Despite India possessing economic growth higher than most developed countries in recent years, a majority of the country’s population still remains unbanked. Financial Inclusion refers to efforts for providing financial services and access to adequate credit at affordable costs to the excluded sections of the society and low-income households where traditional finance lacks its reach.
It became quite famous in the early 2000s when RBI highlighted the importance of financial inclusion in its annual policy statement.
The basic financial services with the introduction of 3-year FIP (Financial Inclusion Plans) and PMJDY (Pradhan Mantri Jan Dhan Yojna) became accessible to the public. With the introduction of said services and measuring its progress, India has improved its score in Global Findex (GFX) from 35 in 2011 to 80 in 2017 but still struggling to achieve last-mile connectivity as concerted efforts are needed to deepen access from all the involved bodies.
Below listed are some of the handful guiding factors to move India towards financial inclusion:
Collaboration Of Fintech Companies With Banks
India has many fintech companies that are constantly working towards simplifying the process of providing financial services to underserved people. Many a time, poor people are exploited by moneylenders and they may end up paying hefty interest rates to them.
In order to save poor people from such high expenses banks, NBFCs can collaborate with fintech companies to come up with simpler and quicker banking processes. The evolvement of such processes will help India towards financial inclusion.
Financial And Digital Literacy
Lack of effective and broad-based financial and digital literacy is preventing full-scale implementation of financial inclusion. The question arises here- Are we doing enough to educate the public? So, more awareness programs should be run through several channels to reach the last mile of underserved segments. An informed customer is an important gear in the payment ecosystem.
Increased Utilisation Of FI Infrastructure
All the sectors that are currently engaged with Financial Inclusion such as NGOs, banks, non-banking financial companies, and government departments should be encouraged to increase the utilization of financial inclusion infrastructure as it has been built by investing huge sums of money.
Training Programs For Startups
Training programs can be conducted for startups and help them locate solutions across the Country. The learning from these programs can be utilized to nurture new solutions for financial inclusion.
Enrichment Of The Bureau
It has always been a challenge to reach out to the underbanked rural areas in India due to its demographic and geographic conditions as opening branches is an expensive way of providing financial services. The issue was a major problem until the digital platforms were observed.
Digital technologies offer affordable ways for the financially excluded be it banking, loans and insurance. The expeditious enhancement in technology new digital players coming up in financial services. With the tremendous increase in the usage of mobile devices globally, the opportunity to gain more understanding of consumer behaviour has also increased.
And that data derived from digital technologies can help commercial banks and other bureaus to come up with suitable financial products and evaluate prospective clients more efficiently and improved financial services will foster financial inclusion in India.
Penetration Of Aadhar
Introduction of the Aadhaar system has proved to be a robust means of identification and authentication. While Aadhaar enabled remarkable gains, it has still to achieve last-mile connectivity. Penetration of Aadhaar in the masses will work as a key tool in financial inclusion as the Aadhaar Enabled Payment System offers financial services like cash deposits, withdrawals and remittance of funds etc.
AEPS can be used to generate demand for small and medium-term loans which will again help India to move towards financial inclusion.
Using digital IDs to enable eKYC and completely digitalize the onboarding process makes it easier for people to open an account and more affordable for financial service providers to reach out to underserved customers of society. The convenience of having financial services at their doorstep is huge for people who sometimes have to travel long hours and lose a day of wages to reach a bank branch.
It will also be beneficial for financial service providers as they can achieve to reach a critical mass of users with low operational costs that will lead India towards financial inclusion.
Financial inclusion aims to provide economically priced financial services to the underserved sections of the society so that they can be financially independent. Over the past few years, financial inclusion has become a very eminent public policy aspect in order to develop the economy in a sustainable manner.
It will also help in minimizing the distance between financial institutions and customers, and this, in turn, assists in maintaining a healthy relationship. With financial inclusion, every economic agent in the country will have the ability to make use of formal financial services which help in the development of the economy.