Financial inclusion (FI) is increasingly recognised the world over as a key driver of economic growth and poverty alleviation. It is broadly a process of connecting the society with the formal financial system known globally to have a multiplier impact on bringing about socio-economic transformation in society. Access to formal finance can boost job creation, reduce vulnerability to economic shocks and increase investment in human capital. Thus, FI is mainly intended to:
  1. Provide access to affordable financial services to society to enable them to save, borrow, and remit funds to settle financial transactions. FI also covers social security financial products like insurance, pension annuities and bank assurance products.
  2. Pool money lying with individuals by developing a robust financial network to spur investments and provide finance to enterprises.
  3. Spread a culture of commercial and business orientation that can add to the economic prosperity and well being of the society.
  4. Eventually develop a well-informed, financially and digitally literate society well versed with optimising financial resources that can plough back into the economy in the form of increased gross domestic product (GDP) and higher tax collections.

1. The genesis of FI

With the introduction of ‘social control’ on banks dating back to 1967, banks began to disseminate services to not merely to the rich and mighty urban class, but also to people at the lower strata of society to uplift their economic well-being. Banks began an arduous journey to move from ‘class banking’ to ‘mass banking’ that still continues. The momentum to connect the banking with people gained more prominence after bank nationalisation in 1969 / 1980. It was intended to hasten reach of banking services to masses, a welfare concept enunciated in the social control of banks that was strengthened further with ownership of the majority of banks passing on to the government.
To read more, please subscribe.