Financial Inclusion as a term has become quite commonplace for all service providers and policymakers from all over the world. As their main priority is to create a financial system that can be spread out to every section of society. No matter the social class or standing of these people they can easily get financial services for their immediate requirements.
These sections of the population can range from low-income people to women to rural inhabitants as well as small-sized businesses. These are all excluded people previously as the main intention of an inclusive financial service is to deliver them proper financial services.
Even though the main goal of inclusive financial services is to reach out to the financial needs of this section of the population very rarely their exact needs are understood and prioritized. Certain small-sized businesses will have their individual needs which might not be understood by the financial services worldwide.
As seen in the cases of any start-up small businesses sometimes they do not get the financial help in areas they require the most. In some other cases, women in society also need some financial assistance not for their individual needs but for freedom. This is where a certain kind of imagination can help to investigate the exact nature of things.
As we can try out an experiment to provide solutions to these real-world issues. Certain low-income populations of society might require financial services for specific needs which might not be understood by the policymakers. So it can be better if we imagine what happens if these financial services can be regulated by the customers themselves. But before we move ahead let’s take a closer look at the basic features of an inclusive financial system and its goals.
What is an Inclusive Financial System?
The term financial inclusion is pretty commonly used in today’s day and age. However, do you what this exactly means? Well in that case financial inclusion can be specified as the affordability of small-sized businesses and other individuals so that they can get financial services or products for fulfilling their needs. All these services can range from savings, transactions, insurance, and so on.
- A Financially Inclusive System can be termed as the key tool for achieving any Sustainable Developmental Goals.
- Financial Inclusion can also be used as a way to curb any sort of extreme poverty as has been noted by The World Bank Group.
- Transaction accounts can be considered an initial step toward financial inclusion for most people.
- Financial inclusion can help certain marginalized sections of society and small businesses to get access to different kinds of facilities so that they can fulfill their long-term business goals to sudden emergencies.
- In the context of countries like India, Pakistan, Peru, and so on inclusive financial systems will have more roles to play.
With the research on these countries like India and Pakistan, it is witnessed that there can be various factors that can play a huge role if they want a financially inclusive system. So let’s take a closer look at these factors which should be examined for initiating a financially inclusive system.
Factors to Consider for Financial Inclusion
Within developing economic countries like India or Mexico, there can be certain factors that can make huge differences as they need to be looked at before financial inclusion practices. Even though even a place like U.S. financial diaries project highlights the precarious financial state of U.S. families.
In this case, the configurations of the components of ecosystems need to be properly managed for initiating the financial inclusion stage. In this case, there can be three main factors that should be looked at closely as these matter the most for the initiation of a financially inclusive society.
In the case of any developing economy like India or Mexico, Socio-Demographic factors can play a huge role in initiating a financially inclusive state. As this factor needs to support the financial inclusion of society as without it nobody will believe in an inclusive state of society. In this case, more citizens will stop to use any financial services which is not good for financial inclusion. These factors as well as the political aspects of it will negatively impact the financial inclusion possibility of the country.
Technological factors are also another one of the primary factors that majorly impact the financial inclusion state of the country. As most financial services do advocates for technological innovation it is important for developing economies to look into this factor for initiating a financially inclusive state. Most financial companies do use digital platforms for getting more transactions from their customers. So technological factors also play a key role for these countries if they are considering inputting a financially inclusive state.
Social and Economical Factors
The other important factors of any country that are crucial for financial inclusion are the social and economical factors as these social and economic positions can be essential for policymakers to strengthen the financial inclusion of the country. The overall social and economic standing of the country can give strength to the services and policymakers so that they can bring financial inclusion to the country.
The political standings of these developing countries can be another major factor that has to be looked at as without its help society can cultivate a financially inclusive state. To deliver the services to certain sections of society these countries will require stable political conditions.
What are the Main Goals of an Inclusive Financial System?
Now before we move ahead with the benefits of customer-regulated financial inclusion let’s have a closer look at some of its objectives. In short, why do we need a customer-regulated inclusive financial system, especially in a developing country like India?
