Systems Theory of Financial Inclusion

This article presents the systems theory of financial inclusion as a theoretical framework to understand financial inclusion. It proposes a theory that revolves around the existing sub-systems that offer a service to only banked individuals and firms. It argues that financial inclusion outcomes can be achieved through existing sub-systems that require financial inclusion to be attained as a necessary condition before service can be offered. The subsystems place conditions that motivate unbanked individuals and firms to become financially included through account ownership or other means. When financial inclusion has taken place, it will have positive spillover effects on the existing sub-systems and the larger economic system while meeting the needs of financially included individuals and firms. The theory suggests that existing sub-systems rely on individuals and firms attaining financial inclusion before they can be served. This theory offers a remarkable addition to knowledge by introducing a new systems perspective to understanding what causes financial inclusion to take place. Policymakers and academics will find the theory useful in understanding the factors enabling financial inclusion and the obstacles to financial inclusion.