As we all too well know, there are many reasons in the world that lead to financial inequality. Throughout human history, we have faced wars, racial exclusion, class differences and many others. Nevertheless, only a few of us might come to think of one reason that is very present around the planet: the lack of financial inclusion. In this article, we will tackle this exciting subject and above all see how money transfers can improve financial inclusion around the world and bridge the gap towards more equal economic opportunities.
According to the World Bank, in 2022 there were roughly 1.7 billion adults without access to a bank account, or almost one third of the world’s adult population. You might wonder what leads to such dramatic figures: the reasons can vary from more straightforward ones, such as limited access to banking services, lack of appropriate identification documents or more culturally underlying factors, for example, exclusion based on socioeconomic factors or discrimination.
Financial inclusion aims to provide affordable and appropriate financial services to all segments of society, regardless of their income level, gender, age, race or location.
There are many challenges that arise when speaking about financial inclusion. Furthermore, these can vary drastically from one country to another. Let's take two real-life stories as examples:
Kristine is 27, living in the vibrant neighborhood of Fredriksberg in Copenhagen. She has always been interested in arts and crafts, which led her to study pottery at the university. After graduating, Kristine started her own pottery studio focusing on traditional Scandinavian ceramics, thanks to a microloan from her bank, which she got in a matter of days.
Now, let’s jump to the other side of the world, to the southern Mexican state of Oaxaca.
María, 26, comes from a long line of female pottery artists. She wants to start a pottery studio, as she has noticed an increasing interest in local arts from expats moving to the city. María went to a bank and tried to get a microloan, but her application was rejected, as neither María nor her parents have a credit history, necessary in Latin American countries to get a loan. A lack of formal studies was also an additional reason stated by the bank officials. When leaving the bank, María knew that there was another underlying cause no one would say out loud: María is Zapotec and the racism towards indigenous people is widely spread in her home state. Additionally, young female entrepreneurs are fairly rare in the Mexican backcountry.
María's story is a good example of many of the barriers towards a more financially including society, the most common ones being:
race, gender and age discrimination
lack of bank and credit history
lack of financial institutions in remote areas
lack of identity documents
Despite these fairly limiting factors, a change in paradigm is taking place, fueled by money transfers.
You might have wondered how money transfers are redefining these complex social factors that we previously stated. Money transfers services promote financial inclusion by:
Allowing access to basic financial services:
Money transfers enable individuals to send and receive money across different locations, including remote areas. This access to basic financial services allows people to store value, make payments, and receive funds despite a possible lack of physical financial institutions in their area.
Creating a more equal financial participation:
Money transfers empower individuals to participate in economic activities by facilitating the movement of funds. This is particularly important for individuals in underserved or marginalized communities who have been denied access to or experience obstacles in participating in the traditional banking systems. Thanks to money transfers, many people throughout the world can receive money without having to meet the extensive documentation that traditional banks require.
Offering different payout options and other advantages:
Money transfer services tend to provide more affordable and convenient payout options, such as:
Cash pickup: with this option offered by many service providers, the recipient can withdraw money in a matter of minutes, normally only having to present an ID-document.
Mobile wallet: a practical digital solution for receiving funds, which offers the possibility of creating a bank history. Eventually, clients can apply for microloans offered by virtual banks, explored in a previous article [LINK]. An additional advantage of these is that the customer is able to open a bank account without having to battle with the previously mentioned social factors related to their culture, such as prejudices, discrimination etc.
By enabling an easier movement of funds, money transfer services contribute to breaking down barriers and expanding financial access for underserved populations. They play a key role in advancing financial inclusion, empowering individuals, and driving economic growth and development.
Since its foundation in 2006, one of the core values of Rebtel was to revolutionize the existing market and offer prime calling services available to persons from all walks of life around the world. In the past 15 years, we have been constantly expanding our services, with money transfer being the most recent one.
With Rebtel, you are able to transfer money to more than 120 countries across the globe in a matter of minutes, and most importantly, fee-free. It is our firm belief that no one should take a cut on your hard-earned money: That is why all the transaction fees are on us. Furthermore, we offer among the best exchange rates available on the market, ensuring that every cent of your money gets where you want it to be.
We are fiercely committed to promote financial inclusion, which is why we offer you the cash pickup and mobile wallet payout options. Thanks to our partnership with Ria, one of the largest money transfer services in the world, you can now send money to more than 490.000 locations worldwide. Because we simply believe that everyone should be able to enjoy equal opportunities when pursuing their goals and dreams, or simply keeping in touch with the people back home.
There are twists and turns to many stories, and this was also the case for María, back in Mexico. An American tourist who had previously visited María’s hometown, learned by word-of-mouth about her project and decided to lend her the money she needed for starting her business. He transferred the money through a US based money transfer provider and María was able to retrieve it just with her ID card. As María had guessed, the pottery studio was a success, attracting new students every week. Some weeks later, she opened an account at a virtual bank based in Mexico City and started saving money in her mobile wallet. After some time, María was eligible for one of the micro loans offered by her bank, which allowed her to expand her studio and buy some much needed extra equipment. One year later, María was one of the few indigenous women who were awarded the Prominent Young Entrepreneur prize by the Mexican Ministry of Finance.
In conclusion, money transfers play a vital role in stimulating financial inclusion and promoting economic empowerment for individuals and communities worldwide. By enabling access to basic financial services, enhancing economic participation and promoting a savings focused behavior, money transfer services break down barriers and bridge the gap between underserved populations and the formal financial system. At the same time, through mobile wallets and digital platforms, money transfers have become more accessible, affordable, and convenient, reaching even remote areas with limited banking infrastructure.
However, to fully realize the potential of money transfers in promoting financial inclusion, collaborative efforts are needed. Governments, financial institutions, and organizations must work together to address the remaining challenges, such as expanding digital infrastructure and ensuring legal frameworks that promote inclusive financial services.
In this way, by embracing the power of money transfers and digital financial inclusion, we can create a more equitable and inclusive financial system that benefits individuals, businesses, and societies at large. Together, we can empower individuals, promote economic growth, and move forward towards a more financially inclusive world for all.