ABSTRACT
Financial inclusion is the situation in which all working-age adults have effective access – i.e., usage option – to financial products such as payments, savings, credit and insurance from formal service providers. Financial inclusion improves social well-being and alleviates poverty. The usage of formal financial services buffers individuals against liquidity shocks, allows for saving with safe financial tools, obviates the unnecessary liquidation of illiquid investments and channels savings from unproductive liquid assets toward investments in productive capital. The literature on economic development proposes different mechanisms through which financial access affects economic development. The pure model facilitates the highest degree of engagement between individuals and the formal financial system since the retail stores enter into direct agreements with banks to offer financial services on their behalf. Hybrid banking correspondents offer financial services on behalf of non-bank electronic money issuers which, at the same time, have agreements with banks guaranteeing indirect or potential access to the formal financial system.
