Financial inclusion is typically defined as the proportion of individuals and firms that use financial services. In broader policy terms financial inclusion can mean to ensure that all individuals and enterprises that need financial services have access to and control over a full range of adequate financial products, delivered effectively and responsibly by financial institutions, and that they have the appropriate knowledge and skills to use these products. Not only to access financial services but also the regular usage and quality of the financial services are important aspects to achieve financial inclusion. As a concept financial inclusion entails appropriate access to financial services, financial consumer protection and financial capability all together.
Today an increasing body of evidence shows that appropriate financial services can help improve households’ welfare and spur small enterprise activity. There is also evidence to show that economies with deeper financial mediation tend to grow faster and reduce income inequality. This means that financial inclusion can be a key driver of economic growth and poverty alleviation as well as boosting shared prosperity, as access to finance can boost job creation, reduce vulnerability to shocks and increase investments in human capital.
The World Bank Global Financial Inclusion (Global Findex) Database indicates that 2.5 billion adults globally—about half the total adult population—have no access to financial services delivered by regulated financial institutions. While account penetration is nearly universal in high-income economies, with 89 percent of adults reporting that they have an account at a formal financial institution, it is only 41 percent in developing economies. In Turkey 58 percent of the adults reporting that they have an account at a formal financial institution. Although account penetration is more advanced in Turkey compared to peer developing countries, still an important part of the population remain unbanked with 42 percent of the adults reporting that they do not have an account at a financial institution.
About the Conference
World Bank, in cooperation with Undersecretariat of Treasury, Banking Regulation and supervision Agency (BRSA), Capital Markets Board (CMB) and Borsa Istanbul organized a conference on financial inclusion on June 3-4 in Istanbul. The objective of the conference was to facilitate the discussion on financial inclusion among stakeholders in Turkey, support Turkey in designing financial inclusion policies, inform policy makers about successful international experiences and support Turkey’s preparations for G-20 presidency in 2015. Topics discussed during the conference included the G-20 agenda on financial inclusion, financial inclusion strategies, increasing access, usage and quality of financial services for individuals and enterprises, women's access to financial services, Islamic finance, and alternative delivery channels for increasing financial inclusion.
Conference provided an opportunity for the government institutions, private sector and international representatives to discuss various aspects of the financial inclusion in Turkey. Turkish government has been prioritizing the financial inclusion as a policy objective in the development of the financial sector. Government has issued a Financial Inclusion Strategy in June covering access to financial services, financial consumer protection and financial education pillars along with action plans in consumer protection and financial education. In addition, the new Consumer Protection Law with a financial consumer protection section, the new Law on Payment and Security Settlement Systems, Payment Services and Electronic Money Institutions, as well as the secondary regulations of the Capital Markets Law and Leasing, Factoring and Financing Companies Laws and fully operationalized credit bureau are all improving the legal and institutional framework in the Turkish financial sector. Chairman and Heads of BRSA, Treasury, CMB and Borsa Istanbul have presented these reforms and their presentations attracted great attention from private sector and triggered discussion.
The role of the government in improving financial inclusion is critical and mainly focusing on setting up an appropriate legal and institutional framework and addressing market failures . But an equally important element is a strong private sector engagement and leadership. To address the challenge of financial exclusion, financial services need to be delivered sustainably and at scale. This requires local resource mobilization and responsible market development. In the end, for responsible market development to be sustainable services have to be viewed as valuable by consumers and economically viable by providers.
Conference was an evidence of strong private sector engagement and leadership. Many financial sector companies such as ING Bank, Ak Bank, Garanti Bank, TEB, Interbank Card Center (BKM ), as well as mobile operators such as Tukcell and Vodafone have presented their services to reach underserved segments of the population, educate financial consumers, enhance woman’s banking, SME banking, microfinance and mobile applications. These companies were already providing services to improve financial inclusion and were eager to expand their services with the new regulatory improvements.
Participants of the conference also benefitted from international experiences and developments in the global agenda. As it is well known financial inclusion became one of the top priorities in the international reform agenda. At the G20 Summit in Seoul, the Leaders of the G20, recognizing financial inclusion as one of the main pillars of the global development agenda, endorsed a concrete Financial Inclusion Action Plan and subsequently announced the establishment of the Global Partnership for Financial Inclusion. Many international organizations including World Bank, UN and OECD has devoted resources and committed to help countries improve financial inclusion. More than 50 countries have set financial inclusion policies as a priority in their reform agenda, developed financial inclusion strategies and committed to targets for increasing financial inclusion. During the conference international participants shared their own experiences with Turkish counterparts. Presenters from the World Bank, IFC, CGAP, OECD, Alliance for Financial Inclusion (AFI), Islamic Research & Training Institute (IRTI), European Central Bank (ECB), Russia, United Kingdom, Canada, Pakistan, WSBI/ESBG introduced country cases, global comparisons, best practices and international standards.
Turkish financial sector has shown impressive growth during last decade which has resulted in greater financial intermediation and inclusion. Building on this success policy makers in Turkey are determined to further develop financial sector and address some remaining challenges by the new structural reforms. In spite of the successful performance in the last decade, low levels of savings, underdeveloped non-bank financial sector including leasing and factoring limiting alternative channels for SME finance, and underdeveloped capital markets for longer term funding are some areas of focus for further development. In addition, although account and credit card penetration in Turkey is higher than in comparable peers formal savings and borrowing from financial institutions are lower. A further breakdown of the data shows that the difference between men and women in the degree of financial inclusion in Turkey is significantly high as well. These areas will be important to address unbanked and under-banked segments in the population. Finally, especially SMEs and entrepreneurs can significantly benefit from improvements in the bankruptcy and secured transaction regimes.
Overall conference provided an opportunity to initiate a healthy and productive dialogue between policy makers, private sector and international community to further improve the financial inclusion in the country. Policy dialogue on financial inclusion can also support and contribute to Turkey’s G-20 presidency starting by 2015.