Huge Benefits of Financial Inclusion
Working to achieve the vast benefits of financial inclusion is central to the efforts of financial institutions and financial service companies worldwide. Financial inclusion has incredible benefits globally and nationally for businesses and financial institutions.
Global Financial Inclusion Efforts
Countries worldwide have also committed to increasing financial inclusion for their populations and launched their digital-based financial service platforms.
Digital-based financial services have effectively reached hundreds of millions of users worldwide. This explosion in financial services has allowed these people to move away from cash-only economies. It is one of the many benefits of financial inclusion.
This is evident in the fact that in 2011 only about half of adults had bank accounts; by 2022, this number has risen to more than 75%. However, despite this massive success in recent years, it's essential to realize that around 1.4 billion adults globally still need access to financial services.
Global Benefits of Financial Inclusion
Access to affordable financial services such as insurance, loans, and payments is essential for global development. Financial inclusion is critical to addressing 7 of the UN's 17 Sustainable Development Goals. The UN is one of many international institutions that has recognized the central role of financial inclusion.
An excellent example is paying the teachers with digital payments rather than cash. This ensures that teachers in emerging economies are reliably paid, making the profession more appealing and saving teachers time traveling a long distance to a bank. With this extra time, they could keep their classrooms open more, spend more time preparing lessons, or work an additional job that allows them to continue being a teacher. This demonstrates how financial inclusion can drive essential aspects of development like education by making financial transactions much more accessible for everyone.
The World Bank Group considers financial inclusion essential to relieving extreme poverty by allowing people to pay for everyday essentials or save for the future. People can have their wages sent directly into their bank accounts rather than using far less secure cash.
One of the most significant benefits of financial inclusion is its impact on remittances—no need to wait weeks for a potentially unreliable postal service to deliver an envelope of cash. Now people can quickly and securely send money to their families worldwide. This allows remittance revenue to flow into emerging economies providing individuals and communities with more financial resources.
Additionally, access to financial services and bank accounts gives people far greater control over their money. They can access and pay for services that may be unavailable with cash only. People also have the option to securely save or invest their money which is not possible only using cash.
Women all over the world are experiencing the benefits of financial inclusion firsthand. With the dramatic increase in financial service access, women are saving and investing more than ever. Surveys indicate that as women obtain greater access to financial services, they invest in education and their communities at historic levels. In doing so, they are helping themselves, their children, and their communities.
Additionally, women can now easily open their bank accounts and not have to bring their earnings back in cash to their homes. This allows them to use their money as they see fit, not as their relatives see fit. This has meant women have more say than ever over the spending habits of their households.
Benefits of Financial Inclusion for Businesses
Small and micro businesses face some of the most daunting challenges when accessing financial services. Many lack credit histories or financial documents, making services such as loans challenging to obtain. With access to such financial services, these small and micro businesses can secure loans that pay for day-to-day operations or provide funding to allow them to grow.
Insurance is often something that these small businesses and entrepreneurs lack. Providing insurance access allows these businesses to be protected from everything ranging from fraud to natural disasters. In addition, such insurance makes investing in long-term investments easier as these small businesses know they will be covered partly by insurance.
Many new technologies, such as mobile banking, make financial inclusion easier, and these new technologies are a much better fit for small and micro businesses. Leveraging older technologies does not allow these smaller players to compete with the larger, more established competition. New financial services allow these small businesses to be fast and flexible. This increased ability for all industry players, whether big or small, to compete helps ensure that innovation will continue. These are just some benefits of financial inclusion that allow small businesses to succeed.
Benefits for National Economies
The benefits of financial inclusion also extend to national economies, and India is a prime example of this. In 2009 less than 20% of Indian adults had bank accounts, and now more than 80% have bank accounts. India has succeeded in dramatically improving financial inclusion with various innovative solutions.
Developing easy-to-use bank accounts, national biometric databases for identity verification, and digital payment infrastructure have all been used to drive India's meteoric rise in financial inclusion. This success has enabled billions of digital transactions all across the country. It has made financial services available to underserved groups and communities. Now these people can access secure bank accounts, payments, government benefit transfers, and other critical financial services.
Widespread and accessible financial services give agency to millions. With this agency, they can start or invest in businesses, make more substantial purchases, or invest in their communities, which benefits national economies.
Benefits for Financial Institutions
Financial institutions, from credit unions to fintech, stand to gain so much from financial inclusion. For example, 1.4 billion adults remain unbanked globally, a vast untapped market that financial institutions have ignored. Simply by providing inclusive financial services, financial institutions can add millions or tens of millions of users.
Investing in providing financial services to women makes so much sense. It does not make any business sense to exclude half of the population from using a bank's financial services. By committing to inclusion, banks can experience the enormous benefits of financial inclusion.