What is Financial Inclusion ?
Financial Inclusion is making financial products and services easily accessible at affordable costs to all individuals and business to meet their needs – transactions, payments, savings, credit and insurance – delivered in a responsible manner. It majorly focuses on providing financial solutions to economically underprivileged sections of the society.
Access to a transaction account is a initial step towards broader financial inclusion as it serves as a gateway to other financial services like credit or insurance; brings down the transaction costs for daily economic activities; allows for planning for longer-term needs; and enables the formation of a cushion for crises.
Why is it important ?
- Financial services and products are secured by people at affordable prices with the help of Financial inclusion such as deposits, fund transfer services, loans, insurance, payment services, etc.
- Financial inclusion builds and maintains financial sustainability with the goal that the less fortunate people have a certainty of funds which they struggle to have.
- Country’s financial system can be enhanced through Financial inclusion. It strengthens the availability of economic resources. Above all, it boosts the concept of savings among poor people living in both urban and rural areas. This way, it contributes towards the advancement of the economy in a reliable way.
- The unbanked population has been vulnerably dependent of informal channels of credit like family, friends and moneylenders. Availability of adequate and transparent credit from formal banking channels shall allow the entrepreneurial spirit of the masses to increase outputs and prosperity in the countryside.
- Reduce leak in subsidy and welfare distribution by pushing for direct cash transfers to beneficiaries through bank accounts
- Up to 80% of Indians now have a bank account, the same proportion that have a mobile phone, but financial inclusion levels are still among the world’s worst
- There is no marked improvement in access to formal credit, and 38% of Indian accounts are inactive–meaning, there were no withdrawals or deposits over the course of a year–suggesting that many Indians are still not integrated into the formal banking system.
- 48% of the country’s bank accounts have seen no transactions in the last one year, the World Bank says in its Global Findex database report
- 66% of the inactive account holders in India have a mobile phone that can be used more efficiently as a banking channel.
- Only 36% of the account owners use their bank accounts to make or receive e-payments.