Financial inclusion for reducing inequality

 Policymakers have been using financial inclusion as a key tool for reducing poverty and inequality, and to spur economic growth.


Global Findex Database 2021 of the World Bank estimates that about 24% of adults globally do not have access to formal financial accounts. Micro, Small and Medium enterprises are also experiencing increasing financial disparity. In developing countries 21% of micro enterprises are constrained either due to rejection of loan applications or incompatible terms. Globally Micro, Small and Medium Enterprises (MSME) contribute about 35% in developing economies and about 50% in developed economies. Closing the funding gap is essential for boosting economic growth and creating productive jobs.


Women entrepreneurs at times face obstacles such as restrictive social norms, mobility constraints, lack of identification, lack of financial literacy etc, in obtaining basic banking services. This is reflected in the gender gap in bank account ownership. This divide is even greater in low income countries. Men with accounts are typically 6 percentage points more likely than women to use digital payment systems. Women also find is difficult to raise emergency money.


A lack of innovation in delivery of financial services, low financial literacy levels, limited capacity building avenues and gender based exclusion can put a lot of stress on financial initiatives. Globally, insurance penetration is also quite low at 7% of GDP. Rural and migrant segments also find it had to access timely and affordable financial services.


There is a need to strengthen the ecosystem and enablers that drive financial inclusion. Promoting private sector involvement in financial inclusion through partnership. There is a need to increase the penetration of financial products. Financial inclusion must also be accelerated, especially for agricultural, rural and migrant segments. The cost of capital for financial institutions must also be reduced.

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