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Financial inclusion means ensuring access to the basic tools, services and systems people need to manage their money and financial lives. In a financially inclusive environment, essential financial tools and services—such as bank accounts and lines of credit—are affordable and accessible to all people and businesses.
Financial inclusion remains elusive for many people. There are many ways someone can be financially excluded, but some of the most common are:
- Not having access to credit
- Not having a safe place to store money
- Not having a way to send money or make payments
- Not having a reliable way to receive money or get paid
When people don't have access to basic financial services and tools, they're vulnerable to exploitation and financial crises, and locked out of important opportunities to improve their futures.
The Importance of Financial Inclusion
Being able to do basic financial transactions allows people to care for and educate their families, improve their health, live under safer conditions, build sustainable businesses, overcome financial setbacks, and ultimately create vibrant and healthy communities.
Although it may seem like most people have access to these types of important services, millions of people around the world don't. People who are low-income or from underserved communities are the most likely to be financially excluded from mainstream financial services and tools.
It can be hard to measure what true financial inclusion looks like, but on a very basic level it means:
- You have access to safe ways to store your money. When people are excluded from the financial system, they often rely on storing cash in unsafe places in their homes, where it can easily be lost or stolen. Ideally, all people would have access to bank accounts: They not only protect hard-earned money, but are needed to complete almost any basic digital transaction.
- You can conduct basic financial transactions safely and at reasonable costs. Often this means helping people get connected to digital tools to easily send and receive money from other individuals or businesses.
- You can access and afford insurance. Insurance reduces risk to yourself and your family by providing for life's unexpected expenses like funerals or becoming suddenly disabled and unable to work. When people have affordable insurance, they're better able to protect their financial futures.
- You have the ability to borrow money. Access to capital to invest in yourself or your business either through small loans or lines of credit is often critical to reaching financial goals.
Financial inclusion also includes financial literacy, which is the ability to understand how to make good financial choices. The more you know about money and how it works, the more confident you'll be when it comes to advocating for yourself, growing your money, and managing your financial future.
Credit and Financial Inclusion
One of the most important parts of financial inclusion is the ability for people to build a credit history. A credit report is a record of how you've managed your debt accounts over time. Companies may look at your credit history to decide whether to do business with you. For example, a landlord might look at your credit report to determine if they want to rent to you.
If you don't have a credit history, lenders and other businesses may not allow you to borrow money or use their service because they don't have a way to vet your financial habits. This could be especially challenging when it comes to things like finding a place to live, buying a car, obtaining utility service without having to pay a large deposit and other basic necessities.
Fortunately, it's possible to build a credit history with time and effort. Getting and using a credit card responsibly is one of the most common ways to start building credit—but you'll find some credit card companies require you to already have a credit history before extending a line of credit. If this happens, there are ways to get a credit card even if you're a first-timer. One of the best ways is by applying for a secured credit card, which requires a deposit that serves as your credit limit and gives you the opportunity to show responsible credit use while having fewer requirements.
There are also other ways to establish a credit history. For example, Experian Boost®ø can help you if you're just starting out because it's completely free and rewards you for doing something you already probably do: pay bills—in this case, your utility, phone and streaming service bills.
Building credit requires dedication, but with the right tools it can be simple. The most important things to remember once you begin building credit using a credit card or loan are to always pay your bills on time and keep credit card balances low. Those two steps alone can improve your credit scores and help put you on a path to other credit products that may help you reach your goals.
Learning about your own personal credit is simple. You can review your credit reports from the three national consumer credit bureaus (Experian, TransUnion and Equifax) for free at AnnualCreditReport.com. You can also get your Experian credit report and credit score for free. Reviewing your credit reports and scores can provide helpful information as you work to improve your financial circumstances.
Financial Inclusion Resources
There are many resources out there to support people in their journey toward financial inclusion, including:
- Mission Asset Fund: Works to help low-income consumers achieve financial success through no-interest "lending circle" loans.
- Accion Opportunity Fund: Helps small businesses get access to capital.
- The Working World: Helps to grow businesses in low-income communities.
- Center for Community Self-Help: Offers financing and other products and services to help underserved communities.
- Credit unions: Owned and controlled by their members, credit unions often offer more affordable financial products and services.
- Community Development Financial Institutions: Help provide access to financial products and services to people and businesses in low-income communities.
These are just a few of the resources aimed at helping people build their financial futures. It can be overwhelming to get started, so beginning with just one resource can help you build confidence.
Financial inclusion is important for building healthy communities and local economies. With access to the right resources and by building more financial literacy, everyone—no matter what their level of income is—can have a solid financial future.