Financial Inclusion is one of the biggest factors for the world economy as more than 2.5 million people around the world are unbanked and devoided of basic financial services. Financial inclusion is necessary for all sectors including the public and private sectors. The reason for the financial exclusion happening is mostly because of poverty, reachability, and lower literacy rate. Without proper financial inclusion, it is very hard to achieve economic stability.
With the help of a bank account, you can save and store money and use it in times of crisis. With technological advancements, financial inclusion is making its steps even in remote areas of the world. Even though lower income groups can create excellent profits for some organizations still big companies prefer to invest in the middle class and wealthiest sections of the economy. The need for the hour is to appreciate the technological improvements and make the process of financial inclusion more affordable and user-friendly.
What Do You Mean by Financial Inclusion?
Financial Inclusion means the inclusion of various services and initiatives around a wide range of populations all around the world despite their background, income rates, and educational qualification. It is necessary to remove all the barriers to financial exclusivity. Financial inclusion is one of the key factors that can bring stability to an economy and improve the lives of people by promoting small-scale farmers and businesses.
Financial Inclusion can help millions of people around the world who are devoid of basic financial services. The facilities provided by any bank like a savings account and current accounts help in making transactions which ultimately uplifts the economic status and helps the unbanked population to indulge in various business and small-scale enterprises.
How Financial Inclusion Works?
Financial exclusion was one of the common hurdles in most parts of the country due to lower literacy rates, improper reachability, and instability. To overcome these hurdles, it is very important to remove all these hurdles and encourage people around the world to take up basic financial services. Technological developments have paved their way around various parts of the world and slowly helping in overcoming various hurdles and making the process more smooth and affordable.
Cashless transactions and other technological developments have enabled various financial advancements as they helped many unbanked people to take up loans and start their businesses and maintain good credits that can help them in future transactions and keep good credit scores.
Despite many technological improvements and introductions of cashless payment methods, still, huge populations from all around the world are lacking basic financial services and are unbanked. Financial problems like picking winners in great remittance disruption complicate matters further. There were various initiatives introduced by the world bank which can lead to an increase in financial inclusivity and help millions of people all around the world to start their businesses and support small-scale farmers.
What is the Importance of Financial Inclusion?
Financial Inclusion is one of the important aspects of today’s world as it helps people from various life-threatening financial conditions because they cannot access basic financial services. People in remote areas may be unable to receive any payments for necessary transactions and can be prohibited from making any transactions or payments for essential items.
Hence, financial inclusion gives a way to save money by opening bank accounts, building credit for taking loans and making investments that can uplift the economic and financial status of both the business and the individual. Financial inclusion is very important to support small-scale businesses and enterprises that can lead to the overall growth of the country. It helps in building the security status by incorporating stability.
Such access is necessary for purchasing assets and creating financial sustainability. More economic participation for smaller businesses is essential because it could improve local standards of living and help create more jobs. Numerous countries still see rapid economic growth. India’s efforts to promote financial inclusion, for example, it has served as a cautionary story. Nonetheless, several African countries are having trouble after more than ten years of expansion.
Laziness is not excused in any way. To create policies that can sustain or revitalize growth, and implications of how low-income households pay for healthcare in Mexico, for example, it is necessary to consider the development and participation of the fintech financial inclusion sector. The IMF actually concluded in research that greater inclusion encourages economic growth. For once, achieving greater diversity and more advancement is both possible.
Benefits of Financial Inclusion
India’s economy currently ranks sixth in the world when compared to the Asian scenario. It exceeds the number of developed countries. Notwithstanding this achievement, a sizeable section of the populace still lacks access to banking services. The use of fintech financial planning is the best answer to this issue. Financial inclusion, however, is a revolutionary idea in India. Giving every impoverished person in India the greatest access to low-cost financial services would constitute financial inclusion.
According to international experts, financial inclusion should be available to all people, not just a select few. Any underdeveloped city situated in an urban region should offer a service that is provided in a rural location. Due to the emphasis on economic inclusion, more people will create retirement savings, transfer money across accounts, take out loans, etc, role of microfinance institutions in post-Ebola recovery is immense.
These skills can be applied to expand your business, build a house, and carry out other tasks. gradually eroding the idea that bias and credit screening are incompatible. Such things will ultimately help society by strengthening the economy. The basic standard of living will rise dramatically for the entire populace.
Challenges Faced by Financial Inclusion
Research on financial transfers for migrants and surveys done in Morocco and Mozambique by the World Bank Group has shown that the study party’s lack of knowledge prevented them from consuming the correct goods and services that fulfill their particular needs. The capacity of these people to make wiser fintech financial planning and select the goods that would best suit their needs can be influenced by boosting their levels of financial literacy.
