Financial Inclusion, an Enabler for Financial Wellbeing of the Marginalised

Great steps have been made towards financial inclusion. 1.2 billion adults worldwide have access to a bank account since 2011. (1) However, according to the latest Findex data, close to one-third of adults – 1.7 billion – are still unbanked, so without an account at a financial institution or through a mobile money provider. (2) About half of unbanked people include women in rural areas or out of the workforce. (3) Male ownership is higher than female ownership of accounts, with a gap of around 7%, highlighting the economic and social limitations that women face in accessing financial services. (4)?

Financial inclusion is an enabler for financial wellbeing of the marginalised and is an enabler to reach the central promise of the 2030 agenda for the Sustainable Development Goals, including the pledge to ensure that “no one will be left behind”. Financial inclusion is a means to reaching financial wellbeing.?

What is the difference between financial inclusion and financial wellbeing??

While financial inclusion and financial wellbeing can be similar, there are some key differences. The objective of financial inclusion is to “be included” such as having access to a bank account, having access to financial services or products such as loans, saving, remittances etc. Financial wellbeing impacts an individual’s financial health more broadly as it includes financial resilience, security and, ultimately, freedom.?

Although financial inclusion means having access to necessary financial services and is important for financial wellbeing, it does not necessarily determine financial wellbeing. For example, in Australia, although people are generally financially included (i.e. they have access to financial services) they may not be financially healthy. The proportion of people with a bank account in Australia is around 98%. (5 & 6) However, in 2021, 31% of Australians reported feeling under financial stress, meaning they had difficulty paying for essential goods and services. (7) In the U.S., nearly 95% of households (approximately 124 million households) are banked (have a bank or credit union account). (8) However, in 2019, 75% of adults in the U.S. indicated they were either “doing okay” financially (39%) or “living comfortably” (36%), with the remainder either “just getting by” (18%) or “finding it difficult to get by” (6%).??(9)

What is financial wellbeing??

It depends. While there is no standard definition of financial wellbeing, there are certain components to financial health which determine how well a person can cope with adverse events, meet financial goals, and build wealth.?

There have been significant improvements to financial health for the most vulnerable people over the years. Disadvantaged people such as youth, women and people with disabilities are now accessing financial services on a more regular basis. More people across the world now have a financial account. (10)? Financial interventions include easier or more affordable access to loans that support economic growth and allow people to overcome poverty.?

Case study of Kun Theara, a women entrepreneur with disability

We would like to share a case study of an entrepreneur with disability and her journey of financial wellbeing through Good Return's partnership with CHAMROEUN . Her name is Kun Theara. She lives in Phnom Penh. She is 35 years old, a wife and mother to two children, Thorn and Ven. She has polio and uses a wheelchair.?

Even though Kun is a micro business owner and owns a snack bar - up until a couple years ago, she had no financial control over her earnings and was unsure of how to save money for daily expenses. She also felt socially excluded and was unable to freely move around her house and shop.?

A couple years ago, Ratana, and her husband, heard of Good Return’s My Money Tracker application, and encouraged Kun to try it. Since joining Good Return’s financial education training with other people? in her community, she has been able to use the app, track how much customers owe her, and see where her money goes and comes from.?

With Kun’s savings she is able to make her shop and home more accessible and also has enough savings to take her children on trips during the holidays. She dreams of building a new house and paying for her children to have access to higher education.?

You may wonder how much an app and financial education can impact someone’s life, like Kun. This is how. Although Kun has been wheelchair bound for most of her life, the My Money Tracker app has enabled Kun to not only improve her finances and better support her children, but has also opened up her world and made it more accessible.?

People with disabilities, like Kun, have the right to be included and have access to technology and financial education. This is a little step to attain UN SDG, leaving no one behind.?

The components of financial wellbeing?

