Financial Inclusion and The NPO Sector

Posted on 10 May, 2021 at 16:59

By Linda Calisto

Financial inclusion refers to the provision of equally available and affordable access to financial services for everyone, regardless of their level of income. It applies to providing services to both individuals and businesses. It focuses on providing financial solutions to the economically underprivileged. However development and philanthropic actors, possess a unique set of financial and non-financial tools that can be applied to help private institutions overcome financial inclusion barriers. Financial Inclusion enables individuals, businesses and communities to have access and usage of a broad range of affordable, reliable, quality financial services and products in a manner convenient to the financially excluded. Research on the needs and habits of the poor shows that nonprofits continue to serve a vital function when it comes to bringing financial services to those who need them most.

Some of the roles that non-profits organisations can play in improving financial inclusion are funding financial literacy programs, supporting women and youth empowerment programs and funding infrastructure development such as roads, networks to make it possible for financial Institutions to establish in certain locations. Financial Inclusion intends to help people secure financial services and products at economical prices such as deposits, fund transfer services, loans, insurance, and payment services. It aims to establish proper financial institutions to cater the needs of the less fortunate groups. Therefore, the Non Profit Organisations, with the support given by the government and private players has been accelerating its development activities by taking up specific issues like poverty alleviation and child rights. Financial Inclusion promotes freedom from commands of informal lenders, enhances financial deepening, promotes inclusive and equitable economic growth. It also boosts employment opportunities, promotes formalization of the economy, promote growth and formal sources of credit, poverty reduction and enhances financial sustainability.

In most cases, rural areas suffer from being not only poorer than urban areas, but also costlier for financial institutions to reach. The high costs of serving clients in those areas often makes the financial institutions operations unsustainable. Furthermore, even in markets where formal microcredit is present, many are not comfortable to borrow from a micro lender. The reasons for their reluctance include concern about price, fear of payback in the case of default, and discomfort with the formality of institutional lenders. In response to these challenges, NGOs such as CARE, Catholic Relief Services and Plan International have come up with what they call “savings-led micro finance” that focuses on creating community savings groups. NGOs present the savings group model to locals at a public meeting and invite attendees to form groups of about 10 to 30 people who can come together to make a weekly or monthly contribution.

NPOs can come together with financial service providers be it micro finances or banks to help people in the rural communities to be financial included. People from the rural communities have established relations with the NPOs thus it will become easy to convince them into using banking services, insurance services and ultimately that increases financial inclusion. Bill and Mellinda Gates Foundation is a perfect example of an NGO that is working on expanding access to digital financial services to the poorest people around the globe so that they can build security and prosperity for themselves, their families and their communities.

 

 Financial inclusion is a key enabler to the achievement of the Sustainable Development Goals, which are a collective call to action to end poverty and ensure that all people enjoy peace and prosperity. Globally, policy makers are increasingly embracing financial inclusion initiatives to nurture inclusive economic growth and social development. Non-Profits have the potential to play a critical role in solving this problem of trust. People may find them to be more credible, and more likely to be acting in clients’ interests, than a for-profit microfinance institution. They are in a position to provide honest information on which financial institutions are most trustworthy and on which products are most suitable to consumers.