Independent Research and Policy Advocacy

Client Empowerment through Creating a Full Financial Picture

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This post first appeared as part of CGAP‘s series on “Financial Capability and Bridging the Gap”.


Low-income households are faced with complex financial decisions almost on a daily basis. Incomes are uncertain and variable, and using meagre resources in the most efficient manner is difficult. At a functional level, households need only two things – liquidity, to meet their short term and long term requirements, as well as a mechanism for managing risk. However, the financial markets they face are incomplete and segmented, further complicating their choices. Thus, the problem is two-fold – that of access and capability.

Much of the innovation in the financial services industry today is focused on access. The growth of microfinance and other delivery channels such as mobile banking and agent networks in India has been unambiguously important for millions of poor households. However, the present channels of financial services delivery place the onus of choosing the best financial strategy on the consumer. The constant innovation in the financial services space makes it almost impossible even for the financially savvy to keep up. As a result, the consumer places high levels of trust in their financial service provider, who has little or no incentive to act in a manner that maximises the client’s welfare and few regulatory disincentives to refrain from selling products that are unsuitable.

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