With the banking sector shifting towards digital channels to serve its customers further, there is still a large group that remains unbanked even today. Unbanked or under-banked people are those that are deprived of accessing minimal financial services or do not receive affordable banking facilities.
An astonishing fact by the World Bank highlights, “Around 2 billion people do not access formal financial services and over 50% of adults in the poorest households are unbanked.”
Considering the facts in a developing country like India, these numbers are equally disturbing. Have a look at these statistics and the graph denoting India’s rank in accommodating unbanked population, as compared to others.
- 40% of Indians remain unbanked today (not having bank accounts) – June 2016 stats.
- In India, almost 167 million people do not hold formal bank accounts (as of Nov 2016).
- This population is equivalent to the world’s 7th largest country.
In light of the current scenario, the government of India in association with the Reserve Bank of India (RBI) has fast-forwarded the initiatives to extend basic financial services to rural and semi-rural population. Ever since Modi government took charge, 28.38 crores new accounts were opened under Pradhan Mantri Jan Dhan Yojana (PMJDY) as on April 19, 2017.
Another effort is to push Financial Inclusion and take banking to every customer’s doorsteps. With this, the government aims to deliver financial facilities to low-income groups and unprivileged sector.
Why Financial Inclusion (FI)?
There are various advantages of Financial Inclusion, however, the policymakers identify the three most prominent ones considering the upliftment of rural, unbanked people. They are listed as under:
1. Imbibing a habit of saving money in people
The people in rural areas generally continue to live in financial stress. This is majorly because they earn money and spend it completely without saving any. This habit of not saving funds for an emergency makes them vulnerable. With FI, they have access to financial products and services to choose from and start saving a minimum value of their hard earned money to be able to use it in future. On the other hand, Financial Inclusion can help in the capital formation of a country by redirecting people to block their money in real estate, precious metals etc.
2. Generating employment opportunities
Financial Inclusion makes Business Correspondent model a reality by empowering individuals or groups to avail their networking capabilities in order to serve people with financial services, assist banks in expanding business and most importantly earning a source of income for themselves. FI creates job opportunities for anyone who wants to work for themselves and even ensures that others join the group/community as business correspondents and earn their livelihood.
3. Empowering the banking system
Financial Inclusion helps non-reliance on a cash economy by bringing maximum currency into the banking ecosystem and thereby increasing transparency.
Financial Inclusion is a critical step for the betterment of unbanked (and under-banked) population and needs focused attention of the government and regulatory bodies. With dedicated efforts, it can redefine growth and laurels for the banking industry.
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