Implementing Financial Health: Creating Mutual Success For Financial Service Providers And Clients

Max Nino-Zarazua, Aurelie Larquemin, Davide Castellani

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Over the last ten years, there has been a global coalition between donors, governments, multilateral organisations, and the financial sector to improve the financial inclusion (FI)1 of unserved and underserved people, particularly from the so-called Global South. International organisations such as the Alliance for Financial Inclusion (AFI), Financial Sector Deepening (FSD), UN Secretary General’s Special Advocate for Inclusive Finance for Development (UNSGSA), United Nations Capital Development Fund (UNCDF), the World Bank, and other financial inclusion advocates have been working towards the same objective. For example, the Maya Declaration movement led by AFI has brought 76 countries around the world to sign institutional commitments to implement national policies and strategies to increase financial inclusion (AFI, 2023).

This global effort has given clear results in FI since adult account ownership increased from 51% to 76% between 2011 and 2021 globally, and from 42% to 71% in developing countries (World Bank, 2021). However, as Castellani et al. (2023) argue, increasing account ownership or even financial usage may not necessarily mean that people are financially healthy2 or that they use products and services that are beneficial to them and are not predatory. Kenya is a good example of this argument. Over 15 years, Kenya’s FI increased from 26.7% in 2006 to 83% in 2021. This is mainly due to the increasing use of digital financial services like digital payments that has revolutionised the financial landscape in Kenya, bringing millions of Kenyans from remote areas to make financial transactions daily. Despite this extraordinary achievement, the population’s financial health has declined from 39.4% in 2016 to 17.1% in 2021 (FinAccess, 2021)3. The exclusive focus on increasing financial access and the implementation of more effective technology to facilitate the usage of financial services is an incomplete effort to improve the financial health of people, particularly when they are also affected by other micro and macro socio-economic factors such as changing consumption preferences, lack of labour market opportunities, rising inflation and problems of over-indebtedness due to aggressive lending practices of some financial service providers (FSPs) (e.g. Cambodia) which can increase financial stress and inhibit their clients’ ability to cope with their present and future financial needs.

Therefore, it is imperative that actors across the FI ecosystem, particularly FSPs, take a step forward in the provision of financial services and explore business models and practices that address the financial health of their clients. Improving FSPs’ financial performance, competitive position, and client base are also important. Therefore, it is crucial to develop business strategies that address clients’ financial health and provide FSPs with growth, organisational resilience, and profitability (Gutman, 2018).
Original languageEnglish
Number of pages25
Publication statusPublished - 3 Jul 2024
Externally publishedYes

Publication series

NameCentre for Development Studies Report
VolumeJuly 2024
ISSN (Print)2977-392X

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