Africa is now the world’s second fastest growing region after Asia, with annual GDP growth rates in excess of 5% over the last decade. Despite this growth, the “Arab Spring” events showed that good economic growth in the continent had not translated into shared prosperity and better livelihoods for the majority. Growth has to be inclusive to be socially and politically sustainable. One key component of inclusive development is financial inclusion, an area in which Africa has been lagging behind other continents. Less than one adult out of four in Africa have access to an account at a formal financial institution. Broadening access to financial services will mobilize greater household savings, marshal capital for investment, expand the class of entrepreneurs, and enable more people to invest in themselves and their families.
Financial inclusion is therefore necessary to ensure that economic growth performance is inclusive and sustained. Financial inclusion refers to all initiatives that make formal financial services Available, Accessible and Affordable to all segments of the population. This requires particular attention to specific portions of the population that have been historically excluded from the formal financial sector either because of their income level and volatility, gender, location, type of activity, or level of financial literacy. In so doing, there is a need to harness the untapped potential of those individuals and businesses currently excluded from the formal financial sector or underserved, and enable them to develop their capacity, strengthen their human and physical capital, engage in income-generating activities, and manage risks associated with their livelihoods. Financial inclusion goes beyond improved access to credit to encompass enhanced access to savings and risk mitigation products, a well-functioning financial infrastructure that allows individuals and companies to engage more actively in the economy, while protecting users’ rights.
The objective of this publication is to contribute into the debate on financial inclusion on the continent while documenting the state of financial inclusion in Africa and informing policymakers, financial sector stakeholders and development actors about existing opportunities and specific challenges that need attention and action. It describes the multifaceted nature of financial inclusion through a compilation of chapters discussing the topic from different perspectives. It is structured around three main parts. The first part lays the groundwork for the subsequent analyses, the second part looks at some transformational mechanisms and approaches designed to serve the underserved, and the third part tackles strategic issues and options.