FINANCIAL INCLUSION HELPING ROLL BACK POVERTY, INEQUALITY

If you are reading this paper issues of financial inclusion do not directly affect you. Or so you think.

You probably suffer a short memory or are too young to remember the days when having a bank account was a status symbol. Or that getting a loan was for a select few who had titled land in Kampala they could serve up as collateral. Or at an even more basic level that access to financial services was restricted by geography – in the capital all banks were located on or near Kampala road. 

Or that banking services were only accessible between 9 am and 1 pm and good luck to you if you miss the Friday close of business. Not only did no bank open on weekends there were no ATMs.

Your challenges with the banks now is the high lending rates and their inability to support your start up business – commercial banks are not designed for that.

The proliferation of banks now means more and more people have bank accounts today – about five million accounts in the 24 commercial banks today.

"While banks have expanded their activities dramatically in the last two decades or so, by far the most prevalent traditional financial service available, they still struggle to reach the majority at the bottom of the pyramid....

This week is financial inclusion week and the theme is “Getting Inclusion right”.

The emergence of mobile money has with one blow answered the challenge of lowering the cost of and providing wider accessibility of financial services.

So much so that in a recent survey where respondents were asked about their usage of financial services in the previous three months, usage of mobile financial services was reported at 36 percent last year up ten percentage points from 2013. Banks on the other hand so active usage fall to seven 

percent of respondents in 2017 from 10 percent in 2013.

Improved technology is improving access to financial services – mobile money accounts have exploded to 22 million in the last ten years or so, and already credit, insurance and hire purchase services are being offered over the phone.

But there is still a long way to go. While we have improved financial inclusion from 22 percent in 2006 to the current 43 percent, the full benefits of this shift are not widely appreciated or enjoyed.

So what? Why should financial inclusion – accessibility to a variety of financial services, be so important to you and I.

On a macro level it does several things among which it aggregates more and more of those little monies lodged under our mattresses, in our socks and bras for use among more people. And relatedly it increases the speed with which money moves around in the economy generating more and more economic activity.

On a personal level it improves safety of our money, carrying all your savings around with you is an accident waiting to happen. It increases the ease with which we can do transactions – increasingly now we don’t need to walk around with cash to buy anything. We don’t know it but that convenience represent savings of time which can be gainfully employed on other endeavours.

But it also allows us to have access to leverage or debt, which in effect increases our capacity to do more with less. If you were to buy a plot of land which would cost you sh10m to try and save the money from your income would not only take time but there is no guarantee the plot would still be sh10m by the time you have saved up. Borrowing would hasten the process and therefore the speed of wealth accumulation.

So for the economy as a whole and our own individual improvements in standard of living, the importance of having as many people as possible with access to financial services cannot be over emphasised...

There has to be a discussion between the policy makers, regulators, market actors and intended beneficiaries on how to further this agenda in way that while it maximises on the benefits, guards against the possible risks of a large financial sector.

The major challenge for countries like Uganda and at the heart of the poverty question, is the inability to unlock the full value of our land, human and capital resources. In all these cases but for purposes of this argument, our financial resources are not aggregated in meaningful sums for them to be deployed to finance projects that create jobs that transform economies.

Financial inclusion therefore is a means to an end. For quality, sustainable   economic growth financial inclusion is imperative.