Microfinance and financial exclusion

Financial exclusion is the inability of individuals, households or groups to access financial services in an appropriate form. Financial exclusion is either a cause or a consequence of social exclusion, or both. Access to financial services is essential for citizens to be economically and socially integrated in today's society. It is also a requirement for employment, economic growth, poverty reduction and social inclusion.

  • Access to transaction services: people without any bank account are referred to as ‘unbanked’. This distorts their access to broader economic opportunity and increases the risk of poverty. 
  • Access to credit: 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. Lack of access to credits impacts access to the minimum national standard of living and may stigmatize people.
  • Access to insurance services: it has not yet been defined what kind of insurances are considered essential when talking about financial exclusion. People excluded can’t protect their savings in a financial institution, or don’t want to do it.
  • Access to savings services: 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.

Causes and Consequences

Financially are excluded people with low income, part of a household with no wage earner, with less education, part of an ethnic minority, with migrant background, very old or very young, or women, are more likely to be financially excluded than others.

Several factors are considered major causes of financial exclusion in European countries:

  • Supply: for example, a financial institution’s criteria for accepting a client, the fees charged to access services, the requirements (e.g. risk assessment procedures), or the geographic location of the institution. 
  • Demand: the potential client’s priorities and concerns, as well as the cultural context he/she is living in. 
  • Societal factors: such as the liberalisation of financial services markets, or the level of income inequality, or societal changes (the rising number of single people and single parents), or the regulatory context and socio-economic policies.

Responses to counter financial exclusion

Market responses: A quick adaptation of the market to society’s needs can take place: e.g. the introduction of basic bank accounts in European countries, partnerships between banks and other organizations to reach a wider range of people, bank’s  own charters and ground rules regarding the provision of their services (such as in Belgium, France, Germany and the United Kingdom).

Regulatory responses: On the governmental side, the fight against financial exclusion is included in the National Strategic Reports on Social Protection and Social Inclusion elaborated by each country within the EU framework (e.g. access to a bank account). Some regulatory responses still need to be implemented (e.g. simplified soft loans, face-to-face counselling, or reinforcement services for debtor advice and guidance).

Source: Financial services provision and prevention of financial exclusion, European Financial Inclusion Network (EFIN).


To find out more, visit:

European anti-poverty Network 


The European Commission

VideoAccess to financial services – EU