03 March 2013

Presentation: Money Management, Financial Inclusion, and “Banking the Unbanked”

Although financial inclusion has gained increasing currency as a policy aim and hot topic in development, there is a surprising dearth of discussion about what financial inclusion means, and in fact, why it should be a national or global priority. I have been listening, reading and thinking about financial inclusion intensively over the past few months and I am concerned that the edifice is built on shaky pillars. The conceptual framework underneath financial inclusion needs shoring up with a clearer theory about the purposes and potential benefits of financial inclusion, particularly to the individuals who are targeted. Without a stronger conceptual framework, the financial inclusion movement may be prone to making important mistakes.

In this essay, I focus on something at the very core of financial inclusion: money management. My contention is that money management is a central concept around which to build financial inclusion policy, and that failure to do so hampers the achievement of the goals that financial inclusion is intended to bring about. Money management is not the only aspect of the conceptual framework that needs improvement (another one being savings), but it is one that touches nearly everything going on at the cutting edge of the field today, from mobile banking to financial education. It is essential that financial inclusion policy makers, providers and innovators understand how financially included and excluded people manage their money, first because improved money management is in itself one of the main objectives of financial inclusion and second because wrong assumptions about how people manage their money can lead to failed experiments and unexplained client indifference.

by Elisabeth Rhyne

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