Financial Inclusion: What will it be like for years to come?:
A country’s economic growth depends on factors such as national income, per capita income and consumption per capita, technological progress, and even political structure. The balance between saving and consuming is another factor that determines economic growth.
Walter Bagehot, the famous classical economist, has long argued that a strong financial system is essential for economic growth and that credit must be ‘fast, free and fast.
Translated into modern scenarios to strengthen financial systems, it is necessary to stimulate economic activities such as financial inclusion, digital banking, and Fintech.
We will explore what and how financial inclusion can do and what it will mean in the future for developing countries such as India, Nepal, Bangladesh, and other African and Asian economies.
Definition of Financial Inclusion
Financial inclusion can be broadly defined as the process of making financial services available to people, especially for the lowest and weakest income groups in society. This includes the timely and adequate availability of a wide range of financial products and services, such as:
Bank accounts for savings and transaction purposes
Products in stock
save the products
For economic growth in developing countries, also focuses on the financial inclusion of non-banking and disadvantaged communities who are ignorant or inaccessible to financial services and products. Through Digital Banking and FinTech, financial services can quickly penetrate all parts of the business.
The goals for achieving financial inclusion are:
• Maximize the use of the latest technologies to transform existing traditional banking or financial models.
• Improve existing products or services in the financial sector.
Financial inclusion: impact on the economies of developing countries
The impact of financial inclusion, especially through Digital Banking or FinTech, can be exponential.
According to a report by the McKinsey Global Institute, also approved by the World Economic Forum, there are more than 2 billion individuals and 200 million companies (small, medium, and micro) without formal access to financial services, such as savings or credit. . Those with access often have to pay high taxes or fees.
The effects of digital finance on developing countries
It is also stated that if financial inclusion is guaranteed by Digital Banking, the following consequences are expected:
The GDP of developing countries such as India, Ethiopia, Nigeria, and comparable Asian economies is increasing by 6%. The absolute value of this increase could reach $3.7 billion by 2025.
This increase in GDP will thus create 95 million new jobs in various sectors.
The addition of 1.6 billion non-banks will create a large number of creditors. It is estimated that approximately $2.1 billion will be borrowed from these individuals or small businesses.
Governments can reduce tax collection losses and earn up to $110 billion a year.
Governments are earning up to $400 billion a year by converting traditional accounts to digital accounts, as they can now save 80 to 90 percent on the cost of managing traditional accounts.
An increase in customer base leads to a $4.2 billion increase in revenue.
All these predictions sound exciting, don’t they?
Concrete benefits of financial inclusion
Some of the many important benefits of financial inclusion include:
Better service penetration
With financial inclusion, it is possible to reach the rural population, facilitating access to bank accounts, cash payments, receipts, and bank statements. Verification and execution of the services can be done by fingerprinting and online testing respectively.
Promote economic growth
The banking ecosystem will be strengthened by reducing the monetary economy and adopting the habit of saving among the rural masses.
Instant Reward Transfer
Government grants are paid directly into the bank accounts of the beneficiaries. The money then gets to the intended recipients, rather than intermediaries, to avoid losses and corruption.
Financial inclusion will lead to a formal banking system and transparent availability of credit, freeing people from the clutches of unofficial creditors. Adequate credit will encourage companies that will further improve the country’s economic performance and prosperity.