Financial wellbeing and financial strategies aim to improve people’s lives, and while financial wellbeing is complex, it often includes components? of financial security, control and freedom.?(11)

1. Financial Security: the ability to meet current and ongoing short-term financial commitments such as basic needs and planned expenses such as food, rent, bills, debt payments, and health care. Nearly all of the 1.7 million unbanked adults live in the developing world, and nearly half live in seven emerging economies being Indonesia, Bangladesh, China, India, Mexico, Nigeria, and Pakistan. (12) When looking into the reasons why people are unbanked, Findex found the most common reason was having too little money to use an account. (13) Other reasons included cost and distance to having a financial institution account, because another family member had an account, lack of documentation and distrust of the financial system.??(14)
2. Financial Resilience: the ability to cope with unexpected or adverse events, such as car breakdowns, a job loss or sudden health emergencies. This includes the ability to respond to and recover from small emergencies and large shocks. This also means being able to recover from a shock and reorient their life after a shock.?
3. Financial Control: being confident in one’s finances and business finances, with no or limited financial distress, now and in the future. Financial control can be a subjective indicator because “being in control” is unique to each person and how they are feeling about their finances. Someone in financial control will feel like they can improve their financial health.?
4. Financial Freedom: the ability to meet long-term financial goals and desires such as children’s college education, starting a new business, or going on a vacation. This means an individual can meet their financial goals and pursue opportunities. They are able to forward plan their finances and have money to spend on the things that they enjoy.?
5. Social Economic Contribution: parts of solutions and contributors to economic justice by accessing markets and promoting inclusive and sustainable economic growth, employment and decent work. This is an additional component that we have proposed, which we have observed through our extensive experience working with the marginalized.

Social Economic Contribution

Social Economic Contribution is a newly recognised component of financial health. It allows people to rely on family, friends and the community to provide support to each other during periods of financial pressure. For example, many people living in poverty are hospitable and generous, despite their own limited income.?

In addition, the poor contribute to society and to economic growth by supporting clean energy, reducing food waste, and becoming climate change champions (e.g. planting trees, contributing to the economy, etc).?

Here is an example of social economic contribution and how people are reducing food waste at the grassroots level. It involves? Good Return’s DFAT -funded project and partnership with CROWDE .? In Indonesia, an estimated 50%-70% of harvested crops never make it to market. In fact, Indonesia records the second largest food waste in the world, wasting 300 kg of food per person per year. (15 &16) ? Through a DFAT-funded Gender Lens Investing partnership with Good Return and Palladium, CROWDE has identified added-value training for women farmers to reduce food wastage and increase productivity in the chilli agricultural value chain.?

CROWDE helps women farmers benefit from the sale of second-grade chilli, which is then turned into chilli paste and chili powder. CROWDE then assists women farmers to complete the product’s life cycle from farm to market: through CROWDE's packaging training, the chilli products are prepared for market and are now available in local modern retailers.?

Ways to improve financial health?

So what are the ways that someone can improve their financial health? The Centre for Financial Inclusion has shown that there are various ways such as balancing income and expenses; building and maintaining reserves; managing existing debts and having access to potential resources; planning and prioritising; managing and recovering from financial shocks; and using an effective range of financial tools. (17)

In addition, key factors have been identified which significantly influence financial health. These include an individual's income level, their income and expenses, their social network and their status within a household (e.g. dependent, contributor or key financial decision maker). (18)

Some of the ways in which an individual can their improve financial health include:?

• Having the financial literacy to understand the pros and cons of different financial products?
• Having a savings or a deposit account, although high inflation may erode any savings
• Investing for their future and retirement

Financial health plays a key role and impacts every part of our lives - work, social and family. It is therefore important to understand the enablers to encourage financial inclusion, and promote financial literacy and capabilities. This will lead to sustainable change to assist people in reaching optimal financial wellbeing and meet long term financial goals.?

