Each year on August 12, the world celebrates International Youth Day. This year’s theme, “Youth Building Peace,” underscores the fact that youth have a vested interest in building peaceful societies, because their safety and livelihoods depend on it. The 2017 Global Peace Index reports that in 2016, the global economic impact of violence was $14.3 trillion — or 12.6 percent of global GDP. That amounts to $5.40 per person, per day, globally. If global violence decreased by a mere 10 percent, $1.43 trillion in resources could be diverted to more economically productive investments and activities.
What can today’s youth (and others) do to improve peace and security? The Global Peace Index Report outlines eight pillars of peace:
- Sound business environment.
- High levels of human capital.
- Low levels of corruption.
- Free flow of information.
- Good relations with neighbors.
- Acceptance of the rights of others.
- Well-functioning government.
- Equitable distribution of resources.
While financial inclusion is not explicitly included as a pillar on the list, it strengthens and supports many of the pillars that are listed, as indicated in the following.
Financial inclusion helps build a more educated workforce
An educated workforce is a critical component of a peaceful and prosperous society. Yet after many years of decline in the number of children who are out of school, progress has slowed. Currently, 264 million children and youth under age 17 are out of school. The high cost of education, particularly for secondary school and beyond, is keeping many young people out of school. Families across the developing world need safe and convenient ways to save, make payments and borrow money for education. As noted in a previous blog post, digital finance is stepping up to that challenge and is creating new products that can enable parents to keep their children in school.
Beyond helping to keep youth in the classroom, financial services can help to expand access to education technology (edtech) products that offer tutoring and test preparation services and eLearning courses. These products can enhance the classroom experience; they can even reach displaced populations that do not have access to traditional schools. Mobile money can play an important role in their business models. Services providers who use mobile money to facilitate small payments from a geographically distributed group of customers often find that using mobile money is more financially viable than handling cash. For poor customers, the ability to make small payments makes these products more attainable.
In addition to the economic benefits of education, the Global Partnership for Education reports that if the enrollment rate for secondary schooling is 10 percentage points higher than the average, the risk of war is reduced by about 3 percentage points. Education is thus a win-win for a peaceful and prosperous society, and financial inclusion efforts can, and should, play a role in making education accessible to more people.
Financial inclusion can improve health and nutrition
Access to goods and services that support healthy lives can reduce preventable deaths and help young people reach their potential. Yet access to health care, clean water and nutritious food is a significant financial challenge for low-income households. Financial services can help poor people to access health care by enabling them to manage their health and nutrition expenses and to overcome health-related emergencies. For example, health savings accounts and microinsurance products can help low-income people access preventative and emergency health care and thereby avoid slipping deeper into poverty. Microfinance programs that finance sanitation products or clean water connections also foster safer living conditions. For example, Water.org is a nonprofit that provides sustainable financial solutions that empower people with access to the water and sanitation solutions they need. It has supported more than 1.4 million WaterCredit loans that benefitted 6 million people across 10 countries.
Digital financial services are introducing a new wave of products and innovative business models to the health and nutrition sectors. Digital health savings accounts like M-Tiba in Kenya allow customers to contribute to an account that can be used at designated health centers. Water kiosks, like those offered by Grundfos, enable customers to use mobile money to access clean water on a pay-per-use basis. And Safe Water Network is testing digital water payments in Ghana, with the expectation that this service will lower operating expenses, increase funds for water station maintenance and improve the sustainability of the service.
Financial inclusion is just one of several components needed to achieve the peace and security everyone deserves. Those of us working toward financial inclusion need to continue to engage with the broader development community so that, together, we can make a difference in the lives of poor people. We need to align our work with broader global goals, leverage partnerships and support innovation across sectors. You are invited to leave comments that reflect your own thoughts on how financial inclusion can support a more peaceful world.