There is some disagreement about the exact definition of “financial inclusion” and how it differs from microfinance. But I thought it might be useful to outline how we at Lendwithcare view the differences and what these mean for our entrepreneurs:
- “Financial inclusion” refers to providing people with a full range of financial services. And although different products do exist under microfinance (such as credit, savings, insurance and remittances), the microfinance industry has traditionally been dominated by credit. Therefore the term “microfinance” has incorrectly become synonymous with only offering microcredit.
- “Financial inclusion” means ensuring we not only provide a range of products but that those products are of high quality. Those products should be appropriate, and specifically designed to meet the needs of clients. It is also important to ensure the clients have the capability to choose and use these products. Financial literacy is also therefore crucially important.
- Finally, “financial inclusion” means that these services can be accessed conveniently and from a range of providers: including, but not limited to, banks, microfinance institutions and telecommunications companies.
- Our partners offer their clients more than just microcredit. In fact, it is an essential condition to becoming a Lendwithcare partner that in addition to offering access to credit, our partners must offer other services such as savings facilities, business training, insurance, remittances etc. Many go far beyond this by providing their clients with access to the market and support and training around implementing environmentally-friendly business practices. You can read the list of full services our partners offer here.
- Our partners are required to follow CARE’s Code of Conduct in microfinance and are supported by CARE to acquire the Smart Campaign certification and sign up to their Client Protection Principles.
- We are ensuring that the services we help provide are having a positive impact on poverty. Many of our partners already measure and monitor the social performance of their clients and we are working with others to conduct rigorous and thorough impact assessments.
So it is likely that you will continue to hear the two terms being used interchangeably (including by us!), but I hope this blog helps to clarify our understanding of the terms. In honour of Financial Inclusion Week 2020 and everything it is trying to achieve, I would thoroughly recommend joining the movement and visiting www.lendwithcare.org today.
By Nancy Thomas, Senior Lendwithcare Executive