Importance Of Financial Inclusion

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Finance is the main spring of the economy and a key to ensuring sustained and inclusive economic growth. Inclusive growth attempts to bridge the various divides in an economy and society, between the rich and the poor, rural and urban populace and between one region and another. Access to a well-functioning financial system, by creating identical opportunities, enables economically and socially excluded people to integrate better into the economy, so as to actively contribute to development and protect themselves against economic shocks. The role of the financial system is to gather or pool money from people and businesses that have more than they need currently and transmit those funds to those who can use them for either consumption or investment.…show more content…
The various financial services include savings, credit, insurance, and payments and remittance facilities. The objective of financial inclusion is to extend the scope of activities of the organized financial system to include, within its ambit, people with low incomes. Through graduated credit, attempts must be made to lift the poor so that they come out of poverty. Financial inclusion is also referred as a ‘quasi-public good’, saying that there is substantial evidence that a well functioning financial system fosters faster and more equitable growth. Access to financial services allows the poor to save money outside the house safely. This brings prosperity over a period of time. Financial inclusion enables improved and better sustainable economic and social development of the country. It helps in the empowerment of the underprivileged, poor and women of the society with the mission of making them self-sufficient and well informed to take better financial decisions. Financial inclusion takes into account the participation of vulnerable groups such as weaker sections of the society and low income groups, based on the extent of their access to financial services such as savings and payment account, credit insurance, pensions etc. Also the objective of financial inclusion exercise is easy availability of…show more content…
Measures such as Self Help Group (SHG) bank linkage program, use of business facilitators and correspondents, easing of Know Your Customer (KYC) norms, electronic benefit transfer, separate plan for urban financial inclusion, use of mobile technology, bank branches and Automated Teller Machines (ATM), opening and encouraging ‘no-frill-accounts’ and emphasis on financial literacy have played a significant role for increasing the use of formal sources for availing loan/ credit. Measures initiated by the government include, opening customer service centers, credit counselling centers, Kisan Credit Card. These renewed efforts are more focused than the earlier measures which were more general in nature having a much wider scope. Introduction of such banking schemes and technologies brought a change in the urban society, but majority of the rural population is still unaware of these changes and is excluded from formal banking due to lack of awareness and financial literacy. Growth of the economy is affected as majority of the population does not have access to formal credit. A vast majority of financially excluded regions suffer from low level of investment in roads, bridges, canals, power supply and market linkages. Absence of these leads to a general malaise in the local economy. This is a serious issue for the economic progress of the

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