Financial inclusion is a key enabling component to minimize poverty and foster prosperity

Financial inclusion refers to the income that individuals and organizations have to different useful and affordable financial products and services that meet their needs in terms of transactions, payments, savings, credit and insurance, which are provided in a responsible and sustainable manner.

Pillar 1 financial inclusion and consumer advocates focus on making holistic financial inclusion assessments and tactics, and assisting consumers on how to address it, with a greater focus on digital financial inclusion and leveraging fintech to promote it in a comprehensive and systematic way, as well as align through a sequence of different measures to work towards the achievement of the broader goal of financial inclusion.

The World Bank finds financial inclusion to be a key enabling factor in minimizing extreme poverty and fostering shared prosperity.

Also, financial inclusion is defined as the entry and use of formal financial services under a convenient regulation that guarantees consumer custody schemes and promotes financial education to improve the financial capacity of all population segments.

Entities dedicated to the issues of financial inclusion and consumer protection take advantage of the knowledge derived from studies on financial capacity and behavioral economics, and provide strategic guidance to the authorities regarding how to approach financial capacity and use it so that financial inclusion initiatives are more effective through concrete measures that complement programs, reforms and regulations, including those in relation to consumer protection.

The work of the World Bank complements the efforts of other entities within the World Bank Group that also focus on financial inclusion.

However, in order to achieve a full financial inclusion process, which makes it possible to deploy the group of positive externalities that it produces, these relevant advances that were achieved in terms of inclusion in financial services could not be sufficient if, at the same time, progress is not made. towards a positive implementation of these.

As of 2010, just over 55 countries have signed commitments related to financial inclusion and just over 60 have implemented or are developing a national plan on the matter.

The nations, where the greatest advances towards financial inclusion have been recorded, stated the following:

“Interest rate ceilings have created financial exclusion, mostly for low-income people and SMEs”

Throughout the pandemic, a simple, well-known, but not very positive response to strengthen credit and financial inclusion, was to force limitations on interest rates.

This has brought inverse results that produce financial exclusion, limit the granting of credit and have a harmful impact on the activation of the economy.