Inclusive finance projects are specific initiatives or programs to achieve financial inclusion. The major funding for such projects comes from impact investing. You can find the impact investors, funding mechanisms, and other details here, promoting financial inclusion.
Financial inclusion is important for economic and societal growth as it promotes affordable financial services for all. Impact investing focuses on positive societal and financial inclusion through projects to bring financial services to underserved people or communities.
The impact investing market in the US is growing, and it is expected to reach $68.55 billion in the next five years with a growth rate of 18.2%. Around 4.5% of people in the US do not have access to banking services or have never opened a bank account.
What impact investors are funding key inclusive finance projects?
The approach of impact investing is also getting popular in the US to enhance financial inclusion through investment in various projects. Many players in the country are investing in financial inclusion, such as:
- US Banks:
- The US banks support the initiatives focused on enhancing financial inclusion and community development.
- The investment generally targets underserved communities and encourages awareness of financial education to bridge the financial gap.
- JP Morgan:
- JP Morgan launched JPMorgan Chase’s Impact Finance Advisory team to offer capital solutions and tools to advance the firm’s impact projects.
- They invest their capital through an IFA, where the investment focuses on financial inclusion and other development for the underserved communities.
- Citi Impact Fund:
- The Citi Impact Fund focuses on investments in startups that work to solve the issues of the communities and focuses on their development, financial health, and others.
- They aim to reach a $1trillion commitment to sustainable finance in the next five years and reach communities from all over the world.
- CDFIs:
- The Community Development Financial Institutions are a great force driving the force of financial inclusion for the unbanked communities and introducing affordable financial products to them.
- Many US-based CDFIs invest in financial inclusion and provide the capital to projects.
Many foundations in the US are investing to ensure that everybody has access to financial services and products, such as CitiFoundation, Goldman Sachs Urban Investment, etc.
How does impact investment work for inclusive finance projects?
You can understand how impact investing operates for the inclusive finance projects in the US or globally below:
- The impact investment first looks for the gaps regarding the financial issues, such as small businesses in low-income areas, minority-owned entrepreneurs, or projects to include unbanked individuals.
- Afterwards, the investors look for collaborators or partners, such as CDFIs, Fintech startups, or minority deposit institutions, to fund the financial inclusion projects.
- The investors can fund the projects through loans, equity, social bonds, blended finance, green bonds, microfinance investments, or others.
- The investors generally track the outcomes of the investment to ensure it completes the goals or achieves what the investment was made for.
What are the inclusive finance projects in the US?
Many inclusive financial projects in the US are going on that are run by governmental agencies, private institutions, or foundations. Here you can find a few examples of such projects:
- ACCESS initiative:
- The National Credit Union Administration initiative ACCESS helps with policies and programs for financial inclusion.
- The initiatives focus on financial literacy, employment needs, and financial services for the unbanked and underserved communities.
- Project REACH:
- The Office of the Comptroller of the Currency started the Project REACH in 2020 to remove the barriers to financial inclusion.
- The project focuses on expanding the credit and banking services, advancing digital inclusion in financial services, and supporting minorities.
- FDIC initiatives:
- The FDIC has taken several initiatives to stabilize the financial system and improve the financial inclusion rate in the nation.
- The Trust Through Transparency initiative of FDIS focuses on fostering trust of people in the banking system.
- The Alliance for Economic Inclusion’s initiatives partner with local leaders from community organizations, financial institutions, and government to connect users with financial products.
Investors make an impact investment with the hope of gaining better results, which include better results for society and the environment. It is different from traditional investment, where the main goal is a positive return or gains.
Many government and private companies’ initiatives are going on to provide financial services for everybody and reduce the unbanked individual rates in the country.
