Estimates indicate that 2.3 billion working age adults do not have an account at a formal financial institution. One of the main barriers to financial inclusion for this group is financial illiteracy and low trust levels due to lack of information on the financial products. According to the World Bank, financial access facilitates day-to-day living, and helps families and businesses plan for everything from long-term goals to unexpected emergencies. As accountholders, people are more likely to use other financial services, such as credit and insurance, to start and expand businesses, invest in education or health, manage risk, and weather financial shocks, which can improve the overall quality of their lives.
Governments, NGO’s and other stakeholders in the financial industry are faced with the utmost challenge of financial inclusion for the poor/ economically challenged in the society. How can we go about on-boarding them to at least have a transactional account? The banks are also not keen on this group due to the high investment costs involved and the low returns; unless the government intervenes through infrastructure development and subsidies.
In the 1980’s Rick Warren used Donald McGarvan’s philosophy to successfully start saddleback church. It stipulated that missionaries should imitate the tactics of other successful movements by appealing to people’s social habits. It specified that liberating multitudes to christianity would be successful only if the evangelists focused on helping people become followers of Christ in their normal social relationships. One of the key strengths in Africa is the high social capital in our communities; trust is a fundamental factor. We see it in the informal credit lines in the society whereby an individual will get goods on credit from the local shop keeper and their repayment is pegged on their society status.
In order to influence change in formal financial products perspective, we have to influence social habits through communal financial literacy trainings. We will achieve this by targeting community groups and Sacco’s for financial literacy programs. The poor think that the banks are a preserve of the rich – unfortunately, for most of these people – the only stories they have heard about banking are the negative aspects of defaulters and not the success stories of growing entrepreneurs or the benefits of compensation by insurance companies incase of an accident. There’s need for a mindset shift. This group needs to hear the success stories from familiar faces in their community. We will be actualising this at Change Corner through strategic partnerships and trainings.