Published by linker 5
Posted on August 4, 2020
5 min readLast updated: January 21, 2026
By Professor Marco Gazel from NEOMA Business School
Discussions on social inequality have intensified significantly in recent years. A large number of researchers and non-governmental institutions are warning policy makers about the rapid growth of social inequality in recent decades, and importantly, about how harmful inequality is to society as a whole. The unequal opportunities across different social groups that are observed in almost all societies have a strong impact for the poorest people: on wages, access to the health system, access to education, and even on the opportunity to become an entrepreneur. How to become an entrepreneur without access to credit for example? This is a real and current challenge affecting economic growth in many countries as in the world of today around 1.7 billion adults remain unbanked.
The negative effects of social inequality have become very evident with the emergence of Covid-19 pandemic. As the virus has spread in some countries, we have seen how low-income workers have been the most vulnerable, either because of the difficulty and cost of accessing the health system, or simply because they will be most impacted by the lack of economic activity caused by the lockdown.
As a result, most governments, at least in developed countries, have tried to anticipate this risk within the labour market and consequent lack of income for many workers, trying to guarantee a minimum income for their citizens while this period of uncertainty and lack of activity lasts. Of course, it is very difficult to predict what the world will be like after this pandemic, but a close look at the measures put in place, and even the discourse of some leaders, indicate that some major changes will be necessary for our society, such as strengthening investment in the public health system, and increasing many populations’ access to healthcare. Indeed, it is increasingly recognised that individual welfare is highly impacted by collective wellbeing, and that spending on health should actually be viewed as an investment and not an expense of society, as well as spending on education and research.
But beyond this, another major change that is necessary within society, and one of the biggest causes of social inequality, is that financial systems are traditionally very unequal and harmful to the less advantaged. So, if governments across the globe really believe that the world should move towards a more equal society, especially after this pandemic, it is completely necessary that changes are made to the financial systems in all countries after this crisis. Of course, this is not something that will happen naturally or quickly – it will only happen if policy makers understand and take measures for financial inclusion, and, importantly, invest in financial education.
So, it all depends on governmental efforts, and using the case of France as an example, the government is guaranteeing the credit of people and companies that need to raise financial resources during the crisis. This is so individuals and companies can have loans in financial institutions at zero interest rates because they are guaranteed by the state. But this is only a short-term solution, and of course poses the question of how will countries act after this pandemic is over? Without the interference of the state it is hard to imagine that the structure of inequality in the financial system will change.
One answer to this problem could be digital finance. It is important to highlight the progress of this sector in recent years. The new technologies that have been adopted for financial services and products have helped towards a more financially included society, particularly in developing countries. These technologies break down geographical barriers and provide lower operating costs, two key factors for financial inclusion. In the last 10 years there have been thousands of projects funded on crowdfunding platforms, projects that probably would not be funded by the traditional financial system. Most recently we have the emergence of Peer to Peer lending platforms, also abbreviated as P2P lending, which is the practice of lending money to individuals or businesses through online services that match lenders with borrowers. These platforms have given people who cannot access the traditional financial system the opportunity to access loans, and they have provided a new type of investment for those with savings.
Another example is the Neobanks. Neobanks are financial technology firms that offer internet-only financial services and lack physical branches. These virtual banks are more accessible, cheap, and friendly to their users. These Neobanks are growing impressively in some countries, especially in countries where social inequality has historically been especially apparent. For example, in Brazil, a Brazilian Neobank named Nubank is the largest Fintech in Latin America and one of the most innovative companies in the world. The potential for these digital banks is huge, especially in developing countries, as Nubank has attracted a huge 20 million users in Brazil, which is almost 10% of the population, in less than 10 years.
Therefore, the digitalisation of financial services have the potential to enable much needed economic growth, and to minimise the financial divide in society, as low-income households and small firms can benefit greatly from advances in alternative financial services. Covid-19 has highlighted the negative impact of social inequalities throughout the world, and new measures for financial inclusion and investment in financial education is essential if economies are to recover. However, its continued success is still very much dependent on governmental adoption and implementation, and leaders must close the digital divide across countries in order to gain the full economic benefits of digital financial services.
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