Financial Inclusion
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- Date Submitted: 01/29/2010 01:36 AM
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Financial Inclusion
Definition
Financial inclusion is aimed at providing banking / financial services to all the people in a fair, transparent and equitable manner at affordable cost. The banking system today has been transformed from a brick and mortar life infrastructure to a system well supplemented by other channels like ATM’s credit/debit cards, online banking, online money transfers etc. The important point however is that these services remained restricted to a select few. There is a growing divide among the high and middle income population, who have an access to increasing range of personal finance options, and a significantly large population who lack access to even the most basic banking services. This is termed as ‘financial exclusion’. The ideal definition would also take into consideration the credit worthiness of the clientele. In short, If genuine claimants for credit and financial services are denied the same, then that is a case of exclusion. Taking into consideration the above aspects financial inclusion can broadly be defined to be :
“Financial inclusion may be defined as the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost.”
Extent of Inclusion
NSSO data reveal that 45.9 million farmer households in the country (51.4%), do not access credit, either from institutional or non-institutional sources. Further, despite the vast network of bank branches, only 27% of total farm households are indebted to formal sources (of which one-third also borrow from informal sources). Apart from the fact that exclusion in general is large, it also varies widely across regions, social groups and asset holdings. The poorer the group, the greater is the exclusion. World Bank estimates suggest that around 59% of Indian households do not have financial access. Assuming a population of 1.147 billion (CIA fact book) and that...
Definition
Financial inclusion is aimed at providing banking / financial services to all the people in a fair, transparent and equitable manner at affordable cost. The banking system today has been transformed from a brick and mortar life infrastructure to a system well supplemented by other channels like ATM’s credit/debit cards, online banking, online money transfers etc. The important point however is that these services remained restricted to a select few. There is a growing divide among the high and middle income population, who have an access to increasing range of personal finance options, and a significantly large population who lack access to even the most basic banking services. This is termed as ‘financial exclusion’. The ideal definition would also take into consideration the credit worthiness of the clientele. In short, If genuine claimants for credit and financial services are denied the same, then that is a case of exclusion. Taking into consideration the above aspects financial inclusion can broadly be defined to be :
“Financial inclusion may be defined as the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost.”
Extent of Inclusion
NSSO data reveal that 45.9 million farmer households in the country (51.4%), do not access credit, either from institutional or non-institutional sources. Further, despite the vast network of bank branches, only 27% of total farm households are indebted to formal sources (of which one-third also borrow from informal sources). Apart from the fact that exclusion in general is large, it also varies widely across regions, social groups and asset holdings. The poorer the group, the greater is the exclusion. World Bank estimates suggest that around 59% of Indian households do not have financial access. Assuming a population of 1.147 billion (CIA fact book) and that...