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A group of 28 banks under the Principles for Responsible Banking (PRB) has founded a first-of-its-kind commitment to promote universal financial inclusion and foster a banking sector that supports the financial health of customers. This marks the start of a collective journey to accelerate action on financial health and inclusion, alongside some other critical topics of our times, such as climate change, nature loss and pollution.
This comes also as a follow-up to the PRB Collective Progress Report released in October, in which financial inclusion was one of the top three sustainability challenges identified by signatory banks as areas in which they can have the most impact – after climate mitigation and adaptation. Through PRB working groups, banks will also define measurements of success, share current best practices and successful approaches to financial inclusion to see how they might be further improved and adopted more widely across the sector.
Accelerating action to ensure universal financial inclusion and financial health of all individuals is of paramount importance in the fight against inequalities exacerbated by the COVID-19 pandemic. Globally, around 1.7 billion adults are without a bank account, which means they are unlikely to be able to save securely or to have access to emergency credit. Such inaccessibility to financial products and services makes it more challenging to be financially resilient in times of difficulty. It excludes people from opportunities to secure and maintain their standard of living and prevents them from taking steps to improve their financial health, such as long-term financial planning, access to credit and insurance.[1]
Signatory banks joining this leadership group will set targets within 18 months of signing. The targets will be supported by measures that seek to drive the necessary changes in one or more of these areas: financial and non-financial products and services, internal processes, data analytics and partnerships. The changes could include affordable bank accounts, accessible ways of making payments, suitable credit offerings, financial education, as well as improved credit and risk policies to mitigate over-indebtedness, among many others. Banks will publish their targets within 18 months and report on them annually thereafter, ensuring a high level of transparency of their progress.
The Commitment, which focuses on segments such as unbanked, formerly-banked and underbanked individuals, households, micro, small and medium-sized enterprises, will help banks contribute to creating and maintaining inclusive societies. In doing so, it will contribute to several United Nations’ Sustainable Development Goals, including addressing poverty (SDG1); gender equality (SDG5); decent work and economic growth (SDG8) and reduced inequality (SDG10). One recent study indicated that improving the availability and accessibility of affordable financial products and services could increase GDP in developing economies by up to 14% and in frontier markets by 30% [2].