Financial inclusion has gained prominence over time.
Recognized by the IMF as a critical pillar of financial development, it is a priority on the G20 agenda. It is an essential, actionable item for leaders in significant payments companies and NGOs.
But we must remember that financial inclusion goes beyond providing banking services. It is about financial strategies that are inclusive across socio-economic classes.
Here are five ways inclusive financial services power economic growth.
1. Aids financial deepening
Financial inclusion initiatives enable marginalized and low-income individuals to gain access to formal financial services like savings, credit, loans, and insurance. As a result, they get access to economic opportunities to improve their living conditions.
2. Reduces poverty and inequality
Financial inclusion initiatives empower individuals and small businesses to access funds to invest in the future. Additionally, access to financial management and investments helps minimize risks and vulnerability. It also protects from economic crises and natural calamities, ultimately acting as a circuit breaker for the vicious intergenerational cycle of poverty.
3. Supports small businesses
Most small businesses need help accessing credit from traditional banks. Financial inclusion, led by new-age lending models and online platforms, provides entrepreneurs with the necessary funding.
Enhanced financial accessibility drives investment in advanced technologies, supports expansion, and facilitates development and long-term viability.
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4. Empowers women and societies
Financial inclusion initiatives equip women with tools to accumulate assets, generate income, and manage financial risks. Besides, studies reveal that the entire household benefits when women are financially independent and empowered. It leads to improved educational opportunities, better health, and increased decision-making power — eventually benefiting families, communities, and society.
5. Fuels innovation
With increased financial inclusion, more people can create and participate. It leads to innovations within the financial sector and the development of unique technologies and fintech solutions tailored for underserved populations. These innovations benefit the broader financial ecosystem as well.
The final word
Access to financial services is a crucial link between economic opportunities and outcomes. By empowering individuals and businesses, inclusive financial services catalyze overall economic growth and development.
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This material has been prepared for informational purposes only. Escalon and its affiliates are not providing tax, legal or accounting advice in this article. If you would like to engage with Escalon, please contact us here.
