“The best time to plant a tree was 20 years ago. The second-best time is now.” – Chinese proverb
Financial inclusion is one of the most important issues facing the world today, a driver for both equality and economic growth.
What is Financial Inclusion?
Around the world, there is massive inequality in access to finance. In 2017, 1.7 billion adults lacked access to a bank account. Without a bank account, it is difficult to access other financial services, such as credit and insurance. This creates a gap between the financially included and the financially excluded.
Financial inclusion represents an attempt to overcome this. The aim is to provide everyone, regardless of their wealth, with access to fundamental financial services, so that they can participate fully in the economy and its benefits. This also means providing access to financial services for all businesses, regardless of size, so that newcomers can compete with established players.
There are several approaches to financial inclusion. Education is critical, so that people understand what is available and how to use it. Technology can also make a difference, with the adoption of online banking, feature phones, and electronic wallets making finance accessible to the geographically isolated.
Financial Inclusion in Practice
Many Middle Eastern countries are making moves to improve financial inclusion among their populations. An estimated 69% of adults in the Arab world lack banking, and national governments are working hard to counter this. Jordan, Egypt, and Iraq almost doubled levels of access to bank accounts in the three years to 2017.
In Iraq, where violence and political disruption have made access to finance particularly difficult, International Smart Card is using technology to spread inclusion. Part-owned by state banks, this Baghdad-based company has created a card payment system that gives millions of Iraqis easy access to benefits, pensions, loans, and public sector salaries.
In Jordan, mobile phones have been key. Since 2014, the Jordan Mobile Payment (JoMoPay) Switch has provided the groundwork for secure mobile payment systems. This gives more people access to electronic finance and has protected the interests of the most vulnerable during the COVID-19 pandemic.
Saudi Arabia has benefited from a wide range of government policies. Initiatives such as home-ownership savings schemes, collective investments, and assistance for those who have defaulted on debts all help to empower excluded groups and make financial mechanisms more widely available.
Financial Inclusion and Economic Growth
Financial inclusion doesn’t just benefit those who were previously excluded from financial systems. A wide range of studies across multiple countries have shown that financial inclusion supports financial growth.
This is hardly surprising. Keynesian economists long ago pointed out that enriching the poorest will boost the economy, as they are more likely to spend money than to save it. By empowering more people through financial inclusion, the whole economy receives a boost.
From public education to micro finance to accessible electronic payments, financial inclusion helps overcome barriers to equality and boost financial growth.