Financial inclusion is an important aspect to be taken into consideration for an economy to thrive i.e, every individual has equal access to financial services. Ensuring that all sections of society, especially lower-income groups like vehicle drivers, have access to credit can significantly uplift their economic status and contribute to a more inclusive economy.
This blog provides you with some insights of extending credit to these groups and evaluates its part in contributing to overall economic growth and stability in India.
Let’s begin by understanding the broad meaning of Financial Inclusion:
Financial inclusion refers to the process of ensuring that individuals and businesses have access to financial services like savings accounts, credit, insurance, and payment systems.
With the goal of providing affordable and convenient financial products to all segments of society, Financial Inclusion plays an important role in determining the development of a country.
Origin of Financial Discrimination
History
Since the historical time periods, economic structures that have favored the high status people and marginalized the rest. They required collateral and credit histories which excluded many low-income individuals from access to financial resources.
Socioeconomic Barriers
Limited access to education led to lack of awareness particularly among lower-income groups that have been deprived from accessing financial services. Moreover, societal biases and stereotypes have entrenched this discrimination.
Perpetual concerns of Financial Inclusion:
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Rural and Urban Differences
Despite the progress, differences between rural and urban areas still exist. Many rural inhabitants face barriers such as lack of banking infrastructure, financial literacy, and digital connectivity.
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Gender Gap
Women, particularly in rural areas, continue to be underrepresented in the formal financial system. Cultural norms,and lower literacy rates contribute to this gender gap in financial inclusion.
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Financial Literacy
Low levels of financial literacy remain a major obstacle to financial inclusion. Many individuals are not aware of the financial products available to them or lack the knowledge to use them effectively.
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Technological Barriers
Although digital payments and banking have increased, there are still significant technological barriers. Many people in rural areas lack smartphones or internet access which limits their presence in financial inclusion.
Current progressive methods to increase financial inclusion:
Pradhan Mantri Jan Dhan Yojana (PMJDY)
Launched in 2014, PMJDY is one of the world’s largest financial inclusion initiatives. It aims to provide universal access to banking facilities, with at least one basic banking account for every household. As of 2023, over 450 million bank accounts have been opened under this scheme, significantly increasing the number of people with access to financial services.
Digital Payment Ecosystem
India has seen a rapid adoption of digital payment systems, driven by the Unified Payments Interface (UPI), mobile banking, and digital wallets. UPI transactions alone have crossed 8 billion per month, showing the widespread acceptance and usage. This digital shift has allowed efficient access to financial services for a larger population, including those in remote areas.
Microfinance Institutions (MFIs)
MFIs have played a key role in extending credit to low-income populations. They provide small loans without the need for collateral, to help India’s population to start or expand small businesses.
Steps that help increase financial service accessibility.
Policy Initiatives
The Indian government continues to introduce policies to enhance financial inclusion. Initiatives like Direct Benefit Transfers (DBT), have improved the efficiency and reach of financial services.
Banking Correspondents
The Reserve Bank of India (RBI) has promoted the use of banking correspondents (BCs) to develop rural areas. These agents provide banking services in remote locations so that more people can access financial services without needing to travel to a bank branch.
Role of Non-Banking Financial Companies (NBFCs)
NBFCs like Khiwasara Finance & Leasing Limited are instrumental in offering tailored financial solutions especially for lower-income groups like vehicle drivers. . They provide loans, leasing options, and other financial products that traditional banks may not offer to low-income individuals or small businesses.
Conclusion
India has made substantial progress in promoting financial inclusion, bringing millions of people into the formal financial system by offering access to financial services like banking, credit, and insurance.
Government initiatives, such as the Pradhan Mantri Jan Dhan Yojana, have played a key role in expanding access to banking services, especially in rural areas and are helping to promote economic growth.
Improving financial literacy and ensuring that all sections of society can benefit from these services and continued efforts are needed to address these issues and to create a more inclusive financial system that supports sustainable development for all.
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