Financial inclusion in simple terms refers to individuals and businesses having access to useful and affordable financial products and services that meet their needs.
This includes transactions, payments, savings, credit and even insurance, and these are supposed to be delivered in a responsible and sustainable way. The importance of financial inclusion cannot be overemphasized as it has also been identified as an enabler for some of the sustainable development goals.
Institutions such as the World Bank Group consider financial inclusion a key enabler to reduce extreme poverty and boost shared prosperity.
The first step towards broader financial inclusion is that one should be able to have access to a transaction account, which allows people to store money. The account, however, only serves as a gateway to other financial services.
The second and most important step to financial inclusion entails the account holder conducting the transactions such as sending and receiving funds, transfers to various money platforms, making payments to beneficiaries, online purchasing and trade, accessing financial services such as loans and insurance services, managing investments, just to mention but a few.
Financial institutions in the country have assisted in ensuring that the majority have access to a basic transactional account with ease, thereby contributing to the first step towards financial inclusion. This second step which basically relates to the transactions can be easily enabled by Fintech.
The acronym Fintech may sound like some technical jargon, however, it is simply a combination of two words “financial technology”.
In this digital era, Fintech is used to describe new technology that seeks to improve and automate the delivery and use of financial services. It entails the integration of technology into offerings by financial services companies to improve their use and delivery to consumers.
If you talk of Fintech now, there are a lot of financial activities associated with it, including the most basic transactions such as money transfers from one account to another electronically and the majority of transactions indicated above which are generally done without the assistance of a physical person. It is, therefore, apparent that Fintech can easily serve the unbanked and under-banked populations more efficiently than branch-based commercial banking.
While traditional brick and mortar banks favour densely populated urban centres, those living in remote rural areas are less likely to have physical access to financial institutions, but they can still transact and participate and access financial services through branchless banking and digital technologies that bypass banks through Fintech.
It becomes a very powerful enabler to ensure that most of the population are exposed and accessing financial services making it easy for the financially excluded and underserved populations to access a range of formal financial services suited to their needs that are responsibly delivered at a cost affordable to them as customers and sustainable for the providers. In this regard, basic technology and devices like the cellphone bring easy and convenient access to financial services.
Generally, the basic technology at our disposal is sufficient to provide a better platform for most of the people to access financial services regardless of their location; hence, achieving financial inclusion. We also need to appreciate the role played by our financial institutions in simplifying the account opening process to enable the majority to have access to a transaction account as the first step towards financial inclusion.
More importantly, there have also been deliberate efforts by financial institutions encouraging customers to go cashless, transact online and access financial services through channels outside the brick and mortar. Covid-19 has also been a blessing in disguise as it has encouraged many to transact online rather than physical access to the bank branches.
However, despite all these interventions financial inclusion still remains low in the country, with only about 40 percent of the population being able to access financial services. In this case there is a lot of work to be done to ensure financial inclusion as it is key to financial development and accelerates economic growth. n
*The author is a chartered banker writing in his personal capacity Feedback: firstname.lastname@example.org