Financial inclusion vital

Focus, Normal
Source:

The National, Monday August 31st, 2015

 By Rex Kiponge

PAPUA New Guinea is one of the fastest growing economies in Asia Pacific region and the world for that matter.

Despite this high economic growth, the bulk of the country’s population that lives in the rural areas seem to miss out on the impact and benefits of this growth.

As a result, the migration of rural people to the cities and towns has seen a dramatic increase in the urban poverty and related social problems.

Increasing globalisation brings tremendous opportunities but this growth will not be beneficial to 

the country if all of its citizens are not participants but mere spectators. 

There is evidence of the widening gap between the people in the major urban centres and those that live in the peripheral towns and rural communities. 

One of the reasons of this disparity is financial exclusion, which can be bridged through the inclusion of the country’s rural sector in the financial system.

Financial inclusion is a process of ensuring access to financial services and timely and adequate credit where needed by the vulnerable group such as weaker sections and low income groups at an affordable cost. 

Financial exclusion on the contrast is the divide with an increased range of personal finance options for a segment of high and upper middle income population and a significantly need for development strategies that touch all lives, instead of a selected few.

For developing nations such as PNG, the era is of inclusive growth and the key for inclusive growth is financial inclusion. 

Financial inclusion or inclusive financing is the delivery of financial services, at affordable costs, to sections of disadvantaged and low income segments of society. 

There have been many formidable challenges in financial inclusion area such as bringing the gap between the sections of society that are financially excluded within the ambit of the formal financial system, providing financial literacy and strengthening credit delivery mechanisms so as to improvised the financial economic growth. 

A nation can grow economically and socially if its weaker section can turn out to be financially independent.

Many countries have achieved high growth rates over the past decade, and many aspire to structural transformation, but the good performance has not translated into significant poverty reduction and shared prosperity. 

It has yet to provide low-income households and other vulnerable groups enough opportunity to improve their living standards. 

In terms of economic indicators, some Pacific countries including Papua New Guinea, were performing well, but the young, low-income earners and other vulnerable groups had been excluded 

from employment opportunities and other means of generating livelihoods to enable them to exit poverty.

The concept of inclusive growth is multifaceted and has financial inclusion as one of its main building blocks. 

For sustained and inclusive development to thrive, a great deal of innovation and thinking is needed to ensure that appropriate financial services and proper infrastructures are put in place for the benefit of the rural communities and other vulnerable groups. 

The O’Neill Government must put more emphasises on financial literacy which is an important tool of financial inclusion. 

The inclusion of financially and socially excluded disadvantaged needy, underprivileged and poor people of our country into the mainstream is important for PNG’s growth.

Although we are developing faster, the literacy level in the country is well below due to lack of proper infrastructure and education systems, leading to social and economic vagaries that the country suffers resulting in vast majority of the people excluded from any kind of financial inclusion.

Exclusion broadly can be said of an individual deprived of having any facility to earn an income, safeguard the same, transfer or invest for a further benefit protect from risks etc. 

Inclusion is to help him/her acquire all these facilities.

We live in the money world where monetary power can open almost all doors.

When the bulk of the country’s people cannot open the doors because of financial exclusion, there is an imminent need to include them and bring them into the economic picture. 

The first and most important action is to teach our people through financial literacy programmes. 

However, the process of financial literacy is not as easy as it sounds. 

With vast population, different languages and cultures, with illiteracy as a major stumbling block this is indeed a challenge. 

We need to accept this challenge and look at ways and means to make the people financially literate.

The Government, several donor partners and other non-governmental organisations (NGOs) have taken up this taski, which really gained momentum when the Bank of Papua New Guinea stepped in and gave directions and guidelines to all commercial banks towards a more practical financial inclusion pathway. 

Financial literacy combined with technology is becoming a major aspect of this initiative.

Studies conducted in other parts of world, especially developing countries, have more or less concluded that financial literacy is a crucial part of the financial inclusion.

In the wake of rapid invasion of technology across the world it also becomes imminent that ICT (information and communications technolog) plays an important role in the financial inclusion and it is strongly advised that the financial literacy curriculum includes technological interventions in a bid to reach quicker and cost effective as also secure financial products and services to the needy.

As a Public Private Partnership (PPP) programme, corporate entities can be brought into the fold through their social responsibility commitment to fund such work.

The Government through the Education Department must play a lead role to involve schools and colleges to start the financial literacy to enable children to understand the system at an early age.

Financial inclusion is not a one-time effort; it is an ongoing process. 

It is a huge project which requires concerted team efforts from all the stake holders – the Government, financial institutions, the regulators, the private sector and the community at large. 

From the sporadic attempts of today dispersed across the nation, it should gather momentum and develop into a focused and effective movement. 

For this is to be achieved requires the passionate involvement, dedication and commitment of all stake holders.

At the same time, technology plays a vital role in bringing about integration in society of all social and economic classes. 

Financial inclusion can empower even the poorest person and bring about a dramatic change in his or her fate.

 

 


  • Rex Kiponge is a freelance consultant. You can contact him via email on [email protected]