Financial Inclusion is a range of activities and projects aimed at tackling two main issues:
- Financial Exclusion, which describes a person’s inability to access appropriate financial products and services.
- Financial Capability, which describes the skills that people need to budget and plan their money for the future, their attitudes to money and financial institutions, such as banks and credit companies.
Too many people cannot gain access to appropriate financial products and services at present; they struggle to obtain affordable credit or helpful financial advice and face barriers in opening and operating bank accounts. Financial exclusion blights the lives of many millions of people; it increases the costs they bear for basic services; it makes them vulnerable to illegal or high cost lending; it reinforces social exclusion.
Financial services play an important role in most people’s everyday lives. Many people rely on their bank accounts to pay their bills and have their wages paid into. Products such as mortgages and pensions enable people to buy homes and save for their futures.
Yet, some people do not have access to even the most basic of financial services and products, resulting in them paying increased prices for the services that they can and do access.
People who are financially excluded find themselves experiencing one or more of the following issues:
- No bank account
- Reliance on doorstep/high-interest credit
- No savings, insurance and/or pensions
This is people’s knowledge and skills to understand their own financial circumstances, along with the motivation to take action. Financially capable consumers plan ahead, find and use information, know when to seek advice and can understand and act on this advice, leading to greater participation in the financial services market’
Being able to make sound financial decisions is an essential life skill. It enables people to manage their day-to-day finances and empowers them to be able to cope with unforeseen emergencies and plan for their futures.
Yet, many people lack these necessary skills, which often results in greater costs to their own financial wellbeing, and to the local economy. The increase in personal responsibility on people to manage their finances and has led to a ‘live for today, pay later’ culture.