Financial Inclusion

Financial Inclusion is described as the method of offering banking and financial solutions and
services to every individual in the society without any form of discrimination.
It primarily aims to include everybody in the society by giving them basic financial services
without looking at a person’s income or savings.
Financial inclusion chiefly focuses on providing reliable financial solutions to the
economically underprivileged sections of the society without having any unfair treatment. It
intends to provide financial solutions without any signs of inequality.
It is also committed to being transparent while offering financial assistance without any hidden
transactions or costs.
Financial Inclusion Schemes in India
The Government of India has been introducing several exclusive schemes for the purpose of
financial inclusion. These schemes intend to provide social security to the less fortunate
sections of the society. After a lot of planning and research by several financial experts and
policymakers, the government launched schemes keeping financial inclusion in mind. These
schemes have been launched over different years. Let us take a list of the financial inclusion
schemes in the country:
Pradhan Mantri Jan Dhan Yojana (PMJDY)
Atal Pension Yojana (APY)
Pradhan Mantri Vaya Vandana Yojana (PMVVY)
Stand Up India Scheme
Pradhan Mantri Mudra Yojana (PMMY)
Pradhan Mantri Suraksha Bima Yojana (PMSBY)
Sukanya Samriddhi Yojana
Jeevan Suraksha Bandhan Yojana
Credit Enhancement Guarantee Scheme (CEGS) for Scheduled Castes (SCs)
Venture Capital Fund for Scheduled Castes under the Social Sector Initiatives
Varishtha Pension Bima Yojana (VPBY)
Objectives of Financial Inclusion
➢ Financial inclusion intends to help people secure financial services and products at
economical prices such as deposits, fund transfer services, loans, insurance, payment
services, etc.
➢ It aims to establish proper financial institutions to cater to the needs of the poor people.
These institutions should have clear-cut regulations and should maintain high standards
that are existent in the financial industry.
➢ Financial inclusion aims to build and maintain financial sustainability so that the less
fortunate people have a certainty of funds which they struggle to have.
➢ Financial inclusion also intends to have numerous institutions that offer affordable
financial assistance so that there is sufficient competition so that clients have a lot of
options to choose from. There are traditional banking options in the market. However,
 the number of institutions that offer inexpensive financial products and services is very
minimal.
➢ Financial inclusion intends to increase awareness about the benefits of financial
services among the economically underprivileged sections of the society.
➢ The process of financial inclusion works towards creating financial products that are
suitable for the less fortunate people of the society.
➢ Financial inclusion intends to improve financial literacy and financial awareness in the
nation.
➢ Financial inclusion aims to bring in digital financial solutions for the economically
underprivileged people of the nation.
➢ It also intends to bring in mobile banking or financial services in order to reach the
poorest people living in extremely remote areas of the country.
➢ It aims to provide tailor-made and custom-made financial solutions to poor people as
per their individual financial conditions, household needs, preferences, and income
levels.
➢ There are many governmental agencies and non-governmental organisations that are
dedicated to bringing in financial inclusion. These agencies are focussed on improving
the access to receiving government-approved documents. Many poor people are unable
to open bank accounts or apply for a loan as they do not have any identity proof. There
are so many people who live in rural areas or tribal villages who do not have knowledge
about documents such as PAN, Aadhaar, Driver’s License, or Electoral ID. Hence, they
cannot avail many of the services offered by governmental or private institutions. Due
to lack of these documents, they are unable to avail any form of subsidies offered by
the government that they are actually entitled to.
Goals of Financial Inclusion for Women Empowerment
Financial inclusion is very particular about including women in financial management
activities of a household. Financial inclusion believes that women are more capable of handling
finances efficiently when compared to men of a house. Hence, financial inclusion activities
target women by helping them get started engaging in financial management. There are many
houses where women are not permitted to be involved in managing money. They are controlled
by the men of the house and are asked to take care of only the domestic chores.
Many conservative people in India believe that women are not capable of handling money.
With the help of financial inclusion, the government, as well as non-governmental agencies,
intend to get rid of this mentality. Financial inclusion is encouraging women to take up more
employment opportunities and be financially independent. It also explains that women will not
have to rely on men for money. They also do not have to wait for men’s permission to do
anything.
Financial inclusion intends to empower women belonging to low-income groups by increasing
financial awareness among them. Women are also taught in simple ways to save their money
for future purposes. They are provided with exposure to multiple affordable savings
instruments. They are also taught about the various forms of credit available in the market.
These forms of credit will help them start up a new small business venture or take up a training
course to apply for a new occupation. This will also increase their monthly income.
