Financial inclusion is crucial in building a healthy economic system. It allows people to access financial services such as transactions, payments, savings, credit, and insurance, which drives the entire circular flow of the economy. However, an estimated 1.7 billion adults worldwide remain unbanked, and women are disproportionately affected by financial exclusion.
In this article, we will delve into financial inclusion and why it is important, provide financial inclusion examples, and discuss how Impact Measurement and Management (IMM) can help drive financial inclusion initiatives.
What is Financial Inclusion?
Financial inclusion is the accessibility of financial services through stable institutions, primarily banks. However, it is more than having a bank account. The Organisation for Economic Co-operation and Development (OECD) highlights the significance of financial literacy and education in developing economies, which remains low globally. Technology is also essential to financial inclusion, with digital financial transactions becoming increasingly important.
Why is Financial Inclusion Important?
Financial inclusion and economic growth are interdependent. Without access to banking, credit, and insurance, it is challenging for individuals and small businesses to function efficiently. Financial exclusion contributes to poverty and leaves people vulnerable to economic crises.
Financial Inclusion Examples
Sopact's partner and customer, Accion, harnesses digital technology's power to create a financially inclusive world. They Advice, Invest, Partner, and Influence. They partner with financial service providers around the globe to better meet the financial needs of underserved individuals and small businesses.
Accion faced several challenges in managing its partners' data and collecting feedback from various sources, leading to a time-consuming and manual process. However, after engaging with Sopact, they could seamlessly collect and aggregate all milestone data on the Impact Cloud®. This allowed them to monitor partner metrics, manage the progress and maturity of MSMEs, and gain deeper insights into partner performance. Additionally, they could present results easily in internal meetings and report quarterly progress data to funders. This resulted in serving more MSMEs, building resilience, and making informed decisions with meaningful insights. Ultimately, engaging with Sopact enabled Accion to build a digitally integrated ecosystem, creating an inclusive world with economic opportunities for all. Proof of change includes increased end-user adoption, more customers using digital products, reduced customer acquisition costs, reduced lending turnaround time, and increased gross loan portfolio.
Financial inclusion strategies encompass policy, consumer protection, education, technological innovation, and robust data. According to the World Bank, over 1.2 billion adults acquired bank accounts between 2011 and 2017, with over 80 of 195 countries now having digital banking products.
Mexico's Consejo Nacional de Inclusión Financiera (CONAIF) is a prime example of state-level financial inclusion in Latin America. CONAIF has developed a framework for Mexico's financial inclusion policy, including regulatory reforms.
Financial technology, or "fintech," has played a significant role in financial inclusion in India. India has emerged as a leader in cashless payments and developed a universal, biometric, digital ID system, improving financial and digital inclusion.
How IMM Drives Financial Inclusion
Impact Measurement and Management (IMM) is crucial in providing strategic planning for financial inclusion initiatives. However, reporting often lacks focus on stakeholder needs and may only fulfill funding requirements.
The right IMM can maximize the positive impact of financial inclusion measures by understanding stakeholders and focusing on impact. Understanding what changed someone's life, such as increased income, reduced stress, or increased financial security, is crucial, rather than just outputs.
IMM is not just for reporting but for learning. With robust IMM, organizations can go through trial and error to produce the best product/service and the most significant impact possible.
Measuring Financial Inclusion
Financial inclusion can significantly impact not only individuals but the entire economy. Innovative digital banking, identification, and payment solutions are vital in achieving financial inclusion. Understanding stakeholders' needs and experiences must underpin financial inclusion initiatives through IMM.
To start your IMM journey, you can contact Sopact.
In conclusion, financial inclusion is vital in achieving a healthy economic system. With financial inclusion, individuals and small businesses have access to financial services that drive the entire circular flow of the economy. IMM can help foster economic inclusion initiatives by providing stakeholder-centric impact data, maximizing the positive impact of financial inclusion measures. By understanding stakeholders and focusing on impact, financial inclusion initiatives can significantly impact people's lives, contributing to poverty reduction and economic growth.
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