Financial inclusion is increasingly being recognized as a key driver of economic growth and poverty alleviation the world over. Access to formal finance can boost job creation, reduce vulnerability to economic shocks and increase investments in human capital. Without adequate access to formal financial services, individuals and firms need to rely on their own limited resources or rely on costly informal sources of finance to meet their financial needs and pursue growth opportunities.
At a macro level, greater financial inclusion can support sustainable and inclusive socio-economic growth for all.
There has been a growing evidence on how financial inclusion has a multiplier effect in boosting overall economic output, reducing poverty and income inequality at the national level.
Financial inclusion of women is particularly important for gender equality and women’s economic empowerment. With greater control over their financial lives, women can help themselves and their families to come out of poverty; reduce their risk of falling into poverty; eliminate their exploitation from the informal sector; and increase their ability to fully engage in measurable and productive economic activities.
An inclusive financial system supports stability, integrity, and equitable growth. Therefore, financial exclusion because of several barriers like physical, socio-cultural, and psychological, warrants attention from the policymakers.
Some of the key reasons resulting in involuntary exclusion are:
Financial inclusion of women is particularly important for gender equality and women’s economic empowerment. With greater control over their financial lives, women can help themselves and their families to come out of poverty; reduce their risk of falling into poverty; eliminate their exploitation from the informal sector; and increase their ability to fully engage in measurable and productive economic activities.
An inclusive financial system supports stability, integrity, and equitable growth. Therefore, financial exclusion because of several barriers like physical, socio-cultural, and psychological, warrants attention from the policymakers.
Some of the key reasons resulting in involuntary exclusion are:
Financial inclusion has been defined as “the process of ensuring access to financial services, timely and adequate credit for vulnerable groups such as weaker sections and low-income groups at an affordable cost”. (Committee on Financial Inclusion - Chairman: Dr. C Rangarajan, RBI, 2008).
The Committee on Medium-Term Path to Financial Inclusion (Chairman: Shri Deepak Mohanty, RBI, 2015) has set the vision for financial inclusion as, “convenient access to a basket of basic formal financial products and services that should include savings, remittance, credit, government-supported insurance, and pension products to small and marginal farmers and low-income households at a reasonable cost with adequate protection progressively supplemented by social cash transfers, besides increasing the access of small and marginal enterprises to formal finance with a greater reliance on technology to cut costs and improve service delivery
The Committee on Medium-Term Path to Financial Inclusion (Chairman: Shri Deepak Mohanty, RBI, 2015) has set the vision for financial inclusion as, “convenient access to a basket of basic formal financial products and services that should include savings, remittance, credit, government-supported insurance, and pension products to small and marginal farmers and low-income households at a reasonable cost with adequate protection progressively supplemented by social cash transfers, besides increasing the access of small and marginal enterprises to formal finance with a greater reliance on technology to cut costs and improve service delivery
While a lot of efforts have been undertaken to increase financial inclusion in the country, a lot of steps are further needed to ensure adequate access to financial services and usage of these services by various segments of underserved and un-served populations in India, so far. Anchored in the country’s development priorities, the NSFI 2019-2024 seeks to address the inherent barriers of access to a gamut of financial products and services.
An inclusive financial system (ably supported through sound financial inclusion policies, focus on financial education, and customer protection) is not only pro-growth but also pro-poor with the potential to reduce income inequality and poverty, and promote social cohesion and shared economic development. Financial exclusion, on the other hand, leaves the disadvantaged and low-income segments of society with no choice other than informal options, making them vulnerable to financial distress, debt, and poverty.
Source: NSFI REPORT
