the 2010 G20 agreement for financial inclusion, working under the banner of the Global Partnership for Financial Inclusion.
Financial inclusion plans involve providing more affordable financial products, using early warning signs to indicate groups who might be vulnerable to financial exclusion, rescheduling repayments and providing further support to those experiencing financial difficulties. In recent years, it has been done with the use of digital financial products, with the digital option making banking and other financial services much more accessible.
Digital financial inclusion and fintechs
Digital solutions are increasingly offering solutions against financial exclusion, providing more people with access to financial services.
Fintechs and other digital solutions have the potential to address financial exclusion by giving people access to financial services and by accessing financial data themselves, which they can then use to develop financial services and products in areas that suit the financial needs of people who are currently excluded.
However, it could act as a barrier for people who don’t have access to high-speed internet connections or mobile phones, meaning they are left behind as financial services moves digital. The customer who is typically excluded from many financial services, is usually inexperienced with financial services, making it a risk to include them, an issue which financial inclusion action plans (FIAPs) are hoping to redress, potentially with the development of digital solutions and fintechs.
Financial inclusion plans around the world
Many countries around the world are getting involved. In the US, financial inclusion was a policy priority under the Obama administration, with banks in the US and other parts of the world finding it difficult to bank people in lower socioeconomic situations. Not only in the US, but all across Europe and Asia, a decent number of people are either underbanked or unbanked. However, inclusion plans are being developed, such as that from the US, all across the globe. In the UK, financial inclusion became a policy in 1997 and since then, they have been working towards identifying the causes of exclusion, to then address, including the Financial Inclusion Commission.
Created at the Seoul G20 Summit, an agreement towards financial inclusion was made in 2010, hoping to advance financial inclusion globally. By giving more people access to affordable financial services, they are hoping to bring more people into the fold and therefore, reduce poverty for the whole world, making financial inclusion a worldwide priority.
A financial inclusion initiative, led by Good Shepherd Microfinance
In Australia, an initiative led by Good Shepherd Microfinance was recently announced, joining together 30 companies, from banks to fintechs and universities, to tackle financial exclusion in Australia.
Companies and individuals in Australia have shown overwhelming support for the initiative. The Queensland government pledged $25 million, EnergyAustralia is giving $10 million and Commonwealth Bank is giving $900,000 for domestic violence training to financial counsellors, and for scholarships. The 30 companies involved range from banks and insurers, such as ANZ and Commonwealth Bank to law firms such as Corrs Chambers Westgarth and retailer, Flight Centre.
It is expected that at least 60 more companies will be joining the program, following the announcement. Companies and governments such as those at the G20 and those getting involved in the initiative led by Good Shepherd Microfinance, are working to tackle financial exclusion around the world, developing financial products for those who are usually excluded. They are making financial services accessible to everyone, hoping that this will expand the market, reduce poverty and ultimately, be good for the economy.
You can find a full list of the 30 companies in a press release by Good Shepherd Microfinance.