Financial inclusion a critical support to economic growth

If just 7% of Australia’s financially excluded were able to improve their wealth position, the nation’s annual gross domestic product (GDP) could increase by a staggering $19.7 billion, new research revealed today.

Household wealth could increase by as much as $50 billion over time, and could also lead to a predicted $2.6 billion saving in government health, welfare and justice spending.

The Microfinance and ‘Inclusion’ and Economic Growth Report was commissioned by Good Shepherd Microfinance and conducted pro-bono by Strategic Project Partners (SPP).

The report estimates the compelling opportunity presented by initiatives including financial inclusion – such as a 1.1% reduction in the nation’s crime rate, delivering potential cost savings of roughly $38 million.

Unveiling the report at the National NILS Conference 2014 in Brisbane, Good Shepherd Microfinance CEO, Adam Mooney, warned greater investment in microfinance was a critical component of economic and social progress in Australia.

“More than 17% of Australia’s adult population – or one in six people – have no access to basic financial services such as a bank account, insurance or a minimum amount of credit,” Mr Mooney said.

“This new report adds to the mounting evidence demonstrating profound benefits for both individuals and society generally if we can move even a small number of people away from financial hardship towards resilience and self-sufficiency.

“It is clear increasing basic financial access will reduce government spending on health, welfare and crime. It will improve productivity, employment and consumption, which all work towards boosting GDP.

“Right now both at State and Federal level we are seeing governmentss facing huge budget challenges.

“In fact some of the initiatives and savings outlined in State and Federal budgets will have a significant impact on the people we work with and it is highly likely there will be increased demand for microfinance and financial advisory services in the coming years.

“If we embrace this principle of financial inclusion the flow on effect will free up government funding, allowing greater budget allocation for areas such as education, housing and infrastructure.”

Mr Mooney said well developed and implemented financial system reform, along with employment and enterprise policy improvements were vital.

“We have set an audacious goal to reach one million clients by 2018. We are committed to working with government and business to develop innovative solutions to address the issues of financial exclusion,” he said.

“Microfinance helps people on low incomes to become financially independent and achieve substantial social and economic improvements.

“Our programs have reached more than 140,000 people previously excluded from mainstream banking access to loans and savings with repayment rates consistently above 95%.”

SPP Managing Partner Phil Noble said the conservative research assumptions provided a useful starting point to understanding the broad range of economic benefits that can come from programs in this area, including financial inclusion.

“This report shows us that there are major benefits from increasing financial inclusion when it comes to breaking the negative cycle for many excluded households,” he said.

“It challenges us to think about ways that we can enhance access to the basic financial services that we all take for granted.

“More study, and a deeper survey following the paths of those that are given greater access to financial services, would be invaluable in understanding the pay-off that programs such as those offered by Good Shepherd Microfinance can deliver.”

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