Can you imagine a world without access to financial services? No bank account, no credit card, no health, property, or life insurance, and no safe location to keep your savings. Nearly 2 billion individuals globally require financial inclusion to maximize their resources and participate in their local economies.
When individuals have access to financial services, they can earn more, accumulate assets, and protect themselves from external shocks. This article will discuss what financial inclusion is and the ways it can help low-income families:
Household income
Financial services can improve people’s lives by financing commercial activity and raising household income. Reliable sources of financial services assist in the planning and expansion of commercial activities, allowing families to save, manage cash flows, and limit the need to sell assets during times of crisis.
Create assets
Financial services enable disadvantaged families to acquire land, build or upgrade their homes, buy livestock and consumer durables, and expand their businesses by increasing their income and ability to save and borrow.
Boost security
Only around one-fifth of the developing world uses financial institutions to keep their money safe. Many people keep cash in their floorboards, under their mattresses, or in containers, where it is easily discovered and stolen. Others invest their savings in jewelry or livestock, a very limited means to accumulate and access savings. Families may safely store, grow, and use their earnings by saving money in a reputable financial institution.
Lessen vulnerability
Financial services enable disadvantaged moms and fathers to transition from day-to-day survival to long-term planning by raising wages and savings. Parents can pay for their children’s education, improve their living conditions, and seek out and pay for healthcare services as needed.
Create new jobs
Financial services give aspiring entrepreneurs the possibility to build their jobs. It also assures that rising microenterprises create employment possibilities for others in the community.
Financial inclusion is a means to an end, not its own goal.
What is financial inclusion? Financial inclusion is a lever for enhancing individuals’ financial health by providing them with tools, goods, services, and knowledge to help them properly manage and organize their finances.
Even as concerted efforts are made to improve financial access across the country, it is important to remember that without proper education and encouragement, the excluded populations we are targeting will not automatically understand how to harness the new tools and opportunities at their disposal (such as mobile banking, customer loyalty programs, savings, quick loans, and investment apps, etc.). This is when financial literacy comes into play.
A crucial component is financial knowledge.
Observing financial inclusion efforts in other markets, there has been documented progress/success with interventions that provide citizens with financial access and proper financial literacy training. In Ethiopia, for example, a USAID program effectively transitioned rural farmers out of poverty cycles by combining financial intervention activities with basic financial literacy and business skills training. Recipients of the financial interventions and literacy skills were able to depart from the safety net program within a year.
Indeed, the adage holds: knowledge is power.
Because excluded persons are distributed across the country and present in every demographic category, delivering this knowledge to citizens would necessitate personalized and contextualized financial literacy activities.
Learning requirements and methods differ. Literacy efforts, as a result, should not be one-size-fits-all. For example, farmers, traders, craftspeople, students, and teachers have unique learning requirements.
Financial knowledge plays a critical role in increasing financial inclusion. The understanding of tools and services, as well as the inherent benefits and opportunities they provide, are the foundations of a good financial profile. Moving forward, we must foster an understanding that the journey to financial inclusion does not end with financial access.
Learn more about what is financial inclusion by visiting top banking providers. Doing so lets you know how financial institutions help improve financial inclusion.
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