What does “financial exclusion” mean?

 A person is considered financially excluded when he/she has either no access to some or all the services offered by mainstream financial institutions in his/her country of residence or does not make any use of these services. A distinction is made between access to services of mainstream financial institutions and informal ones. The financial services in question fall under the following four areas: transaction banking, savings, credit and insurance services.

As European societies move more and more towards economies relying on virtual money, simple tools such as a credit card and a bank account to receive one’s pay have become pre-requisites for many activities of day-to-day life.

A lack of access to these tools and services and/or the absence of use of these represents a serious obstacle to a person’s economic and social integration into society.

• Access to transaction services has become fundamental in today’s societies: people without any bank account are referred to as ‘unbanked’, while those who make little or no use of the services they could have access to, are generally described as ‘marginally banked’.

• Similarly important, access to credit has become necessary for various aspects. A distinction has to be made between people who are refused any access to credit by lenders, that is ‘credit excluded’ people, and those who can only access credit through loan sharks at unaffordable rates.

• Access to insurance services has increasingly come under scrutiny. Though it is, in some cases, compulsory to have insurance (as for example for a car), it has not yet been defined what kind of insurances are considered essential when talking about financial exclusion.

• Finally, access to savings services is usually considered less of a problem in European societies, since it concerns far less people than the three types of services mentioned above. Still, it remains a problem for some people who either lack the necessary documents to open a deposit account or who do not see the point in opening one and have thus to be taken into consideration.

The study  of the Réseau Financement Alternatif establishes a list of basic financial services considered essential for one’s day-to-day life:

• Holding an account to receive one’s income
• Having a transaction bank account as a means of making payments
• Owning a savings account in order to be able to store money
• Enjoying unsecured credit to manage temporary cash shortages or unexpected expenses

Sources: Financial services provision and prevention of financial exclusion, Réseau Financement Alternatif report