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Life, Liberty and Access to Credit

John Hope Bryant says that "financial literacy is the new civil rights of today". He argues that every young person should be given the right to a basic bank account at birth. Others who campaign against poverty, notably Nobel-laureate Muhammad Yunus, have argued that access to credit is a human right.

How should we understand these arguments? It might make sense to talk in more general terms of a person's right to be financially included, or of a human right to access a range of high quality financial services at reasonable costs. Philosophers and lawyers disagree about the nature and importance of human rights, but there are three questions that we should ask about the purported human right of financial inclusion. First, what sort of right is this? Second, who is responsible for meeting the obligations that the exercise of this right will incur? Third, is the language of human rights the most effective way of promoting the goal of financial inclusion?

How would the right to financial inclusion compare with other types of human rights? There are some human rights that provide protection for the person against physical or mental abuse: the right not to be subjected to arbitrary arrest and imprisonment, the right to a free trial, the right not to be tortured, etc. Another set of human rights enable citizens to participate in the political life of their community: the right to free speech, the right to vote, the right to form political associations, etc. A third set of human rights help to ensure a basic standard of well-being for all: the right to education, the right to healthcare, the right to employment, etc.

The right to financial inclusion does not look very similar to rights of personal protection, which tend to be negative; that is, they are rights not to be treated in a certain way. However, it might be a civil right - part of what it means to be a citizen - if we think that access to the financial system is crucial to effective participation in the life of the community. Or it might be a welfare right - part of what it means to achieve an acceptable standard of well-being - if we think of financial inclusion as part of living a good human life.

If we opt for the civil rights model then we would expect governments to take responsibility for ensuring this right is guaranteed for all community members, in the same way that they are responsible for ensuring that the legal system and the electoral system are accessible to all. This would imply a significant socialization of the financial system, with governments running far more of the financial infrastructure than they currently do.

Alternatively, if we opt for the welfare rights model then there seems no reason to think that the private provision of financial services would cease to be the norm, as it is, for example, in the provision of employment. But in this case, private sector providers would be under strong obligation to meet the standards of service provision set by the government, and the government would provide some form of safety net for those whose needs are not met by the mainstream.

However, this implies that communities with stronger and more reliable governments will be much better placed to provide inclusive financial services. In communities where government is weak and inconsistent, the provision of inclusive financial services is likely to be far more patchy. Those most in need of better financial services are therefore those least likely to get them.

In particular, the provision of financial services to the young - the basic education in financial literacy that John Hope Bryant advocates - is unlikely to be of high quality in communities that are already struggling to provide their children with adequate healthcare, education and employment opportunities. Nor is it clear that poorer communities should reallocate resources from health and education budgets in order to provide better financial services. This is not to say that financial literacy is not an important issue; simply to say that it is not the most important issue.

Using the language of human rights adds a certain urgency to the debate about the need for financial inclusion. It also challenges the complacent assumption that access to high quality financial services should remain a privilege of the rich. But, as I have argued elsewhere, "human rights are political claims, which citizens make against governments and against institutions that have been established by governments, such as courts and tribunals." It follows that where governments are weak or ineffective, so too the promotion of human rights will be weak and ineffective.

Perhaps Muhammad Yunus would do better to consider the success of his own company - the Grameen Bank in Bangladesh - as a model for improving the provision of financial services to the poor. There is plenty of evidence from all over the world that private sector microfinance initiatives - or "bottom of the pyramid businesses" - are the best hope for better quality financial services reaching the poorest and most excluded people. Financial inclusion might therefore be better thought of as a challenge for innovative businesses rather than as an obligation for governments.

© Mark Hannam June 2010