What is Financial Inclusion?

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Microfinance > Best Practices > What is Financial Inclusion?

What is Financial Inclusion?
Jaap de Jonge, Editor, Netherlands
As explained above, microfinance was an initial, PRIVATE effort pioneered by Muhammad Yunus to reduce poverty by giving impoverished entrepreneurs access to microcredits and other financial products and services.
In 1976 Yunus started the Grameen Bank in Bangladesh. In 2006 the Grameen Bank and its founder Yunus were awarded the Nobel Peace Prize.
However, according to the United Nations (UN), three billion people around the world still do not have access to formal financial services like savings accounts, credit, insurance, and payment services. More than half the population in developing countries and more than 80 percent of households in most of Africa are financially excluded.
On 29 December 2003, Former UN Secretary-General Kofi Annan said: ”The stark reality is that most poor people in the world still lack access to sustainable financial services, whether it is savings, credit or insurance.
Financial Inclusion (FI) (from ±2004) is an economic POLICY of various governments and NGOs that (also) aims at giving disadvantaged or low income households and enterprises access to a COMPLETE RANGE of financial / banking services at affordable costs through building an entire INCLUSIVE FINANCIAL SYSTEM.
Financial inclusion includes many products and services like: savings facilities (microsavings), short and long-term credit, micro credits, loans, leasing and factoring, mortgages, insurance (microinsurance), pensions, payments, micropayments, credit and debit cards, overdrafts, cheques, local money transfers, electronic fund transfer (EFT), international remittances, pensions, and last but not least financial advice, coaching and education.
Compared to microfinance, financial inclusion is more comprehensive, more systemic and more public.
Compared to financial inclusion, microfinance was initially more focused on microcredits, more practical, and more private.
Financial inclusion is also referred to as: Inclusive Finance.

Financial Inclusion Should Be the Policy Framework to Drive Microfinance
Gabriel Femi Adewara, Management Consultant, Nigeria, Member
Obviously, microfinance institutions are failing to thrive in the less developed countries because of very poor distilling of policies and regulatory oversight roles by the central banks. A policy framework that is not based on an in depth research of the peculiar characteristics of the preponderant base of the pyramid will not drive microfinancing as a sustainable proposition for development of the financial services sector in particular and the macro economy in general.

Financial Inclusion: Innovation and Education
Laxminarayan Katti, Student (MBA), India, Member
Banking the unbanked is financial inclusion. To reach the unbanked, the use of the right technology is an important factor. Decisions regarding this are to be made by the stakeholders (banks, NGOs).
All said and done the main challenge for financial inclusion is to educate the target population about the benefits of the services provided by the banks, as well as keeping these financially included accounts active.
There is need for the banks and the governments to innovate.

Demands on an Inclusive System
VENKATESWARAN, Teacher, India, Member
Financial inclusion means all financial, insurance, banking and credit facilities for all without any exception must be an affordable, available, accessible, acceptable and accountable system. The whole benefits should not be in the exclusive purview of a far and few citizens.

Financial Inclusion and Credit Unions
RIchard Langlais
Financial inclusion is a global economic initiative, which serves to eliminate the negative financial status of low income individuals. In most western countries, one will find credit unions which offer financial services to low income households that traditional institutions will not offer. The service has global reach, however the levels of service in developing nations are not of the same standard as those in the developed world. In layman's (Ed: ~amateur) terms, it is an effort by the greedy upper classes to feel less shame on themselves.

Financial Inclusion & Development
Abhishek Saxena, Project Manager, India, Member
The article itself mentions “traditionally banks were unable to serve the base of the pyramid”... Will financial inclusion (FI) alone be able to achieve holisticdevelopment?
Although it is a wonderful instrument, in my view FI has to be accompanied by public systems (health services and education institutes) to support this population and hence also contributing to development. This will prevent the fallback of the individual/family.

Microfinance and Financial Inclusion
John Michael Donohue, Business Consultant, United States, Member
Economic development at the individual/household level is conditioned on certain institutions of capitalism, which in themselves, must evolve and mature as a condition precedent to enterprise creation and development, with or without microfinance.
The prominence of a public sector is at the base of these institutions. What is required is not more government, but less, although there are many voices here who plead on the side of more government. One may even argue that MF was invented because institutions were dysfunctional, and therefore we shouldn't be concerned with them. However, if we concede that point, the greater issues of financial inclusion will never be resolved.

Financial Inclusion - Key to Achieving an Effective Financial Empowerment
John Moses, Manager, Nigeria, Member
Financial inclusion should be pursued with a great passion by governments across the globe especially among the less developed countries in order to redeem their citizens from poverty and deprivation.
Financial education and enlightenment should be given to the low income earners and the poor citizens before making the facilities accessible to them with close supervision on how the facilities can be utilised efficiently and effectively. Government policy framework on microfinancing should be flexible enough and also workable rather than being strenuous and impracticable.

Financial Inclusion is Now a Common Objective
Vishnu R. Padhiyar, Member
Financial inclusion is the delivery of financial services at affordable costs to sections of disadvantaged and low income segments of society. Unrestrained access to public goods and services is the sine qua non of an open and efficient society.
It is argued that as banking services are in the nature of public good, it is essential that availability of banking and payment services to the entire population without discrimination is the prime objective of public policy.
The term "financial inclusion" has gained importance since the early 2000s, and is a result of findings about financial exclusion and its direct correlation to poverty. Financial inclusion is now a common objective for many central banks among the developing nations.

Microfinance is a Form of Inclusion
Juan Bravo, Management Consultant, Ecuador, Member
In my opinion, microfinance is a form of inclusion for the most vulnerable groups in rural areas. We need to develop specific financial products according to ability to pay and have an advisory and monitoring system defined.

Financial Inclusion: Whose Objective Should it Be?
Sabo Victor Emmanuel, Nigeria, Member
Considering the aim of this policy, I think financial inclusion should be the objective of the government and not of corporate entities.
Government activities are welfaristic in nature because they are carried out for the benefit of the society. However, that of private/corporate firms are carried out wth the main objective of existence, profit maximization, at heart.
Presently, in Nigeria, I don't think we have such policy in existence and I suggest the central bank of Nigeria should adopt such policies.
In as much as microfinance institutions were originally created for this, the goal is far from being achieved due to the lack of focus of these institutions. The level of poverty in the country is still high. Moreover, majority of the MFIs in the country are owned by profit oriented individuals/entities who are not really concerned about the financial success of their customers but making profit out of them.

Financial Inclusion
Luisa Pineda Martinez, Professor, Guatemala, Member
There should be a lot of expectancies around this subject, for what I read. As a manager could do a social analysis of the particular situation of the entire family or a community before granting a financial help. I founded poor persons who could not accept help without giving something in payment, that means manufacturing, buying or selling items. Greetings!

Financial Inclusion Definition
Saikat Basak, Accountant, India, Member
Financial inclusion may be defined as the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost.

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