70 percent of the adult population in developing countries, or 2.7 billion people, do not have access to basic financial services, like loans, savings or checking accounts.
Here, the question arises, how can nations achieve the goal of financial inclusion for all. What kind of measures are required to provide financial services to the poor or under-served? Financial services such as savings, insurance, and loans for the poor or under-served offer a distinctively powerful tool capable of stabilizing some of the most challenging issues in several developing countries such as ending severe poverty and hunger promoting gender equality and promoting inclusive economic growth. Access to finance is important for nations’ overall development and success.
Despite countries taking initiatives to achieve full financial inclusion, financial systems still fall short in many developing countries. The common reasons include the geographical reach of traditional banking systems in rural areas, lack of trust in people for traditional banking services and lack of necessary documents to access such services. Due to this micro, small and medium business enterprises also face constraints.
Digital finance refers to the financial services delivered through mobile phones with internet connectivity. Digital finance comprises all products and services that empower individuals to have access to payments, savings and credit facilities via the internet through innovative financial service providers without the need to visit a bank branch.
How digital finance can empower the poor section of society and help in achieving full financial inclusion?
- Digital finance carries a huge opportunity for financial inclusion and extended access to basic financial services as nearly half of the population in the developing world owns a mobile phone.
- Digital solutions can provide affordable and secure banking services to poor individuals in developing countries and it is, in fact, helping millions of poor customers move from conventional methods of transactions to formal digital financial transactions.
- Providing financial services through digital innovations like mobile money can be an encouragement for the poor section for use of a wide range of financial services that include credit, insurance and savings using their mobile phones only. Those who are not included can enjoy extended access to money-transfer services, loans, and insurance.
- Digital finance will provide poor people with opportunities to build savings, make investments and access credit. It will also help them to handle income breakdowns over unpredictable emergencies such as loss of employment or illness. It will encourage the poor section to maintain financial stability and a part of the financial system.
- By getting loans through digital financial services, small and medium business enterprises will get opportunities to expand their businesses which can result in more employment opportunities in developing countries and thus result in full financial inclusion.
- Digital financial services can bridge the gender gap and expand women’s overall level of access to financial services. It can be a powerful tool for women to carry out their roles even better be it paying their kids’ school fees, purchasing inventory for her business or saving money for seeds for next planting.
Access to financial services plays a crucial role in global development as it makes it easier to invest in health, education, and business. Digital financial services like payments and savings actually help people lift themselves out of poverty. These services bring increased access to information, transparency and stimulate growth through more efficient and targeted customer engagement in developing countries. Advancements in electronic payment technology will enable people to live more secure, empowered and included lives and in the coming years “Digital Finance” will be the only way to achieve universal access to financial inclusion.