EXCLUSIVE: A Newcomer’s POV to Financial Inclusion

Hello again! No beating around the bush, this is a straight-to-the-point return to form for these newcomer pieces. I missed writing these. So what am I delving into today? We’ll be looking at Financial Inclusion. It’s been a hot buzzword on a lot of people’s lips, lately. Anywhere and everywhere to do with finance, you’ll find people talking about it. From Naira’s digitisation into eNaira being a step forward, to Huawei’s ever-onward mission towards this end goal, and the financial world spreading their reach further and further across the world, one might ask:

What exactly is financial inclusion?

It could be easy enough to make an educated guess, but let’s dig as deep as we can into this.

In 2017, there were approximately 1.7 billion people in the world who were unbanked. What does this mean? An unbanked individual is someone who does not have access to financial services or resources; even something we take for granted, like a bank account, is out of reach. That number may well have fallen by now, but the sentiment is the same – it’s a lot of people. Don’t believe that this is just for undeveloped countries either. This is global. For these unbanked people, they might deal primarily in cash or have someone else handle all of the financial services for them (be they willing or not). They themselves don’t have access to this.

Financial inclusion is the movement to remedy this. It is the process of including more and more people in the financial world. Not just helping them set up a bank account – though it definitely is the first step – but also guiding them through establishing credit, setting up insurance, and making long-term plans for the sake of one’s financial security and stability. That also means educating people on how to navigate the world of commerce. It isn’t an overnight process, but one that’s taken many, many years and still isn’t complete worldwide.

So how are the unbanked being served and helped? Technology has helped this a great deal. We’re seeing financial inclusion acted upon through the use of smartphones and apps. Digital banking, money transfers through social media, and similarly accessible channels. Just as it needs to be accessible, though, it also needs to be affordable and efficient. Getting someone inducted into the financial world must involve an easy onboarding process, and one that anyone can jump onto no matter their economic status.

This also reaches into other fields of finance. Cryptocurrency, for instance, has been another massive tool used to improve financial inclusion. Micropayments, being able to transfer in pennies or tiny fractions of bitcoin, can draw people into making transactions early. Building someone’s credit score helps them reach for more financial services – such as loans! It’s a cooperative effort. If any field sees new breakthroughs and efficiencies, we can likely see that making a positive impact upon financially including the unbanked and underbanked.

It is especially important in this time, where we are still feeling the pandemic’s effects. Everyone was hit hard by it, and economic stability across the world was uncertain, but the more vulnerable communities of the world have been hit the hardest. And I want to recall something I mentioned earlier; don’t believe that this is just for undeveloped countries either. To bring attention to two frightening statistics and insights from Deloitte and Banking Exchange…

“The COVID-19 pandemic has worsened a situation that was previously affecting millions of people in the UK. As a result of the crisis, even more people are suffering poor financial wellbeing and previously comfortable groups are falling into financial difficulty – with many finding that they are not able to access the financial products and services they need to get their lives back on track.” – Deloitte.

“According to the Credit Invisible Policy Report by the Consumer Financial Protection Bureau, one in ten U.S. adults are credit invisible, or have no credit at all, making it more difficult for them to access financial services and resources. To put that into context, a total of 26 million U.S. adults are without a credit history, causing them to be stuck in a cycle of financial disadvantage.” – Banking Exchange.

This is happening in first world countries as it is anywhere else. There are a variety of underlying causes behind this (of which we won’t delve into, we’d be here forever), and it all leads to the same result – an upsetting amount of people do not have access to a majority (if not all) of basic financial services.

Why do you think financial inclusion is one of the biggest talking points as of late? It’s become one of the biggest engines of economic development and stability across the world. What has happened recently, then, to drive this forward and prove everything I’ve said above?

In early 2021, Vanquis, a credit-building bank, and LOQBOX partnered up. Not only were Vanquis already determined to help often-declined credit appliers, but this partnership offers alternative solutions to those who are still struggling instead of simply ending their journey. And with government support schemes ending, this is going to become even more important.

Recently, Logiq announced that it will be releasing a “super app” in Indonesia that can handle an incredible amount of financial services straight from one’s phone. Loans, transactions, accounts, and so much more. All from a single app. This is especially important, since Indonesia unfortunately boasts the third-highest number of unbanked individuals, behind China and India.

Finally, as another highlight, Santander recently announced a challenge for startups and scaleups to offer solutions towards financial inclusion. Specifically, “Finance for Youth”, “Finance for Elderly”, and “Finance for Unbanked”. It represents their commitment towards improving the quality of life and financial health for people across the world.

Thanks for following along with this. It’s a slightly different style; as someone who’s in a more privileged position than others out there, it’s hard to comment on personal experiences. I can still, however, provide insight and financial education to the best of my ability. Financial inclusion has a long way to go. It’s entirely possible we won’t see this end goal reached until a decade from now, if not more. That might be daunting to think about. Even if we take it slowly, though, we’ll eventually ensure everyone is inducted into the financial world. One step at a time, people