Financial Inclusion & It’s Significance
Financial Inclusion also called Inclusive financing means providing businesses and individuals access to financial products & services which are delivered responsibly and sustainably at affordable costs. The goal of Financial Inclusion is to address and offer solutions to the constraints that come in the way of providing equal opportunities to access financial services.
Why Financial Inclusion Matters?
Underserved, SMEs, entrepreneurs, even banks & governments will benefit from Financial Inclusion. It can improve the income and savings of the underserved thus enabling them to invest in education, healthcare, other necessities like food, rent, etc. It equips them to overcome and manage any financial risks.
SME owners and entrepreneurs will have a lot of innovative ideas but many of them lack the exposure to services & markets and have less capital to implement their ideas. Inclusion will provide them access with valuable consulting services and helps them to connect with the people in the mature markets with enough capital. This gives them wings to start their new venture and implement new ideas for their business expansion and take well-informed decisions. This will, in turn, result in more creation of jobs and finally leads to economic prosperity.
Banks are always looking to expand and server larger & inclusive markets. Given the competition from new players who offer similar products & services, reaching out to the unbanked population helps the banks to grow their business. Developing services that cater to the needs of the underserved at affordable costs and building brand equity will help the banks create a valuable relationship with the customers.
Financial Inclusion decreases the size of the informal economy, reduces corruption and discourages tax evasion. By allowing the subsidy and pension payments to be made digitally will help Governments to reduce administrative costs and improve efficiencies. Governments will benefit from increased economic activity and improved cash flows. It also helps them to increase security and regulatory oversight into financial transactions.
Technology and Financial Inclusion
The role of technology in facilitating Financial Inclusion should not be underestimated. Technological advances have helped financial institutions reach the untapped markets and serve customers of different economic backgrounds cost-effectively.
The concept of e-KYC has modernized the customer on-boarding process. The use of digital IDs & biometric information has helped to reduce forgery & fraud and contributed to the increased percentage of account ownership.
Mobile Banking has revolutionized the banking sector by helping banks to extend their financial services to the unbanked populations. It has helped to improve the reach and ease of transactions.
People in the emerging markets have zero to fewer chances of getting loans from financial institutions due to lack of credit record and financial history. Peer-to-peer lending sites help them by allowing each other to lend and borrow money.
Digital payment services which comprise of mobile apps, mobile wallets, virtual cards, and others have enabled new ways of providing access to the financial services. Besides, they are fast, simple, convenient, and low risk which is paving the way for better financial inclusion.
Financial Institutions and regulators are adopting new forms and technologies to achieve financial inclusion. It is critically important for them to take measures by keeping the consumer’s best interest in mind.
To increase the trust in financial institutions, it has become imperative for them to embrace transparency while communicating service offerings and also to close the wealth & gender gap. Educating consumers and creating tailored financial services for the underserved also helps to promote financial inclusion.