About Good Return

Good Return has a mission to enable those living in poverty in our region to achieve economic empowerment, through responsible financial inclusion and capability development. In addition to our DFAT accreditation we hold an Australian Financial Services License from ASIC that enables us to raise and deploy investment funds. Our programs focus on 3 areas:

• Providing funding for micro and small businesses, with a focus on women in agriculture
• Financial education to help low-income people manage their money and small businesses
• Training for local financial institutions to make their services more inclusive and responsible so they can serve more people from their communities?

We partner with bilateral and multilateral organisations, central banks, fintechs, MFIs, government agencies, and other development agencies in the Asia Pacific region to ensure our work to advance economic inclusion creates systems for long-lasting change.?

Authors

Fifi Rashando - Impact Investment Manager

Fifi manages Good Return’s gender-lens investment team, business advisory support, and stakeholder engagement to support agricultural value chain financing and build inclusive economies in the Asia-Pacific region. Holding a Strategic Leadership for Inclusive Finance certificate from Harvard Business School and an MBA from University of Wollongong in Australia, she has over 20 years of management and consulting experience in inclusive finance, impact investment, international development and humanitarian sectors. She has contributed towards the growth of reputable organisations to build inclusive economies, ensuring participation of marginalised people including women and people with disabilities. She also serves as Executive Committee Member of Australian Disability and Development Consortium and Non-Executive Director of the Leprosy Mission Australia. LinkedIn

Jenny Collins- Research Assistant

Jenny holds a master’s degree in International Development Practice and has a particular interest in workplace gender analysis. Jenny works as a legal professional and has expertise in workplace relations, human resources and governance/policy. Jenny has many years of experience in research, writing and analytical skills working across many sectors including education, contract services and corporate. At Good Return, Jenny is part of the impact investment team. LinkedIn

(1) https://www.worldbank.org/en/topic/financialinclusion/overview#1

(2) https://globalfindex.worldbank.org/

(3) https://globalfindex.worldbank.org/

(4) Centre for Financial Inclusion (Available at Building Women’s Financial Capability: A Path Toward Transformation | Center for Financial Inclusion)

(5) The World's Unbanked Population, in 6 Charts (businessinsider.com)?

(6) Microsoft Word - Exploring Financial Wellbeing in the Australian Context - Final Report.docx (csi.edu.au)

(7) Financial Review, Financial stress spreads to a third of Australians: survey (Available at

?Financial stress spreads to a third of Australians: survey (afr.com))

(8) FDIC, How America Banks: Household Use of Banking and Financial Services (Available at How America Banks: Household Use of Banking and Financial Services, 2019 FDIC Survey)

(9) The Federal Reserve, Report on the Economic Well-Being of U.S. Households in 2019, Featuring Supplemental Data from April 2020 (Available here Report on the Economic Well-Being of U.S. Households in 2019, Featuring Supplemental Data from April 2020, May 2020 (federalreserve.gov))

(10) ?United Nations Capital Development Fund, Delivering Financial Health Globally, A collection of insights, approaches and recommendations (Available at https://www.uncdf.org/article/7008/delivering-financial-health-globally-a-collection-of-insights-approaches-and-recommendations)

(11) United Nations Capital Development Fund, What is Financial Health (Available at https://www.uncdf.org/gfh)

(12) World Bank, Global Findex Database 2021 (Available at https://globalfindex.worldbank.org/basic-page-overview)

(13) World Bank, Global Findex Database 2021 (Available at https://globalfindex.worldbank.org/basic-page-overview)

(14) World Bank, Global Findex Database 2021 (Available at https://globalfindex.worldbank.org/basic-page-overview)

(15) https://www.fao.org/indonesia/news/detail-events/en/c/1320656/

(16) https://ei-ado.aciar.gov.au/supplementary-reports/annotated-bibliography/vegetable-value-chains-eastern-indonesia-focus-chilli.html

(17) Centre for Financial Inclusion (Available at Beyond Financial Inclusion: Financial Health as a Global Framework | Center for Financial Inclusion)

(18) Centre for Financial Inclusion (Available at Beyond Financial Inclusion: Financial Health as a Global Framework | Center for Financial Inclusion)