Across the world, we hear reports of the rich getting richer and the poor being left behind, but you may not have heard of financial exclusion. Financial exclusion is a global issue, and many people are left without access to services that would benefit them and their families. Read some of the main causes for global financial exclusion below and the impact that this has on the individuals that have been excluded.
What is Financial Exclusion?
Financial exclusion is when people are unable to access financial services such as current accounts, savings accounts and other beneficial financial services as they are deemed to be too high risk. There are many negative effects of this exclusion, and it generally means that people become unable to remove themselves from poverty.
What Causes Global Financial Exclusion?
There are many reasons for financial exclusion, and these can vary from country to country. We’ve taken some of the most common reasons and explained them below.
1: Lack of Access to IT
Many people find themselves financially excluded because they are unable to maintain an IT presence and do not understand how to access finance online such as online banking. This trend seems to impact those over 65 more as they are not used to online systems and need support to relearn this method of banking.
2: Lack Of Products That Suit All Customers
Another cause of financial exclusion is a genuine lack of financial services for people who do not fit a mainstream financial profile. A lack of insurance, credit and day to day banking facilities stops those who want to access services from getting them. This then means that it becomes very difficult to improve its financial profile and become included.
3: Social Exclusion
Social exclusion is a very common cause of financial exclusion. This is when people who are unemployed, financially dependent on another person or who have no credit history in the country they reside in becoming financially excluded due to their social status. It is also very common for people who have migrated to a new country to become financially excluded in their new country.
4: Low Income
It is widely believed that a low income is directly related to those people who are completely financially excluded. People who are on benefits have low paid cash-in-hand jobs, single parents and those with a disability often find themselves in the low-income bracket. This makes them less desirable to mainstream banking, and so it becomes virtually impossible to gain access to financial products.
What are the Consequences of Global Financial Exclusion?
There are two main consequences to financial exclusion; first, the financial implications of financial exclusion mean that people who are excluded will find it harder to save, spend and raise money when they need to. This means they are unlikely to be able to improve their financial status over time and so their quality of life remains affected in the long term.
Secondly, people who are financially excluded go on to become more socially excluded as time passes. They are unable to access jobs that require bank accounts to pay them and so become less significant in their society. This type of social exclusion leaves people with little hope of being able to improve their own lives.