Imagine having no access to financial services: no chequing account, no credit card, no health, property or life insurance, or no safe place for your savings. Nearly 2 billion people worldwide need financial inclusion so they can make the most of their resources and take part in their local economies.
When they gain access to financial services, they can earn more, build their assets, and cushion themselves against external shocks. Here are five ways financial inclusion benefits poor families:
1. Household income
Financial services can improve lives by providing needed financing for business activities, which can increase household incomes. Reliable sources of financial services help to plan for and expand business activities, which can enable families to save, manage cash flows and reduce the need to sell assets in times of crisis.
2. Build assets
With increased income and the ability to save and take on credit, financial services provide the means for poor families to acquire land, construct or improve their home, purchase livestock and consumer durables or expand their businesses.
3. Increase security
Only a fifth of the developing world utilize financial institutions to keep money safe. Many store cash in their floorboards, under the mattress or in a container – where it is easy to be found and stolen. Others invest their savings in jewelry or livestock – a highly inflexible way to accrue and access savings. By saving money in a trusted financial institution, families are able to safely store, grow and utilize their funds.
4. Reduce vulnerability
By increasing earnings and savings, financial services allow poor mothers and fathers to make the transformation from everyday survival to planning for the future. Parents are able to pay for their children’s tuition, better their living conditions, and seek out and pay for healthcare services, as they are needed.
5. Create jobs
Financial services provide budding entrepreneurs with the opportunity to create jobs for themselves. It also ensures that growing microenterprises will provide opportunities for others in the community to access jobs.