Spotlight
New
Delhi, 16 November 2018
Financial
Inclusion
INDIA
LEADS THE WAY
By Moin
Qazi
Money,
says the proverb, makes money. When you have got a little, it is often easy to
get more. The great difficulty is to get that little-- Adam
Smith
Prime Minister
Narendra Modi has emerged as the foremost champion of financial inclusion. The
latest milestone in his journey towards eradicating financial apartheid is the
launching at his hands at the Fintech Festival at Singapore of APIX, a
banking technology designed to reach two billion people worldwide, who are
still without bank accounts. APIX will
support banks to reach out to those without bank accounts in 23 countries
including the 10 ASEAN members as well as major markets such as India.
Finance is the glue that holds all pieces of our life together. Ideal
financial societies are those which provide safe and convenient ways of
managing these simple monetary affairs. This philosophy is known as financial
inclusion. It is providing financial tools to people -- tools they can
afford, are safe and properly regulated, can be accessed conveniently from
formal institutions. These tools enable people to save, insure and
to responsibly borrow -- allowing them to build their assets and improve their well-being and financial prospects.
The term most buzzed in this
respect is “the unbanked” -- usually defined as people who don’t have a
traditional savings account. These are the people who have to be brought into
the orbit of formal finance. Ideal
financial societies are those that provide safe, affordable and convenient ways
of managing their everyday monetary affairs.
Access to financial
services has a critical role in reducing extreme poverty, boosting shared
prosperity, and supporting inclusive and sustainable development it is the key element of financial health. It can provide an opportunity to
move out of poverty or absorb a shock without being pushed deeper into debt.
The poor need to set aside money in times of plenty and draw it out in lean
times.
Financial
inclusion has been recognised as a key building block which will form the
foundation for achieving several of UN’s Sustainable Development Goals. In the absence of proper formal financial systems they have
to rely on informal means of managing money, like cash-on-hand, family
and friends, moneylenders, pawn-brokers or keeping it under the mattress. These
choices are expensive, insufficient, risky, and unpredictable. Without access to affordable
credit, it is difficult to get a business idea off the ground or to acquire an
asset like a house or higher education. Without insurance, all your security
can be wiped out by one misfortune.
Enhancing financial
inclusion can improve resistance to shocks, boost productivity of business, facilitate
empowerment of marginalised groups, such as women and rural residents, and help
reduce poverty Life is one long risk for
them as they are just a tragic event away from a financial catastrophe. It allows people to insure for health care, save for
children’s education, and borrow for wedding or funeral costs.
These
people as such require a safe reliable and affordable line of credit, so they can reach their most important goals, like setting
up a house or buying improved tools for their business. Insurance can help
them to cope better with risks. Managing money
is hard, and it's harder when you live on an earning that makes you plan your
life on a day to day basis. Limited access to finance is seen as a major
contributor to persistent poverty.
Macroeconomic
evidence suggests that economies with deeper financial intermediation tend to
grow faster and reduce income inequality. Financial inclusion -- defined in
certain societies as the proportion of individuals and groups owning accounts
and using a basket of basic formal financial products and services available
through them -- has been evoking considerable interest among governments,
policy makers, academicians, financial institutions and other stakeholders.
Better financial tools can help accelerate
the rate at which people move out of poverty and help them hold on to economic
gains. Access to financial services is also key to equitable growth,
for the government to derive the benefits of social security schemes and for
bringing savings of the poor into the system and investing them
Financial
inclusion enables people to have safe place to save money, affordable and
appropriately designed and affordably priced credit and trusted risk
management services, a state managed pension to
gain better control over their own lives and that of their families People are striving hard to improve their financial health
.They want to save money, after meeting their everyday needs, so that they can
recover quickly when faced with an emergency.
When more people have access to
affordable and good quality financial services, they have more opportunities to
thrive. This is especially true for women, who are often underserved by
traditional financial institutions. In all societies, howsoever oppressed or
illiterate women their women are, they remain the stewards of household
savings. They require financial products and services that appreciate
their experience and perspective.
Financial
inclusion of women enhances their self-confidence and places financial
decision-making power in their hands resulting
in large development payoffs. It is
often cited as an essential tool in helping women in particular rise
from poverty. The theory goes that when you empower women financially
they’re able to secure their families’ welfare and create pathways toward
education and improved quality of life for their children.
Women’s participation
in the financial system can have significant benefits in terms of economic
growth, greater equality and societal well-being. Access and usage of financial
services are levers for increasing women’s participation in the economy.
The President and
CEO, Women’s World Banking, Mary Ellen
Iskenderun has set the right tone for more women -- enabling financial
inclusion agenda: “There is a strong connection between women’s access
to financial products and services and greater opportunity not only for that
woman herself, her family and her community, but really for the nation as a
whole. Women are far more likely than men to spend money they have under their
discretion on the education of their children, the health care for their family
and improving their housing. And those are the kinds of developmental changes
that can really have long-term intergenerational impact.”
We do not necessarily
need gender-specific policies, but rather policies that work for women. We
need an enabling environment that incorporates the women perspective. We must understand that financially empowering women
generates a multiplier effect in having a substantial impact on the well being
of future generations. Thus, an enabling financial landscape with a blend of a
favourable regulatory regime, innovative women-centric products/schemes,
enhanced mobility, robust customer protection framework and reformed attitudes
towards women will increasingly stimulate women’s foray into the workforce and
yield success for the Indian economy.
Overlaying
all these needs and objectives will be the need for increasingly enhancing
financial literacy across society. This needs to be achieved across all age
groups. A financially literate society makes the job of financial inclusion
that much easier. Financial education is an essential prerequisite for
financial inclusion .providing access to financial services is just the first
step on the ladder, but for climbing the ladder to explore the larger horizons
of finance requires skills.
Merely opening
physical accounts as flag posts of financial identity won’t help unless they
are actively used by people for managing their money. To make this possible
people have to be imparted an ability to understand and execute matters of
personal finance, including basic numeracy and literacy, budgeting, investing,
and risk diversification. This skill is known as financial literacy. It is a
combination of financial awareness, knowledge, skills, attitude and behaviours
necessary to make sound financial decisions and ultimately achieve individual
financial well-being.
Without
greater and consistent usage of bank accounts, the promises of financial inclusion--
equitable economic growth growing and successful businesses, and improving
financial security and prosperity-- will remain elusive. ---INFA
(Copyright,
India News & Feature Alliance)
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