Financial inclusion refers to the ability of individuals and communities to access and use financial services, such as banking and credit, to improve their economic well-being. It is a broad concept that encompasses a variety of services, including savings accounts, credit, and insurance. The goal of financial inclusion is to ensure that everyone, regardless of their income or social status, has access to these services and can use them to improve their lives.
One of the key components of financial inclusion is access to banking services. This includes having a bank account, which enables individuals to save money and make transactions. Without access to a bank account, individuals are often forced to rely on informal financial services, such as loan sharks, which can be costly and risky.
Another important aspect of financial inclusion is access to credit. Credit allows individuals to borrow money to make purchases or investments that they could not afford to make with their own savings. It can also be used as a tool for economic development, allowing individuals to start or expand a business.
Despite the importance of financial inclusion, there are still many individuals and communities worldwide who are unbanked or underbanked. This includes individuals who do not have a bank account, as well as those who have an account but do not use it regularly. The challenges to achieving financial inclusion are multifaceted. They can include a lack of trust in financial institutions, a lack of understanding of financial services, and a lack of physical access to financial services.
To promote financial inclusion, it's important to understand the challenges that exist and to work to address them. This can include education and awareness campaigns, as well as developing new financial products and services that are tailored to the needs of underbanked and unbanked individuals.
The Benefits of Financial Inclusion for Organizations
Promoting financial inclusion in the workplace can bring a range of benefits to organizations. By ensuring that employees have access to financial services and can use them to improve their economic well-being, organizations can help to improve their employees' financial wellness, leading to increased productivity and higher job satisfaction.
According to a report by LendingClub, 63% of Americans are living paycheck to paycheck, and 67% of employees in the US report that financial stress affects their job performance.
One of the main benefits of financial inclusion in the workplace is that it can help to improve employee financial well-being. According to a report by LendingClub, 63% of Americans are living paycheck to paycheck, and 67% of employees in the US report that financial stress affects their job performance. A study by PwC found that financially stressed employees are more likely to take time off and are less productive on the job. However, when employees have access to financial services, such as savings accounts, credit, and insurance, they are better able to manage their money and plan for the future, which can help to reduce financial stress and improve overall well-being. (Dickler 2022, PwC 2022)
Another benefit of financial inclusion for organizations is that it can lead to increased productivity. Studies have shown that employees who are financially secure are more engaged in their work and miss fewer days of work. This is because when employees are financially stable, they are more likely to be focused on their work and to be less distracted by financial concerns.
SHRM states that 80% of employers report that financial stress among their employees is negatively impacting their performance and is costing them nearly half a trillion dollars per year.
Additionally, when employees have access to financial services, they may be able to plan for the future and make investments in their education or career, leading to increased productivity in the long run. SHRM states that 80% of employers report that financial stress among their employees is negatively impacting their performance and is costing them nearly half a trillion dollars per year. Investing in your employees' financial wellness will not only give you a more productive workforce but save you tons of money too. It's a win-win. (Reilly, 2020)
Employers who make employee well-being a priority see 11% lower turnover, as reported by Mercer's 2017 National Survey of Employer-Sponsored Health Plan. Additionally, when organizations promote financial inclusion, they can attract a more diverse workforce and be more responsive to the needs of the communities they serve. (Purcell, 2020)
How to Promote Financial Inclusion in Your Organization
Promoting financial inclusion in the workplace can bring many benefits to organizations and their employees. Here are some steps that organizations can take to promote financial inclusion:
- Offer financial education and resources: Organizations can provide employees with access to financial education and resources, such as financial literacy classes or online financial education platforms. This can help employees to better understand financial services and how to use them effectively.
- Provide access to financial services: Organizations can work with financial service providers to offer employees access to financial services such as savings accounts, credit, and insurance. This can help employees to better manage their money and plan for the future.
- Implement on-demand pay: On-demand pay can be a powerful tool for promoting financial inclusion within an organization. On-demand pay allows employees to access their earned wages sooner, which can help employees better manage their money and avoid financial hardships.
- Encourage savings and investment: Organizations can encourage employees to save and invest by providing access to retirement savings plans or other investment options. This can help employees to plan for the future and achieve long-term financial security.
- Create a financial inclusion policy: Organizations can create a financial inclusion policy to ensure that all employees have access to financial services and that the organization is committed to promoting financial inclusion.
- Measure and track progress: Organizations can track progress and measure the impact of their financial inclusion initiatives. This can include monitoring employee participation in financial education and resource programs, tracking employee access to and usage of financial services, and surveying employees to gauge the effectiveness of the organization's financial inclusion efforts. This data can be used to identify areas of success and areas for improvement in order to continually improve the organization's financial inclusion initiatives.
On-Demand Pay and Financial Inclusion
On-demand pay is a powerful tool that organizations can use to promote financial inclusion within their own workforce. On-demand pay allows employees to access their earned wages sooner, rather than having to wait for a traditional pay cycle. This can provide employees with the flexibility to manage their money more effectively and avoid financial hardships.
One of the key benefits of on-demand pay is that it can help employees to manage their cash flow better. Traditional pay cycles often result in employees experiencing a "financial cliff" at the end of the month, where they have little or no money left until their next paycheck. On-demand pay can help to alleviate this issue by providing employees with access to their wages as they are earned, rather than having to wait for a traditional pay cycle.
On-demand pay can also help employees to avoid financial hardships such as high-interest loans or financial penalties. When employees have access to their earned wages sooner, they are less likely to resort to high-cost financial products and services to meet ends. This can help employees to avoid costly financial penalties and interest charges, and can improve their overall financial well-being.
On-demand pay can be beneficial for employees who do not have a direct deposit as it can be accessed through digital means, such as a mobile device or computer, and eliminates the need to go to a location to receive their paycheck physically. This can be particularly useful for employees who may not live close to their employer’s physical location or for employees who are working remotely.
Dickler, J. (2022, December 15). Amid high inflation, 63% of Americans are living paycheck to paycheck. CNBC. Retrieved January 19, 2023, from https://www.cnbc.com/2022/12/15/amid-high-inflation-63percent-of-americans-are-living-paycheck-to-paycheck.html
Purcell, J. (2020, February 11). Employee Well-Being: A New Perspective On ROI. Forbes. Retrieved January 20, 2023, from https://www.forbes.com/sites/jimpurcell/2020/02/11/employee-wellbeing-a-new-perspective-on-roi/?sh=1b448e36574d
PwC. (2022). 2022 PwC Employee Financial Wellness Survey. PwC. Retrieved January 19, 2023, from https://www.pwc.com/us/en/services/consulting/business-transformation/library/employee-financial-wellness-survey.html
Reilly, C. (2020, September 9). Crisis: Worker Financial Stress Costs Employers Billions Of Dollars Annually. Forbes. Retrieved January 19, 2023, from https://www.forbes.com/sites/colleenreilly/2020/09/09/why-financial-wellbeing-at-work-is-more-important-than-ever/?sh=7b92988178dc