Financial inclusion is the extent to which a person, legal or natural, is included in the formal banking system and able to obtain sustained banking services. Not every person can get a bank account. There are sectors of people and of businesses that are financially excluded.
In respect of natural persons, those who are excluded tend to be people who are undocumented or stateless, such as refugees and in Canada, people who are homeless, who lack a permanent residence, or are incarnated and it particularly affects First Nations in Vancouver. People who are poor are financially excluded as well because they cannot afford the costs of maintaining banking services or of conducting financial transactions.
There are other causes of financial inclusion issues that are tied to financial regulation, such as anti-money laundering and counter-terrrorist financing laws applied inappropriately, that kick large segments of people out of the banking system and force them to use alternative and unsafe forms of banking.
Children are a particularly vulnerable and large segment of the population who are denied banking services, particularly in the Middle East and Asia. In many parts of the world, however, children are the heads of households and financial inclusion is fundamental to their ability to care for younger siblings who depend upon them for survival.
In respect of legal persons, the type of businesses that are financially excluded include those that operate licensed digital currency exchanges. But there are others. Equity crowd-funding platforms are being denied banking services more frequently, as are other emerging FinTech companies over client risks. In Amsterdam, for example, licensed coffee shops that sell marijuana legally to consumers were denied banking services until they successfully sued for financial inclusion.
Unfortunately, the concept of financial inclusion, particularly in respect of what it means for legal persons and the effects of the denial of banking services on businesses on economic development, is not well-understood.
In Canada, unlike other countries, there are few programs for resolving financial inclusion issues to bring legal and natural persons within the formal banking system.
Part of our mandate is to raise awareness of financial inclusion globally for businesses and natural persons, and to address the issue of balanced financial regulation that accommodates financial inclusion.