Financial inclusion as a factor for socio-economic development

Abstract

Paper dwells upon approaches to understanding the concept and role of financial inclusion. It is established that financial inclusion is one of the factors for economic development; the study of the role of financial inclusion among the factors for socio-economic development is substantiated. The evolution of the term “inclusion” has been traced from the area of social processes analysis at the social groups’ level, including various social relations, to the macroeconomic level. It has been revealed that a consistent definition of “financial inclusion” by key standards-setting institutions has been extended by financial market experts: interpretations of the term “financial inclusion” include its definition as “process”, “stage” (of development) or “state” (of development). Authors define the concept of financial inclusion as a process of interaction between financial market entities and financial services’ consumers, which, by providing equal access to financial services, offers a level of participation of financial services’ consumers in the financial relations, which contributes to the sustainability of financial institutions and increase of social welfare. There is an alternative view of the financial inclusion definition through its opposite concept of financial exclusion, which is either voluntary or forced, and is determined by four groups of reasons. It has been found that the most crucial is the need to reduce the fourth group of reasons, which are subject to compulsory exclusion, since this category of users is excluded from the financial system because of regulatory deficiencies or market barriers. Authors analyses consensus offered in the scientific literature regarding the three main aspects of financial inclusion: coverage, use and quality of financial services. Positive factors and risks of financial inclusion development, as well as negative aspects of financial exclusion are highlighted.