Financial Inclusion, Reframed: What the Well-Being Literature Can Teach Us

The terms "financial health" and "financial well-being" are becoming more common in discussions around financial inclusion. And that is a good thing. They push us to go beyond traditional metrics - like whether someone has a bank account - and ask deeper questions. Are financial services helping people meet their needs? Plan for the future? Feel secure? Live with dignity? 

These are the kinds of questions we need to ask if we want financial inclusion to lead to real impact. 

Where's the well-being in financial well-being?

Most research until now has taken a rather narrow view of financial well-being without stepping back to ask: What are the different dimensions of financial well-being? What factors really contribute to it? And what does the word "well-being" actually mean? 

This last question is key. And there are decades of research in psychology and social sciences that could offer richer definitions than the ones currently used. How we define financial well-being is important as it shapes what we try to measure—and what we ultimately prioritize.

The World Health Organization reminds us that well-being is not just the absence of problems—it is about flourishing: physically, mentally and socially. If we apply that thinking to finance, it means looking at how people experience their financial lives over three key dimensions: material, psychological and social. 

Three dimensions of financial well-being

The financial well-being framework that I propose considers these three dimensions – material, psychological and social - to be integral parts of a holistic look at well-being.  The material dimension, which encompasses the financial means to meet daily expenses, the money set aside for emergencies and savings to accumulate a lump sum for a future purchase, is the most commonly used in existing definitions of financial well-being. 

Financial satisfaction, security and stress are all tied to the psychological dimension of well-being. Research shows that emotions and satisfaction are only part of the picture. There is also the importance of having goals and a sense of purpose, of working toward something meaningful. In many cases, these goals extend beyond the individual to the household or community. That is where the psychological and social dimensions intersect.

The social dimension of financial well-being is especially overlooked. A person’s financial situation affects the role they can play in their family, their household, and their community. At the same time, social expectations and norms influence how people view their own financial status. What are you expected to provide? To achieve? To contribute? All of these shape how satisfied someone feels about their financial life.

Feelings, goals and belonging: connecting financial inclusion to financial well-being

Here’s the disconnect: while financial well-being is increasingly treated as the end goal of financial inclusion, we’re still not fully connecting the two concepts. 

Our understanding of financial inclusion has evolved—especially with the rise of demand-side data. There is a greater focus on access, affordability and client protection. Usage now gets more attention too, and rightly so. Access alone won’t lead to change if people cannot or do not use the services in ways that meet their needs.

But we need to go further.

To make financial inclusion truly meaningful, we need to link it to financial well-being through the three dimensions in our framework: material, psychological and social. 

So how do we get there? First of all, we need to make sure that financial services and practices align with the goals people set for themselves. Their goals and motivations are deeply shaped by this framework’s three dimensions - through their personal motivations and social norms, as well as material needs. Combining these goals with appropriate financial management practices and the use of financial services is what can ultimately lead to a meaningful financial inclusion which can bring about financial well-being.

And how do we get to the point where people form their own financial goals and are empowered to work towards them through financial management practices? Taking another step back, we see that we need to go even deeper to understand the drivers of how people make financial choices.

The hidden forces behind financial decisions

The driving forces that bring about true financial inclusion go beyond access and affordability, tapping into psychological and social dimensions that shape behavior in powerful ways.  The use of financial services depends on more than whether they’re affordable or easy to use.

While financial literacy matters, so does financial confidence—believing you can apply your knowledge. People also need financial control, the ability to manage their money, and financial autonomy, the freedom to make decisions without pressure from others. Finally, financial agency allows people to act on decisions and adjust them over time. 

These five elements, which come from the psychological well-being literature, form the foundational dimensions of financial inclusion – necessary building blocks for individuals to start on the path towards meaningful financial inclusion. With these foundations in place, individuals are empowered to set financial goals and work towards achieving them. Financial inclusion is then a mechanism to help people achieve the most sought-after outcome: financial well-being. 

If we put this whole framework together from the foundations through to the outcome, we have a pyramid which shows us the building blocks that form each level on the path to financial well-being.

Highlighting the social lens in this framework

While all the building blocks in this pyramid are necessary, it is important to highlight the social dimension of financial well-being, since it has been the least studied and understood. Recognizing the social dimension changes how we understand inclusion. It is not just about who has access or who uses services - it is about whether people can participate fully in social and economic life. Can they support their families? Contribute to their communities? Meet social expectations?

Financial goals are not just personal—they’re often social. Financial inclusion should help people meet both. 

Related research from the CGAP Blog:

Financial Well-being – A Concept That Has Come of Age
Three Principles to Guide Financial Health Measurement
Going Beyond Demand-Side Surveys to Measure Financial Health