How financial inclusion and access to financial tools can have a positive impact on one's mental health

Whether or not an individual or community has access to financial services has a significant effect on a range of socio-economic metrics.

Financial inclusion has been identified as an enabler of seven of the 17 United Nations Sustainable Development Goals, and the World Bank Group considers financial inclusion a key enabler to reduce extreme poverty and boost shared prosperity.

But financial inclusion can also have a profound individual effect. October is Mental Health Awareness Month in South Africa, prompting us to look at how financial inclusion can result in more confident, empowered and effective citizens.

Jonathan Holden, COO at digital wallet provider SOLmate, says “Financial inclusion is defined by the World Bank as access to useful and affordable financial products and services that meet the needs of individuals and businesses, and which are delivered responsibly and sustainably. We can therefore begin to understand how financial exclusion – the lack of access to these products and services – can have severe and lasting effects on people’s social and economic integration, and thus their mental health.”

Financial exclusion can create feelings of hopelessness, as individuals and families find it challenging to break free from economic vulnerabilities. People excluded from the formal financial system may resort to high-cost alternative financial services or fall into a cycle of debt. This chronic financial instability can significantly impact their mental health, causing anxiety, depression, and sleep disturbances.

Excluded populations are often targeted by unscrupulous financial actors. This can lead to financial exploitation, fraud, and predatory lending practices, which not only exacerbate financial instability but also contribute to immense stress and a sense of betrayal. The lack of access to financial education and counselling services further compounds the problem. Without proper guidance, individuals struggle to make informed financial decisions, perpetuating their financial exclusion and stress levels.

Financial exclusion perpetuates poverty and inequality, making it difficult for individuals and households to afford necessities like food, housing, and healthcare. The resulting social exclusion can lead to a deep sense of shame, embarrassment, and frustration, affecting mental well-being.

As individuals are unable to invest in education, skills development, businesses or health, their personal and professional development is hindered. This lack of opportunities can lead to feelings of stagnation and despair, contributing to poor mental health.

Mobile banking and digital wallets are technologies that are particularly well-suited to promoting financial inclusion. They allow individuals to access financial services through their mobile phones, which can be especially important for individuals living in rural or remote areas. Digital wallets allow individuals to save and transfer money using their mobile phones. These wallets can be used for a range of transactions, from saving and investing, paying for goods and services to sending money to friends and family.

SOLmate is a leading online payment platform that provides clients in South Africa with a comprehensive digital wallet facility and virtual cards. The platform offers secure online payment options and enables users to shop online safely and withdraw cash from various retail stores and ATMs. Through the provision of accessible, easy-to-use products, SOLmate is dedicated to driving financial inclusion and improving the lives of individuals and businesses across the region. SOLmate allows for free or low cost receipt and transfer of money and avoids the need for paperwork and branch visits.

Digital wallets also have the potential to empower small businesses through improved efficiency, expanded access to capital, and enhanced economic growth. With low-to-no transaction costs, mobile money provides a way for small businesses, particularly those in underserved areas, to access formal financial services without prohibitive overhead costs. It enables them to participate in the digital economy, establish financial identities, gain access to savings, credit, and insurance services and reduce the risk associated with dealing in cash.

Holden concludes, “Addressing the issue of financial exclusion is not only important for economic development but also for the mental health and overall quality of life of vulnerable populations. Initiatives that promote financial inclusion, provide access to affordable financial services, and offer financial education and support can help alleviate the negative mental health effects of financial exclusion while fostering a more equitable and prosperous society.”