2020.04 The Taiwan Banker NO.124 / By Hank Huang (黃崇哲)
Resilience: Financial Inclusiveness 2.0Editor's note
Starting in February, the COVID-19 coronavirus has drawn the world’s attention. As the pandemic has spread globally, economies have been frozen, and markets have faced record declines, reflecting a profound sense of unease. In the absence of any WHO assistance, Taiwan has strongly demonstrated the power of advance preparation. At first, Taiwan was predicted to be the world’s 2nd most affected country, but in the latest Johns Hopkins ranking, it was the 64th most affected area, making Taiwan one of the safest countries in the world, an honor shared by all of the people of Taiwan. Nevertheless, we can’t stop here and ignore the huge challenges ahead: the financial risks resulting from the economic downturn. The wholesale loss of financial assets not only reflects changes in balance sheets. For the general public, it means large-scale job losses, reduction in household income, and rapidly increasing pressure on personal finances. Any government bailout, no matter how it’s done, has its blind spots. Now is the test of the financial resilience for which people have been preparing.Financial resilience, a new financial and economic concept that arose from the last financial crisis, refers to people’s ability to withstand, adapt to, and recover from financial risks. It includes economic resources, access to financial goods and services, financial knowledge and behavior, and social capital. It contrasts with the concept of financial inclusion, which focuses more on the delivery and accessibility of financial products and services. Resilience emphasizes people’s ability to effectively function under adverse circumstances. Put simply, the basic promise of financial services should be to strengthen individuals’ and households’ ability to withstand risks, so that those who are affected by unemployment, acute illness, or unexpected financial loss can raise sufficient funds to recover. Only in this way will finance become truly ‘inclusive.’ Therefore, financial resilience is considered to be ‘financial inclusiveness 2.0.’Resilience is reflected in the ability to meet the needs of daily life while preparing for possible financial risks. As the gap between rich and poor has become more pronounced, many unexpected factors can easily cause financial pressure, particularly for vulnerable groups such as the younger generation and single wage-earners with high expenses. Hidden poverty among the older population may also be exacerbated as aging continues. Insufficient financial knowledge and planning and management capabilities lead to improper decision making – a risk for all age groups.The current situation remains unpredictable, and nobody knows when the next wave will come, or how bad it will be – just as nobody anticipated that this epidemic would become the next global financial crisis. In addition to disaster relief, advance preparation should include strengthening of resilience during ordinary times. Effective financial policies and education can help Taiwan build a strong financial safety net, allowing people to use finance to build their dreams.