Well in that case the answer is pretty simple we need to give basic financial assistance to all sections of society. Ultra-poor graduation is the strongest case so far for why financial services must be a part of the solution to extreme poverty. These overlooked underprivileged sections of the population require certain financial assistance for their day-to-day needs. These sections can comprise women, small business organizations, daily wagers, and so on.
- The main objective of financial inclusion is to provide effective financial services to all underprivileged sections of society.
- It helps people to acquire financial services through loans, deposits, and insurance at the time of their needs.
- It tries to initiate a financial institution for the assistance of low-income people.
- One of the main goals of financial inclusion is to maintain a financial sustainability rate in society so that all marginalized people can get access to funds.
- Financial inclusion can also increase the overall awareness of the benefits that people can have through various financial services.
- The other aim of financial inclusion is also to bring out digital solutions for all the marginalized people in society.
- The financial literacy of the entire country also depends on financial inclusion.
Financial Inclusion In India
The current economical condition of India has proven the fact that there are gaps between the privileged and underprivileged sections of society. Credit Suisse-sponsored event focuses on financial capability and the policy and business case for youth financial inclusion. For this reason, the government has been initiating a lot of schemes for achieving financial inclusion in society. All of these schemes are brought in so that all the marginalized people in society can get access to social security.
With the help of thorough research and planning from policymakers, the government has launched a variety of schemes for poor people in Indian society. Let’s have a look at some of these.
- Pradhan Mantri Jan Dhan Yojana
- Stand Up India Scheme
- Atal Pension Yojana
- Pradhan Mantri Vaya Vandana Yojana
- Pradhan Mantri Mudra Yojana
- Jeevan Suraksha Bandhan Yojana
- Sukanya Sambridhdhi Yojana
How Can Financial Inclusion Help in the Case of Women’s Empowerment?
Can bank accounts save women’s lives violence against women and financial inclusion? Well in that case financial inclusion can definitely play a big role in helping in the case of women’s empowerment, especially in an underdeveloped economy like India. One of the main goals of financial inclusion is to put women in front of financial management in any household.
In fact, this kind of inclusive practice does advocate the fact that women can be more capable of handling financial management than men. In many Indian households, women do feel left out to handle any kind of money management n the house as this is where financial inclusion can bring them forward.
The strict conservative nature of Indian society does feel that women are incapable of handling any kind of money as reported by the top five resources of 2013 on financial inclusion of women. As the government and other services can bring about a change in the mindset of these people through financial inclusion. With the help of financial inclusion, a lot of women can go out and earn their own living as this can make them even freer financially.
Thus, financial inclusion can make a lot of changes in the lives of these Indian women as they can get empowerment as their financial awareness can be easily raised. With the help of the Fintech companies India as a country is advancing even more as through the implementation of advanced technology the financial sectors can reap more benefits.
This is where the new wave of partnership models between banks and fintech startups can help. The Fintech technologies are giving opportunities to the service providers to simplify their process of financial services so that everyone can get these services at a minimum cost.
However, even after these schemes and services, not a lot of attention is paid to the real-world needs of these rural dwellers. This is where the experiment can be made where all the consumers can be the primary participants in the creation of the inclusive financial system.
The Advantages of Customer-Regulated Inclusive Financial System
All the target consumers can put forward their needs and want as the main driving forces for the creation of an inclusive financial system. The consumer research that was conducted in countries like India, Pakistan, Peru, Mexico, and Kenya has proven the fact there can be a lot of benefits if inclusive financial systems which are regulated by the consumers themselves. So what exactly are the advantages one can see if the inclusive financial systems are regulated by the consumers themselves? Here are some of the benefits of consumer regulated inclusive financial system.
Meeting the Financial Health of All the Consumers
The main advantage that can be enabled through customer regulated inclusive financial system is that it can assist the needs and wants of the consumers which is the maintenance of financial health. The basic term of financial health can be quite similar both in the case of the Indian marginalized society or even a rural area in Kenya.
As some of the crucial elements of financial health are the smooth working of the regular systems, financial capability during any kind of crisis hours, and the capability of building a secure future. If the inclusive financial system can be regulated by the consumers in this case then all of these financial health conditions can be prioritized. This is the ultimate goal of any financial inclusion program to provide financial health to marginalized sectors of society.
