By Selina Zhan

Financial literacy refers to the ability to make informed financial decisions through acquiring relevant knowledge and skills such as investing, budgeting, and asset management. Individual financial literacy is crucial as many governments around the world are unreliable when it comes to providing adequate and stable financial support to their civilians. Additionally, as institutions become more and more exclusive with their increasingly complex products, the need for financial literacy grows, especially as the cost of retirement rises each year. While financial exclusion is internationally prevalent, exclusion worsens in low-income and least-developed countries where lack of infrastructure and proper education form a high barrier to entry for average customers looking to gain access to suitable, affordable financial services. Exclusion also primarily targets historically marginalized groups including immigrants, manual laborers, women, and certain minority races. This targeting of already disadvantaged populations through tactics such as predatory lending and redlining creates a vicious cycle of generational poverty that is rarely escaped by either families or entire communities. This paper examines four critical aspects of financial exclusion: (1) the role of informational access in promoting financial inclusion on two sides, from both the perspective of the lender and potential borrowers or consumers of financial products; (2) the persistent gender disparities in financial inclusion, often rooted in societal expectations and traditional household roles; (3) the relationship between global banking institutions and financial exclusion, uncovering how underprivileged communities are constantly being exploited when profit could be made through ethical financing systems instead; and (4) the impact of digital finance as a modern solution, providing new access points to financial services through mobile banking and fintech yet still facing the challenges of regulation and obtainability. Addressing and breaking down financial exclusion requires a multi-faceted approach that starts with addressing systemic causes of exclusion (lack of financial information, gender inequalities, and the exclusionary practices of global banking systems) and continues with improving accessibility through widespread informatory resources, variety in financial product offerings, and implementation of digital finance.

Source SSRN