What is Financial Inclusion?
Financial inclusion is the availability and equality of opportunities to access financial services. It refers to a process by which individuals and businesses can access appropriate, affordable, and timely financial products and services. These include banking, loan, equity, and insurance products. Financial inclusion efforts typically target those who are unbanked and underbanked, and direct sustainable financial services to them. Financial inclusion is understood to go beyond merely opening a bank account. It is possible for banked individuals to be excluded from financial services. Having more inclusive financial systems has been linked to stronger and more sustainable economic growth and development.
Due to the lack of financial infrastructure many under-served and low-income communities suffer. Specifically, the lack of proper information can be detrimental to low-income communities and expose them to financial risks.
Why is it important?
Financial inclusion strengthens the availability of economic resources and builds the concept of savings among the poor. It is a major step towards inclusive growth. It helps in the overall economic development of the underprivileged population.
The Reserve Bank of India had constructed a composite Financial Inclusion Index (FI-Index) to capture the extent of financial inclusion across the country, in consultation with the concerned stakeholders including the Government and published it in August 2021. The value of FI Index for March 2022 stands at 56.4 vis-à-vis 53.9 in March 2021, with growth witnessed across all the sub-indices.
In India, effective financial inclusion is needed for the uplift of the poor and disadvantaged people by providing them with the modified financial products and services.When countries take a strategic approach and develop national financial inclusion strategies which bring together financial regulators, telecommunications, competition and education ministries, our research indicates that when countries institute a national financial inclusion strategy, they increase the pace and impact of reforms.
How it can help tackle societal issues?
Financial inclusion helps to solve a number of societal issues, such as economic growth, employment, poverty, and income equality in both developed and developing countries. However, the issues and challenges of fostering financial inclusion are particularly salient in the developing world. As it is believed that financial inclusion contributes to faster and more equitable macro-economic growth, reduces poverty, and promotes income equality in developing countries by providing access to formal financial services, this study empirically examines relationships therein by taking a large sample of developing countries
Way Forward
To support public and private investment in digital payment infrastructure, new regulatory standards, and gender equality initiatives such as digitized government benefit payments are taken by various stakeholders, to ensure continued progress toward the promise of financial inclusion.
For the success of financial inclusion in India, there has to be a multidimensional approach through which existing digital platforms, infrastructure, human resources, and policy frameworks are strengthened and new technological innovations should be promoted.If adequate measures are taken to tide over the existing problems, financial inclusion has the potential to amplify the benefits of economic growth to the poor.
Question: How we can ensure financial inclusion?
References :
“How Financial Inclusion Can Be Improved by New Technologies.” World Economic Forum, www.weforum.org/agenda/2022/05/new-technologies-improve-financial-inclusion. Accessed 30 Nov. 2022.
Author. “Financial Inclusion Reduces Instability in Utilization Costs - Passionate in Marketing.” Passionate in Marketing, 27 Dec. 2021, www.passionateinmarketing.com/financial-inclusion-reduces-instability-in-utilization-costs.
“Overview.” World Bank, www.worldbank.org/en/topic/financialinclusion/overview. Accessed 30 Nov. 2022.
“How ‘financial Inclusion’ Can Lift Millions Out of Poverty: World Bank Economist.” World Economic Forum, www.weforum.org/agenda/2022/09/financial-inclusion-findex-radio-davos-world-bank-economist. Accessed 30 Nov. 2022.
“Women’s Financial Inclusion: A Pathway to Women’s Economic Empowerment | CGAP.” Women’s Financial Inclusion: A Pathway to Women’s Economic Empowerment | CGAP, 25 Oct. 2021, www.cgap.org/topics/collections/womens-financial-inclusion?gclid=Cj0KCQiAj4ecBhD3ARIsAM4Q_jEmrQ8OP326bZkvX49oytppKxNReDt9Av_gcVr9PP988-EzY-dP_sAaAnptEALw_wcB.