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Financial exclusion is when people lack access to basic financial services like bank accounts, loans, and credit cards, and results in being unable to save for the future, invest in education, or overcome unexpected financial setbacks. It is a persistent problem, particularly among low-income communities, and makes building a better life nearly impossible when unexpected bills can shatter what little stability they have.
The worst part is that financial exclusion hits the communities that need financial services the most and the hardest. Achieving life goals seems to be an unachievable distant reality for such communities.
The roots and implications of financial exclusion
Traditional financial institutions often view individuals with limited credit histories or lacking formal identification as high-risk borrowers, and they are reluctant to lend to them as a result. This reluctance leads to discriminatory practices, making it nearly impossible for these people to access loans, build credit profiles, or improve their financial standing. Compounding the issue is a lack of financial literacy, which leaves people vulnerable and less likely to make sound financial decisions.
The consequences of financial exclusion are far-reaching, extending beyond those directly affected. It stifles entrepreneurship, prevents business creation, and limits job opportunities. Forced outside the formal financial system, the financially excluded are often left with predatory alternatives like payday loans, which only exacerbate their financial difficulties.
Introducing the data for inclusion initiative
However, hope is on the horizon. According to The World Bank, in the decade since 2011, the global population of people who did not have access to a bank account dropped from 2.5 billion to 1.7 billion. This progress is partly due to new initiatives and startups designed to enhance financial inclusion. One such initiative is Data for Inclusion, founded by Abhishek Bhasin, a fintech expert with over 15 years of experience across various financial services sectors, including banking, credit bureaus, microfinance, and impact investing.
“I am passionate about leveraging financial systems for sustainable wealth creation for communities to facilitate financial inclusion as well as access to credit. Growing up, I was impacted by the widening wealth gap between the haves and the have-nots,” says Bhasin.
Data for Inclusion aims to empower those marginalized by traditional financial systems by leveraging data and technology to address the root causes of financial exclusion. Their data-driven approach focuses on the quarter of the population that still faces significant challenges in fulfilling their life goals due to lack of access to financial services.
Leveraging AI to break down barriers
One of the key objectives of the Data for Inclusion initiative is finding ways to break down long-held assumptions about the lack of data. It is doing so by showcasing successes from around the world. Highlighting solutions leveraging technology developments in the space of artificial intelligence (AI), alternative data, open banking, and digital identity, it is spearheading new approaches that challenge the traditional assumptions that foster exclusion.
AI has the potential to be a major development in increasing financial inclusion. It can analyze massive datasets and generate insights to identify new financial products and service opportunities. These could include personalized financial recommendations, automated loan approval processes, and AI-powered chatbots for financial literacy and empowerment. However, challenges like potential biases in algorithms need to be addressed to ensure fair and equitable access.
Financial inclusion is a complex issue that requires sustained collaboration. Open dialogue that amplifies the voices of marginalized communities and creates engagement between decision-makers and financial experts is crucial.
Run by experts in fintech like Abhishek Bhasin, initiatives such as Data for Inclusion offer a blueprint for tackling systemic barriers and empowering individuals from all walks of life. By working together, a future can be built where everyone has equal access to the financial opportunities they deserve.
