Need for Financial Inclusion
In order to thrive in the world today, individuals need to be included in the modern financial system. This worldwide need for financial inclusion is presently standing in the way of billions of people who remain unbanked. Many of these people and societies would prosper without the obstacle of being allowed access into the world of modern banking. Banks are aware of the issue, and are slowly making strides toward including everyone into their system of worldwide finance. It is important to remember that the need for financial inclusion must involve education about personal finance so that people who are new to the system of modern finance don’t get themselves into trouble by making uninformed decisions about money.
The Push for Worldwide Financial Inclusion
In today’s modern economy, the need for financial inclusion and access to financial services offered by institutions is growing in importance. The definition for financial inclusion is being left out of the financial system means less economic opportunities are available to those excluded, inevitably leaving them in a vicious and unabating cycle of poverty. The need for financial inclusion has led international financial institutions such as the World Bank, to outline strategies and policies in an effort to integrate every person, regardless of his or her socioeconomic status, into the modern financial economy.
Increased Financial Inclusion Will Impact People and the World
“Financial inclusion matters not only because it promotes growth, but because it helps ensure prosperity is widely shared. Access to financial services plays a critical role in lifting people out of poverty, in empowering women, and in helping governments deliver services to their people.” – Sri Mulyani Indrawati, Minister of Finance of Indonesia, former head of the World Bank Group
“Too many Americans do not get their basic financial needs met by traditional financial service providers. By turning to alternative financial services, families often face substantial costs, including not only direct monetary ones but also lost economic opportunities.” – Jason Furman, Chairman of the White House Council of Economic Advisers, 2016
The results from a nationwide telephone survey asking whether the individual had taken an economics or business course at high school and whether they were banked found a statistically significant association between level of high school financial education and being banked (Wiley). https://onlinelibrary.wiley.com/doi/pdf/10.1111/j.1745-6606.2010.01171.x
“If you don’t understand the language of money, and you don’t have a bank account, then you’re just an economic slave.” – John Hope Bryant, CEO, Operation HOPE
People Need Education Before They’re Included in Financial Systems
15% of adults roll over $2,500 or more in credit card debt each month (National Foundation for Credit Counseling). https://www.nfcc.org/wp-content/uploads/2017/03/NFCC_BECU_2017-FLS_datasheet-with-key-findings.pdf
26% of adults admit to not paying their bills on time (National Foundation for Credit Counseling). https://www.nfcc.org/NewsRoom/FinancialLiteracy/files2013/NFCC_NBPCA_2013%20FinancialLiteracy_survey_datasheet_
key%20findings_032913.pdf
37% of recent college graduates have been late with a student loan payment at least once in the past year (US Financial Capability). http://www.usfinancialcapability.org/downloads/NFCS_2015_Report_Natl_Findings.pdf
Researchers at NBER demonstrated the positive relation between the average stock market participation between the individual’s community and the individual’s participation rate in the markets. This effect was proven to be stronger in more sociable communities (National Bureau for Economic Research). http://www.nber.org/papers/w13168.pdf
40.2% of those with low levels of financial literacy relied on parents, friends, and acquaintances as their most important source of financial knowledge, compared to 20.8% of those with the highest levels of financial literacy (National Bureau for Economic Research). http://www.nber.org/papers/w13565.pdf
Financial Education is a Necessary Part of Financial Inclusion
Behavioral change, most financial educators will agree, is the ultimate goal of financial literacy initiatives and is directly related to the history of financial inclusion. The hope of financial educators is that learning about different personal finance and money management topics will prompt individuals to examine whether they are implementing such astute practices in their lives and, if they are not, what changes they can make to their habits to improve their financial health. A successful financial literacy program is one that will stimulate this critical self-reflection.
The International Organization of Securities Commissions underscores that when developing the educational curriculum, evidence-based research should be evaluated and insights gleaned implemented into the program (International Organization of Securities Commissions).
https://www.iosco.org
The State Bank of Pakistan underlines that the efficacy of the program should be measured by such metrics as higher average savings and improvements in debt management (St. Benedict’s Preparatory School). http://www.sbp.org.pk
Financial Inclusion Should Not Assume Financial Literacy
1% agree they have more debt than the average person (Money Confident Kids). http://www.moneyconfidentkids.com/content/dam/money-confident-kids/PDFs/PKM-Surveys/2017_PKM_Results.pdf
54% of millennials expressed worry that they would not be able to pay back student loans (PwC). https://www.pwc.com/us/en/about-us/corporate-responsibility/assets/pwc-millennials-and-financial-literacy.pdf
“Academic qualifications are important and so is financial education. They’re both important and schools are forgetting one of them.” – Robert Kiyosaki, founder of the Rich Dad Company
“Financial literacy is an issue that should command our attention because many Americans are not adequately organizing finances for their education, healthcare and retirement.” – Ron Lewis, former United States Representative
“The number one problem in today’s generation and economy is the lack of financial literacy.” – Alan Greenspan, former Chairman of the Federal Reserve
The Need for Financial Inclusion is Being Addressed
The need for financial inclusion stems from a promise to every individual that they will have the opportunities and financial services necessary to bring them out of their poverty and into a better life. Financial inclusion is widely regarded as a prerequisite to a reduction of poverty and as a policy that will grant individuals who are currently excluded from the financial system greater stability in their lives. The need for financial inclusion is being fulfilled by government agencies that are expanding the financial system into poorer communities and by financial literacy initiatives that educate individuals about the modern financial economy. Get the latest financial inclusion data.