Some Thoughts on the Ethics of Financial Inclusion

> Posted by Sonja Kelly, Director of Research, CFI

In ethics, there is a commonly shared thought experiment called the trolley problem. You are standing next to trolley tracks, and a trolley is coming. In its current trajectory, it is going to run over five people who are tied to the tracks. You could divert the train using a lever in front of you, but then the trolley would hit one person tied to the tracks. Do you become active in this scenario and sacrifice the one person? Or do you abstain from involvement and watch the five people get run over?

I don’t mean to be morbid here, but this is a thought experiment that I have been mulling over when it comes to financial inclusion.

Instead of people tied to tracks, I think of things that financial inclusion unlocks or restricts in the lives of individuals. If the world continues as is, and we don’t pull the “financial inclusion” lever, people are going to experience inequality of opportunity, financial illiteracy, a limited set of financial tools, and maybe even continued poverty—and that would be extraordinarily unfortunate. A world without financial inclusion would be an unequal and discouraging place from my perspective.

But as we enable financial inclusion, we must admit that there are also good things that we may be restricting and bad things that we may be unlocking.

People who relied previously on social capital and informal financial services might find that decoupling their finances from their relationships weakens those relationships, for example. Or they might find that they no longer have repayment structures that are flexible and forgiving. Or they might find that they are enrolled in services that aren’t suited to them, perhaps because of coercive sales practices or because they didn’t fully understand the services when they signed-up.

As more commercial players enter the financial inclusion space, we may see the sector’s social mission diluted and the unlocking of negative effects. If we pull the financial inclusion lever and strengthen and enable nontraditional providers, we risk misuse of sensitive data, overindebtedness, and other unintended consequences. The financial inclusion lever could, and probably will, be responsible for eroding social capital and disrupting economic equilibrium.

On balance, I think financial inclusion is an extraordinary source for good. I’ve been advocating for financial inclusion for the past decade and I wholeheartedly believe in its value in the lives of individuals. However, there are things that we sacrifice when we push for financial inclusion. Understanding what those things are—and the value that they hold in the lives of individuals—is critically important to being responsible as we advocate for inclusion. Of course mitigating and even eliminating those sacrifices are part of what the Smart Campaign and others working to ensure responsible treatment of clients in the financial inclusion sector are all about.

But even beyond the goal of being responsible, understanding what financial inclusion makes people give up may make our industry better at creating products that fit well into people’s lives.

Image credit: McGeddon via Wikimedia Commons

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