Models of Including Financially Inactive Population into the Financial System
14 Pages Posted: 10 Sep 2008
Date Written: June 3, 2007
Raising money and directing it into savings is the most important passive task in banking. Restrictive monetary policy makes it increasingly difficult for banking institutions to take loans, thus they turn to the general population as a money source. Their interest is partly served through inclusion of financially inactive population. As the new legislation will correct the current illogical situation (some deposit institutions have not been under control of the central bank), this will eliminate the unfair competition which is at the moment existing in the banking system. At the same time, the operation of a new form of non-profit deposit institutions, i.e. credit unions, will be regulated. With solidarity and common interest as the basic tenets of their operation they can be attractive to this particular segment of population. The paper explores and proposes some possible models and ways of including the financially inferior population into the financial system.
Keywords: financial system, financially inactive population, money source, solidarity, common interest, credit union
JEL Classification: E4, E52, R2
Suggested Citation: Suggested Citation