Inclusive Finance

The concept of financial inclusion is a way to look at the financial system that has become increasingly widespread after its articulation at the end of the International Year of Microcredit.

An inclusive financial system is one that services all clients -- not just the relatively well-off. This means reaching out to poor and low-income clients and providing them with affordable financial services tailored to their needs.

In many countries, poor and low-income people don’t have access even to basic savings accounts, let alone more advanced financial services that could provide security, predictability and the seeds of economic growth for their household. An inclusive financial sector will support the full participation of lower income households in the financial system.

There’s now plenty of evidence that access to financial services is a critical tool for both economic growth and human development. Meanwhile, global experience also shows clearly that the poor can be reliable clients and institutions that service them right do good business.

An inclusive financial system is one that recognizes both the market potential and the development opportunities of learning to bank the poor. This generally involves fostering:

Sound institutions, ensured by self-regulation and standard setting, performance monitoring and sound prudential regulation;

Financial and institutional sustainability. ensuring the ability of financial service providers, including microfinance institutions (MFIs) and commercial banks, to continue to provide access for poorer customers to financial services over time; and

Multiple providers of financial services, to bring down costs and provide a variety alternatives to clients, including sound private, non-profit and public providers;

A broad range of financial services, including credit, savings, insurance, remittances, pensions and mortgages.