Definition of inclusive finance

Definition of inclusive finance: what is inclusive finance?

Definition of inclusive finance: inclusive finance, often confused with the ‘microfinance’, is concerned with financial services and products destined to aid low income populations. It is a word that is on one hand more global because it regroups all the activities linked to the financial sector, but also more precisely because it clearly indicates its objective: to include the whole population of course, in the economic system.

Inclusive finance is the range of banking products and financial services made available to poor populations. These people are usually locked out of the conventional banking system due to their low income. Inclusive finance helps them to finance their activities, save money, support their families and hedge against the risks of everyday life.

A variety of players work to develop inclusive finance products and services, such as microloans, micro-insurance, money transfers, micro-pensions and savings products. They are marketed by a variety of financial institutions, including microfinance institutions, cooperatives, micro-insurance brokers, banks, etc. These distributors must fulfil their duties in a responsible and social way if they are to achieve the main objective of inclusive finance: fighting poverty.

Microloans, small loans for the creation of an income-generating activity, are the product that made inclusive finance known among the public at large. The microenterprises that sprout thanks to them help poor people to improve their living conditions.

When granting microloans to borrowers who usually have no guarantees of repayment, inclusive finance organisations draw upon methods that have been tested and developed over the last four decades. For these organisations, the road ahead is full of challenges. It is all about furthering the interests of poor populations while guaranteeing their economic viability.


Why are speaking about inclusive finance?

Finance becomes inclusive from the moment when it enables a given population, being a family, a young entrepreneur, a larger firm to access to an entirety of services and products, sometimes personalised, which respond to a specific need.

Those products or services can be of a financial type, as for example the access to a specific credit, to a dematerialised payment system, subscription to an insurance or a system of transaction management. But they can also be of a non-financial type:

Participating in a training, dispose of legal or accounting aid, support in creating a firm.

Inclusive finance is considered to be responsible, when it takes into account all the protagonists of the value chain, namely the final beneficiary of course, but also the donors, the microfinance institutions, and in a more global way the impact which it can have on our planet. Whether it is environmental, energetic or economic.