Also, students will gain knowledge on how to use the various banking channels more efficiently. In other words, it is possible to boost the adoption of fresh bank accounts by employing more successful and cost-effective methods, which will result in greater overall savings.
One of the greatest obstacles stopping people without bank accounts from enjoying basic financial services, Kopo Kopo mobile money platform in Kenya, etc., is a lack of official identification credentials. Most countries normally require a valid ID before allowing someone to open a bank account. Indeed, transferring money and applying for government assistance both require an ID. So in order for the financially excluded to have easier access to financial services, government institutions must simplify and streamline the process of obtaining an official ID card.
Although innovations in the financial sector, such as digital payments and currencies, have multiplied to widen the availability of financial services, there is still a lack of customer trust in the security and trustworthiness of these recently developed systems. The Africa board fellows convened a meeting to discuss overindebtedness, which is a major issue for micro-finance as well.
The Roadmap for Successful Financial Inclusion In 2020
One of the measures taken by the Center for Financial Inclusion at Accion, states to fill the bridge between the unbanked population and technologically enabled financial Inclusion. FI2020 challenges the economy to fight against all the disparity and lay a successful roadmap for Financial Inclusion by the end of 2020.
- It is very important to shift the model of financial inclusion by utilizing financial education and knowledge, for promoting more thoughtful ideas and concepts.
- It is necessary to incorporate the knowledge of financial integrity within the customers using basic financial services.
- Proving access to client needs is a very important aspect of financial inclusion. It is very important to help the customers by listening to their perspectives and proving soulful solutions to every customer.
- One of the key aspects that can help build a sustainable financial inclusion system is by including the poor and lower-income people and making products readily available to every weaker section of the people by making them affordable.
- With the rapid technological advancements, it is very important to create technologically enabled systems to help the people in the lower income groups or at the base of the pyramid.
- One of the most beneficial ways to promote the use of technologically enabled products is by promoting the products made available or launched by the government of the country itself. It can enable the use of cashless payments like G2P to promote Fintech Financial Inclusion.
- It is very important to encourage the people at the base of the pyramid to use technologically enabled products to support the global appeal for responsible microfinance and ensure inclusivity in every sector of the economy.
- Trust building is one of the important aspects of financial Inclusion. It is very important to provide customers with financial protection and provide them with all the rights and standards.
Frequently Asked Questions
Q1. What are the challenges in achieving financial inclusion?
Some of the challenges in achieving Financial inclusion are as follows:
- There is a lack of formal documentation.
- One of the main challenges in the path of financial inclusion is the lack of literacy.
- Gender discrimination and inequality are among the factors for financial exclusion.
- The unbanked population or people without any savings account are unable to carry on any kind of transaction or any form of business.
Q2. How do you achieve financial inclusion?
To achieve financial Inclusion, it is very important to give attention to the base of the Pyramid or the population with lower income groups, and remote areas and convince them to use technologically enabled products and open bank accounts to start their own small business. One of the ways to achieve financial inclusion is by promoting women to take up loans and giving them equal rights to fight against the odds and do something on their own. Educate every section of the population about the importance of financial inclusion and its advantages in achieving financial inclusivity.
Q3. What is the main aim of financial inclusion?
The main aim of financial inclusion is to include every sector and build bridges between fintech and financial institutions by finconecta and to participate in financial inclusivity all around the world despite income status, gender discrimination, and literacy status. One of the main objectives of financial inclusion is to increase the reachability of basic financial services and set up institutions to cater to the needs of people globally. This will help in uplifting the economic status of the country by creating a robust economic system.
Financial Inclusion is one of the important aspects of economic development. Financial inclusion provides support to various small-scale farmers and small enterprises to support businesses. With technological advancements, it is very necessary to focus on the population at the base of the pyramid who are devoid of any financial services.
Still, there are 2.5 million population are unbanked due to various reasons like poor reachability, educational qualification(illiteracy), and gender discrimination. To remove all the hurdles and increase financial inclusivity, it is very important to make the whole process more trustworthy, affordable, and user-friendly at the same time.
- Jonas Taylor is a financial expert and experienced writer with a focus on finance news, accounting software, and related topics. He has a talent for explaining complex financial concepts in an accessible way and has published high-quality content in various publications. He is dedicated to delivering valuable information to readers, staying up-to-date with financial news and trends, and sharing his expertise with others.