Improving Financial Inclusion in India: 5 Things to Do
Money is an enabler, connecting people with their wants and needs. Though the popular adage is, “Money makes the world go round”, it could also be said that the world must make money go around. In other words, money isn’t something that must be concentrated in the hands of a few. It must be an enabler of the masses.??
A financially inclusive society is not one where the difference between rich and poor does not exist. In fact, in a financially inclusive society, it is okay for people at both ends of the spectrum to coexist. Where it stands out is the ease with which one has access to money for wants and needs, depending on their ‘capability’ to afford it.??
And What Exactly is Capability??
Capability in this context is often defined by a credit history and score reflecting your borrowing patterns and the timeliness of repayments. With the right credit score and good credit history, and by showing proof of a steady income, you can avail yourself of an instant line of credit to see your dreams to fruition.??
Nothing Comes in Your Way?
And with the digitally enabled processes of today, there is no risk of human error or bias standing between you and the key to your dreams, the money you always wanted. And this is not just true of the progressive West but for rapidly developing India too. But there is still a lot to be done. Given the strides we have already made, what does the future of financial inclusion look like in India? What can one do to make India more financially inclusive??
And What is Driving This Positive Change??
The government is already playing a key role in financial inclusiveness through several initiatives. Technology, advancing at an unprecedented rate, is helping both the government and other financial institutions play a key role in improving financial inclusiveness in the country. Increased awareness and financial literacy are other drivers of change for the better. Let’s see how everything comes together.?
5 Steps to Improve Financial Inclusiveness in India?
Based on findings in a report by the Reserve Bank of India outlining how countries like China, Brazil, etc. were able to achieve financial inclusiveness, here are the six steps we need to take.??
1. Following a Target-Based Approach?
It is necessary to target specific sectors and populations to achieve financial inclusion. Such targeting is based on needs. Some sectors that need to be targeted are agriculture, mining, unorganized retail, and MSMEs. It is also important to give as much importance to the rural population as one gives to the urban and to women and youth as much as it does to well-established male entrepreneurs.?
2. Strengthening financial infrastructure through technology?
The integration of mobile payments, AI and the introduction of blockchain (in a suitable manner) can all contribute to speeding up the payment mechanisms and improving their reliability. Improving the network and following global standards for communication can also be a game-changer. Onboarding will also improve as a result, bringing in more participants.??
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3. Strong regulatory framework?
“With great power comes great responsibility” is a quote popularized by the movie Spiderman. So, if technology lends power to your financial infrastructure, strengthening the lending process, you must also have a regulatory framework in place to ensure that the rules are followed, minimum conditions are met, and fraud actors are removed.?
4. Focus on last-mile delivery and financial literacy?
The last-mile connectivity of financial services is crucial to ensure that the borrower’s experience remains great. An example is the lead bank scheme that is immensely popular now, with several districts in India becoming digitally enabled and financially literate. Underserved regions are not undeserving of such help, and last-mile connectivity initiatives have helped strengthen this belief.???
5. Periodic monitoring and evaluation of progress made?
Apart from monitoring the initiatives frequently to ensure that they are bringing about the expected progress, it is also necessary to evaluate the initiatives based on the feedback that is received from the people whose lives such financial inclusiveness is impacting. It is also necessary to get the input of other stakeholders involved in the process and consider what they think of the reforms introduced by the government.??
Financial Inclusiveness Cannot Be Achieved Overnight?
Financial inclusiveness is not a remedy that can be prepared simply. Like some of the finest brews known to man, it takes time. In the context of India, with still a substantial population below the poverty line and with problems like malnutrition, poor living conditions and socio-cultural barriers to overcome, it will take a long time to extend financial inclusiveness to the grassroots level. But we do not know of a better time to start the process than now!??
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