Financial inclusion is one of the powerful ways through which a country can bring changes to its economy. Through that, a country can increase the socio-economic standard of the population across the horizon.
For example, a person who stays in the rural side of the country can now get banking services which will help a farmer or a small business owner to get bank loans at a lower interest, and they can get the capital to do their work.
For a large country, the government needs to ensure that every segment of the population gets proper banking service, and for that, the sector must work with customers and stakeholders at various touchpoints.
In this blog, we will look at the process of financial inclusion and how it can help individuals meet their financial needs and get the advantage of banking services.
Why is Financial Inclusion Important in a Country like India?
When it comes to financial inclusion in the rural areas of a country, the question for the banks is that it’s not feasible to cater to that segment of society. Here comes the push from the government and other cooperative organizations that aims to tap value in that sector.
For example, the NBFCs are now working with loan DSA partner who are structuring the loan book and bringing transparency in the loan process, which helps a farmer or a small shopkeeper to take some money at lower interest rates from the bank and not from the loan sharks.
When a country is included in the traditional financial system, in that case, the overall image of the economy becomes strong, and one can have their financial behaviour stored in the form of a data point and get an outlook on the habits of each individual and based on that one can be rewarded accordingly.
How Policy Makers are Focusing on Financial Inclusion
Policymakers are looking for objectives where they can find a structured plan to include all the rural people within the financial diaspora. Here, a policymaker is arranging ways through which one can get all the banking facilities and can save and invest properly.
Here, policymakers work with different financial institutions who are working on the ground and bringing financial tools which will help the rural dwellers to come within the financial domain.
Areas Where Traditional Banking Services Can Help the Local Economy
The next thing that should be considered while working towards financial inclusion is the areas or touchpoints where financial institutions can work to bring people to the traditional banking system.
- Reducing the Credit Gap
The first thing which a banking institution needs to bring people within the financial landscape is to reduce the cost of credits. In many places, there were a few financial institutions, and for that, people used to visit the loan sharks, and they were getting loans at a higher interest rate.
Hence, the payment of the loan gets hefty, and one tends to fail on the loan repayment. Here come the traditional banking and lending partners who reduce the cost of credit and work with farmers and members of another profession to understand their credit requirements and, based on that, can set a proper loan amount and interest rate, which is easier for the farmers to pay.
- Catering to the Saving Habit
People in rural areas have a saving habit, and for that, they should get some extra interest on that saved amount. Here comes the need for financial inclusion, which allows people to save in the bank and earn an interest on that amount.
People contact business loan agents to get loans with higher amounts when they have good saving practices. The lender can improve the person’s credit rating, and the banks can further help the customer.
- Reduce the Subsidy Gaps
Governments across states aim to provide some subsidies to the people of the rural economy so that they can have some basic comfort in their livelihood. Through financial inclusion, the governments can directly provide the benefit to the person who needs subsidies as they can directly transfer the amount to their bank account.
This approach helps to plug the discrepancies in providing subsidies, reduces corruption, and directly benefits the beneficiary.
Thus, through the initiative of proper financial inclusion, one can work for the betterment of the rural economy and bring the traditional banking system to all parts of the country.