From Exclusion to Empowerment: The Meaning of Financial Inclusion

June 30, 2023

“Although three-quarters of a billion women are still excluded from the formal financial system, we remain steadfast in the mission to usher in universal financial inclusion to unlock the potential of women worldwide.” – Mary Ellen Iskenderian, President and CEO of Women’s World Banking

What is Financial Inclusion?

Our world is made up of interdependent economies, and when collectives of people get left behind, the economic and social impacts are dire.  Financial inclusion provides a pathway to address the systemic barriers that have hindered access to financial services and opportunities for billions of people worldwide, driving inclusive and sustainable economic growth. It ensures that individuals, communities, and businesses have access to affordable financial products and services regardless of gender and socioeconomic background.

True financial inclusion embraces a holistic approach that encompasses comprehensive range of financial products and services such as microloans, credit facilities, investment opportunities, and more. It goes beyond access alone, providing individuals with the necessary tools, resources, and knowledge to actively engage in a former financial system. This empowerment enables them to make informed decisions and utilize affordable and responsible financial services that cater to their specific needs.

Why Does Financial Inclusion Matter?

Financial inclusion plays a pivotal role in achieving the United Nations Sustainable Development Goals (UNSDGs). It actively contributes to the realization of Goal 1 – No Poverty, Goal 2 – Zero Hunger, Goal 3 – Good Health and Well-being, Goal 4 – Quality Education, Goal 5 – Gender Equality, Goal 8 – Decent Work and Economic Growth, Goal 10 – Reduced Inequalities, and Goal 17 – Partnerships for Goals. By providing access to financial services, empowering the underserved, and fostering collaboration, financial inclusion emerges as a vital enabler of sustainable development.

Financial services often exclude individuals from marginalized groups such as people with disabilities, migrant workers, women, those living in poverty and rural areas, and other underserved populations, perpetuating inequality and hindering their economic participation. Marginalized communities face limited access to formal financial institutions, discriminatory lending practices, limited financial literacy and education opportunities that contribute to their exclusion. Financial services often come with high costs, such as account maintenance fees or minimum deposit requirements, which can be prohibitive for individuals with limited resources.

Many migrants and refugees also lack documentation required to open bank accounts and access financial services. This excludes them from participating in a formal financial system and limit their ability to save, access credit, or engage in other financial transactions. Women experience significant exclusion from financial services including limited access to credit, discriminatory interest rates, or cultural biases that restrict their financial decision-making authority. Furthermore, financial institutions often fail to accommodate accessible banking facilities, inclusive digital platforms, and assistive technologies so that people with disabilities can access and utilize financial services effectively.

By extending access to financial services to marginalized groups, we have the power to tackle long-standing disparities while fostering gender equality, social development and economic growth. People with disabilities can gain independence and autonomy through financial inclusion, while migrant workers can establish financial stability and secure their family’s futures. For women, financial inclusion is an essential tool in overcoming gender disparities, enabling them to break free from traditional roles and pursue their entrepreneurial aspirations and gain financial independence. Women’s financial participation has a multiplier effect on communities as they tend to invest a significant portion of their financial income and resources in education, healthcare, and well-being of their families, leading to better social outcomes.

In poverty-stricken and rural areas, financial inclusion opens doors to economic opportunities, empowering communities to lift themselves out of poverty. This catalyzes empowerment, enabling individuals to mitigate risks, pursue their aspirations, build wealth, and secure their financial future.

The quest for financial inclusion has gained significant momentum as a global imperative seeking to bridge the gender gap in accessing and utilizing financial services. In 2022, Women’s World Banking facilitated access and usage for 8.6 million women across seven countries through 26 active innovative financial solution projects. These solutions are exceedingly critical as financial inclusion goes beyond merely having access to bank accounts.

Digital financial services (DFS) have played a transformative role in recent years, revolutionizing the accessibility and utilization of financial products and services. Innovative platforms, such as mobile banking, digital wallets, and online lending platforms have democratized access to financial products and services. Kaleidofin, a prominent multi-product fintech company, exemplifies the power of DFS in driving financial inclusion. With over 98% of its customer base being women, Kaleidofin demonstrates the transformative potential of tailored and intuitive financial solutions. This success story serves as proof of the incredible possibilities that lie ahead as we continue our collective pursuit of inclusive finance.

However, despite the immense potential of financial inclusion, numerous barriers hinder its progress. Women in many countries face challenges in obtaining formal identification, which restricts their access to essential financial services such as bank accounts, property ownership, credit histories, and financial activities like saving, securing loans, and expanding businesses. Limited access to basic resources like mobile phones for financial transactions further exacerbates the issue. Additionally, financial service providers often fail to recognize the profitability of women as a customer segment and make sufficient investments in products, services, and channels that cater specifically to their needs.

Addressing these barriers and achieving universal financial inclusion demands following gender-intentional approaches and collaborative endeavors from governments, businesses, policymakers, and the financial services industry on a global scale so that women can share the same opportunities as men.

Read Part Two where we delve into Women’s World Banking’s approach to financial inclusion, explore its impact, and examine the initiatives and strategies fueling its promotion.