Quick Delivery of Services
In the case of financial inclusion, marginalized people will not want to spend an extra amount of time on services. This is where the digital revolution in the form of mobile technologies can definitely help them to get access to quick and convenient services. The mobile services here can offer 24/7 financial assistance that can definitely help out the majority of these marginalized people in society.
Simplicity and Transparency of the Products
Certain kinds of financial products and services can come with a lot of hidden terms but with the help of electronic and digital surfaces, people can easily understand these. This transparency of the services can come in handy as more people can use these financial services with more trust. The increased simplicity of the usage of these financial services can also be beneficial for the majority of consumers.
Talking to People about New Services and Products
The survey conducted in places like Kenya and India has proved the fact most consumers are very much into digital transactions which is crucial for financial inclusion. However, when they want to take up any new service for usage they will want to know how it works. This is where talking to a person face by face can give them can be much more preferable for most consumers.
Safe and Secure Savings
With the consumer-regulated financial inclusion system savings can be much safer and more secure. With more control over the services, consumers can keep track of the risk levels of their investments.
Protection in the Time of Crisis
A health crisis can be termed as one of the main issues for all the low-income population of society, but with the help of a consumer-regulated inclusive financial system, this issue can be easily addressed. This can give them proper insurance to protect them from any kind of health-related or property or accidental issues.
Loan Services for Meeting Life Goals
There can be various kinds of life goals any consumer can have during their financial life as these can be education for their children, growth of business operations, shelter, and security in old age. With the help of the consumer-regulated inclusive financial system, this section of society can acquire savings and loans to fulfill their life goals.
Protection from Frauds
Protection from fraud especially for low-income people gas becomes more essential. With an understanding of the good members from the bad ones, one can overtake any kind of security breach while investing or taking a loan.
Gaining Confidence and Control in Financial Lives
With a proper understanding of consumer needs and wants financial services can bring a lot of benefits to consumers. In this way, they can easily acquire a lot of trust in these services and gain stability in their financial lives. The overall stress of money management thus can be easily weaned with the help of these consumer-regulated inclusive financial systems.
This entire consumer focused inclusive financial system has shown a lot of positives as it clearly fulfills the personal needs or wants of all consumers. The overall safety and simplicity of the inclusive financial system is also another key area on which the consumers focus. Thus, the consumer-regulated inclusive financial system can be the way to go forward for all these developing countries.
Frequently Asked Questions (FAQs)
Q1. What are the factors of financial inclusion?
In certain developing countries or anywhere there are some big factors which are needed to be looked at before initiating financial inclusion. Some of these factors can be socio-demographic, political, technological, social, and economic. Policymakers need to understand all these core elements so they can easily strengthen their inclusion practices.
Q2. What are the barriers to financial inclusion?
In developing countries, there a still a lot of factors like strict documentation requirements from banking institutions, lapses in business management, and bad experiences which can be barriers to financial inclusion. The lack of education and informal work processes are also other barriers that any consumer can face in financial inclusion. The lack of access to various financial services can also be another barrier that any consumer can face.
Q3. Can financial inclusion lead to women’s empowerment?
Financial inclusion can definitely lead to women’s empowerment as its main goal is to put forward women in leading money management activities. In developing countries like India or Mexico, women can take charge of the money management processes in the house with the help of financial inclusion. So it definitely helps in the women’s empowerment cause.
Q4. What are the advantages of consumer-created financial inclusion?
If there ever was an experiment, then consumer-regulated financial inclusion can bring out a lot of positivities in the lives of these consumers. Some of these are the increase in quickness and reliability of services, meeting the financial health of the consumers, safe and secure savings, protection from various kinds of scams, and many more.
Financial inclusion has become quite a common term among the low-income community for their sudden requirements for any kind of emergency. However, the security of these financial services is often neglected. As a result, most consumers do feel less confident about using these services for their financial growth. So it is better that these services should cater to the individual needs and wants of these consumers so that they can earn more trust from them.
- 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.
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