Social inclusion is why we bother about financial inclusion
For a variety of reasons, many are cynical about the role of international institutions – such as the World Bank – and international non-governmental organisations in poverty reduction. This cynicism extends to their activities on measures they believe will reduce poverty. Some of the cynicism is borne out of the misunderstanding of the terms they use, and the complexities of their approaches. But often times, all the work and activities they carry out are underpinned by economic research, and the focus on certain measures is underlined by the economic and social linkages identified in these researches.
The promotion of financial inclusion in developing and emerging economies is one of these areas – the benefits of financial inclusion translate beyond the opening of bank accounts to the provision of a platform for long term linkages between economic well being and social relevance, and the tracking of such changes.
It is in this context that the promotion of financial inclusion has become a key global priority and topical issue in the last decade, and why virtually all key global economic meetings in the last decade have sought to address financial inclusion. The G-20 economies spearheaded the debate in 2009 with the creation of its Financial Inclusion Experts Group (FIEG) and the endorsement and launch of the Financial Inclusion Action Plan (FIAP) in 2010. In the same year, it created the Global Partnership for Financial Inclusion which has provided the platform for the extensive policy advocacy and coordination we have today.
The major international progress from this point was the review conducted in 2014 that led to the incorporation of financial inclusion in the United Nations Sustainable Development Goals (SDGs) 2030 agenda. In itself, the agenda was unique because it “integrates in a balanced manner the three dimensions of sustainable development – economic, social and environmental. The 2030 agenda is also indivisible in a sense that it must be implemented as a whole, in an integrated, rather than a fragmented manner, recognising that different goals and targets are closely interlinked.” Though the UN 2030 Agenda for SDGs does not include a stand-alone SDG on financial inclusion, it views financial inclusion as a key enabler for achieving sustainable development worldwide As such, it is featured in seven of its 17 goals.
Now, for the purposes of review, monitoring, and update, the greatest contribution to the growth of financial inclusion is the World Bank’s Global Financial Inclusion Database Index. Launched in 2011, and released every three years, the latest being 2017, the report provides systematic and comparable data on the growth of financial inclusion in the world. The report indicates that the most important reason for financial exclusion is “not enough money”. The absence of enough money goes to the root of why people are excluded financially but this also explains why those who are financially excluded are often socially excluded as well. The common denominator of both is poverty. In many cases, “not enough money” means that those concerned have no jobs, do not receive social income support, do not engage in any serious form of economic interaction and exchange, and in extreme case, the society does not have, nor record, or monitor their economic engagement, relevance or existence.
Therefore, they are often the less privileged in the society, low income earners, uneducated, semi-skilled and unskilled labour force, operating in the informal sector. A typical financially excluded person is most likely to be poor, unemployed, uneducated beyond the primary level, from the poorest 20% household, have poor housing and living in the rural areas. Where such persons are employed, they are most likely to be self-employed, involved in subsistent agriculture or such other person-to-person menial services. These classes of people constitute a larger percentage of the population of most developing countries and regions that make up the world’s financial exclusion population ..
The work on social exclusion is focused on combating poverty. For social inclusion to occur, the material abilities, opportunities and dignity of the socially excluded must be improved for them to reasonably take part in society and become central to it as well. In so far as financial inclusion provides the financial enablement to the excluded to combat poverty and better their lives, the direct linkage to enabling social inclusion is unmistakable, and become very critical. As such, while the mere opening of accounts does not immediately solve these problems, it is usually symptomatic of the concrete steps being taken towards and the progress being made in tackling social exclusion, which runs deeper than financial exclusion.
So, the focus on financial inclusion is not an end in itself. Just as money is an enabler, so is financial inclusion. Within our immediate Nigerian landscape and in sub-Saharan Africa in general, the progress and the tracking of financial inclusion is increasingly showing the concrete links between financial exclusion and social exclusion. This makes tackling financial inclusion even more crucial. While financial inclusion cannot directly lift people out of poverty, the tracking of financial inclusion and the associated progress highlights the deep effects on the lives of the excluded and the data helps to further understand the links between it and social exclusion and provides a platform to effectively deal with it.
Ogho Okiti