The role of Financial Inclusion in reaching the SDGs
The Sustainable Development Goals launched in 2015 by the United Nations General Assembly (UN-GA) and intended to be achieved by 2030 are designed to ensure every individual enjoys a better and more sustainable future. These 17 sustainable development goals (SDGs) are non-discriminatory and adopted by developed and developing countries:
Goal 1: No Poverty
Goal 2: Zero Hunger
Goal 3: Good Health and Well-being
Goal 4: Quality Education
Goal 5: Gender Equality
Goal 6: Clean Water and Sanitation
Goal 7: Affordable and Clean Energy
Goal 8: Decent Work and Economic Growth
Goal 9: Industry, Innovation and Infrastructure
Goal 10: Reduced Inequality
Goal 11: Sustainable Cities and Communities
Goal 12: Responsible Consumption and Production
Goal 13: Climate Action
Goal 14: Life Below Water
Goal 15: Life on Land
Goal 16: Peace and Justice Strong Institutions
Goal 17: Partnerships to Achieve the Goal
Looking at these goals, access to financial services isn’t explicitly stated. However, without a doubt, financial inclusion is an enabler of the SDGs and plays a huge role in reaching these goals. The big question is, how possible would it be to achieve the SDGs without creating the opportunity for people to access financial services regardless of their income level, education level etc?
Financial inclusion enables eight of the seventeen goals. They are:
SDG1- eradicating poverty; SDG 2- ending hunger, achieving food security and promoting sustainable agriculture, SDG 3- profiting health and well-being, SDG 5- achieving gender equality and economic empowerment of women, SDG 8- promoting economic growth and jobs, SDG 9- supporting industry, innovation, and infrastructure, SDG- reducing inequality and SDG 17- partnerships to achieve these goals.
It is extremely hard for individuals excluded from the banking system to break out of poverty. A farmer with a good harvest will find it hard to make transactions with customers if they don’t own a bank account. If they also lack access to loans and insurance, growth becomes almost impossible for them because they won’t have the ability to make bigger investments in the planting seasons and be prepared for a disaster by insuring their farms in case a disaster occurs. When farmers are empowered financially, their yields are higher; therefore creating progress toward greater food security. A field experimental evidence from Malawi proved how access to financial services can improve the lives of those in Agriculture. Malawian farmers who had their earnings deposited into a bank account spent 13% more on equipment and increased the value of their crop output by 21%.
A savings account encourages people, especially in rural areas to keep saving their earnings, thereby providing greater security over their money. Saving groups in rural communities continues to encourage a savings lifestyle among rural dwellers ensuring they can afford basic needs such as paying their children’s school fees when they occur. Efforts by financial services providers (traditional and digital) to offer savings and other financial services in rural areas can significantly cut rural poverty.
In 2004, USAID launched the Rural Savings Promotion and Enhancement of Enterprise Development (Rural SPEED) program to stimulate economic growth and increase wealth by expanding access to financial services in Uganda’s rural areas. The results were incredible as rural Ugandans had new options for savings accounts and agriculture-oriented loans, as well as innovative ways to access and transfer their money. They opened more than 300,000 new savings accounts and borrowed billions of Uganda shillings (UGX) to expand farming operations and other small businesses. The number of new savers in rural Uganda grew by 321,000, exceeding the program target by 7 percent.
As one of the ways to promote gender equality, financial inclusion ensures women are not financially excluded. A gender barrier exists as women face more challenges in accessing financial services. In sub-Saharan Africa, only 37 percent of women have a bank account, compared with 48 percent of men. Women are behind their male counterparts in finance even though the majority of Village Saving Groups (VSLA’s) are women. In our pilot project with 255 saving groups, the average group had 62% women.
Access to savings leads to positive economic outcomes for women, including increasing productivity and profits and greater investment in their businesses. Governments and other institutions are partnering to address women’s financial inclusion. The G7 Partnership for Women’s Digital Financial Inclusion in Africa is one such.
In one of our recent articles, we discussed the role of partnership in aiding financial inclusion. Read here
Mobile phone technology is also helping expand financial access for the poor and those in rural areas. Since there are more Africans with mobile phones than bank accounts, financial services can be made more accessible to them on their phones. In some African countries such Kenya (M-Pesa), mobile phone banking ensures rural areas have access to financial services. These are areas where conventional banks have been physically absent or too expensive.
The evidence of financial inclusion as an enabler of the SDGs is prominent in today’s societies.
