Financial inclusion strategies can be defined as road maps of actions, agreed and defined at the national or sub-national level, and ideally prepared by public sector in partnership with the private sector to encourage broad innovation and development in line with FI targets.
A comprehensive approach to financial inclusion addresses at least three aspects of financial services and products:
All are defined by consumers' ability to benefit from their financial options within a reliable (consumer protection) and sustainable (financial capability) framework.
Strategies can integrate public and private sector actions to address different barriers to financial inclusion, and can also focus on high-impact, high-priority areas, such as SME finance or financial education action plans. Financial inclusion is interlinked with financial stability, financial integrity, market conduct, and the financial capability of consumers, and should be prepared with reference to analysis and objectives for those areas, irrespective of whether the financial inclusion strategy is a standalone document or a component of a broader financial sector development strategy.
Financial inclusion strategy development, implementation, and monitoring can be characterized by six components (not necessarily sequential – each country context is complex, developed unevenly, with political economy, social and technological factors varying widely):
- Stock-taking: Data and Diagnostics
- Targets and Objectives
- Strategy Building or Revision
- Public Sector Actions: Policies, Regulation and Financial Infrastructure
- Private Sector Actions
- Progress Monitoring
Policy consensus can be needed throughout and may, to an extent, be institutionalized through multi-year commitments, coordination mechanisms, institutional mandates and roles, and the involvement of civil society and the private sector. Each component or stage has to be carefully planned and executed to ensure sustained progress and consensus toward the financial inclusion goals.
Financial capability and consumer protection can be components of a ‘responsible’ financial inclusion strategy that can lead to stronger positive impacts and lower risks at the level of individual, firm, financial institutions, financial sector, and economy. Where consumers are not well protected, or able to take informed decisions about any type of financial service, or where products or institutions not well monitored, then the impacts of financial inclusion can be reduced or even negative. This was clearly illustrated by the sub-prime housing loan crisis in the US, the recent payments protection insurance ‘scandal’ in the UK, and microcredit repayment crises in India, Morocco, and beyond.