Financial inclusion is also making many women get mobile phones for their own usage. In
several parts of the nation, only men had their own mobile phones and women had to depend
on these men. Over the past few years, women have started to own mobile phones and have
started to use them for work purposes, business purposes, and financial requirements. Many of
them have started to utilise digital modes of payment and other financial operations with the
help of mobile phones. This has simplified and quickened their transactions.
The idea of financial inclusion is encouraging banks and other financial institutions to assist
the unbanked sections of the society. Many of these institutions are also focussing on making
women financially independent by providing special rates and exclusive discounts or other
benefits. Many banks charge subsidised or discounted interest rates to women for their loan
products. For savings accounts offered by certain banks and non-banking financial
corporations, women depositors gain more interest on their deposits when compared to men.
Financial Inclusion with the Help of Financial Technology (Fintech)
Financial technology (fintech) refers to the utilisation of advanced technology in the financial
industry or the financial sector. With the introduction of financial technology or fintech,
financial inclusion is improving extensively across the whole world. India also has many
fintech companies that are constantly working towards simplifying the process of providing
financial services to prospective clients. Fintech companies have also been successful in
offering financial services and products at minimal costs. This is very helpful to customers as
their expenses are low and they can distribute their savings to their other needs also.
Financial technology companies are enabling people in rural areas to apply for loans or open
bank accounts by using mobile phones. Several people in Indian rural places have mobile
phones and some of them have access to mobile internet and hence, they can make use of
fintech services to get reliable financial services.
A few of the latest fintech options that are used by individuals include crowdfunding, digital
payment systems, peer-to-peer (P2P), electronic wallets, etc. Many people in both rural and
urban areas are utilising these advanced options of banking. However, there are still many
untouched people who have not had any experience with a banking or any other financial
institution. For such people, it is tough to use any mobile-based financial service.
When many of these poor people engage in financial transactions via cheques or cash, they
tend to get cheated by financial scammers. Also, when they visit bank branches or branches
of NBFCs to open a deposit or to apply for a loan, they may end up paying high fees at the
branch. These fees or charges can be processing fees, transaction fees, money order fees, etc.
In order to save poor people from such high expenses for availing financial services, banks,
NBFCs, and fin tech companies are collaborating together to come up with simpler and quicker
banking processes which will eliminate unnecessary fees and charges. The evolvement of such
processes will help in including the underbanked or unbanked people of the society.
Financial Inclusion through Digital Payment Systems
They can also make payments for products and services in their residential regions with the
help of electronic payment wallet systems. The Government of India has launched several
electronic wallet systems through smartphone apps such as Bharat Interface for Money
(BHIM), Aadhaar Pay, and lots more!
Electronic wallets or e-wallets refer to wallets that can be used with the help of electronic
means such as mobile phones. These wallets replace physical wallets. A user can make cashless
payments through online as well as offline means. He or she will need to download the e-wallet
app on their mobile phone and utilise it to make transactions. These e-wallets can be utilised
for mobile recharges, utility bill payments, grocery stores, e-commerce portals, etc.
Many digital financial tools offer attractive offers and discounts when people make use of these
tools. These are very helpful and new to the economically underprivileged sections of the
society. They can enjoy offers, receive cashback options, and rewards. These incentives will
help a user save a lot of money.
Impact of Demonetisation on Financial Inclusion
With the objective of making India completely cashless in a few years, the government has
introduced inexpensive e-wallet options so that the less fortunate people of the nation are not
excluded from going cashless. These e-wallets have regional languages apart from English.
The user can select the language that he or she knows and make use of the app conveniently.
Some of these e-wallets not only allow a user to make payments, but also enable them to make
fund transfers from one bank account to another.
With the implementation of the demonetisation process in India in the year 2016, the need for
digital financial services has risen. The ban on usage of the notes of Rs.500 and Rs.1,000 led
to the increasing demand for alternative modes of payment for goods and services. Hence, the
number of digital wallets increased extensively in the country. The goal of the Indian
government is to make the nation cashless and hence, the high number of digital wallets is
excellently helping the government in attaining its goal. Moreover, there was a rise in the
transaction limit for electronic wallets to Rs.20,000. This is great news for both users and e-
wallet companies.
Many people belonging to low-income groups also started to utilise electronic wallet options
as they did not have any other choice. It is true that a lot of them struggled initially due to the
demonetisation process. Several middle-class and low-class people were left stranded when the
demonetisation process came into effect suddenly. However, the introduction of multiple
digital banking and financial services served as a great boon to all economic classes of the
society.
Several low-income people, unemployed people (including people who were illiterates) living
in both rural and urban areas started to learn about how to open a bank account, how to apply
for credit, how to use technology for banking services, how to avail financial services without
standing in long lines, and how to carry out transactions without carrying cash in hand.