How financial inclusions impact the country economy?
Financial inclusion refers to the ability of individuals to access financial products and services to meet their needs. The requirements that should be met include saving, transacting, making and receiving payments, receiving credit, and insurance. The commodities and services have to be affordable and useful to the target people so that the desired goals can be met. The financially underserved population largely consists of people in the developing or underdeveloped regions of the world who operate in the informal economy. This lack of access to financial services has had important adverse effects on their lives and the economy in general.
To begin with, the world’s poor people have no reliable means of making and receiving daily payments. This inability to transact reliably daily hinders their upward mobility. It sets them on a path to failure and keeps them in a vicious cycle of dependency where their only access to finances is through unscrupulous means.
Financial inclusion products and services mean limited access to credit. A majority of the world’s poor population work in the informal sector. They grow crops on a small scale and keep animals. Others are artisans who sell wares to the population while others are small-scale vendors who sell basic items such as food and vegetables. Despite their ability to make further purchases in their little enterprises and improve their lives, they lack access to credit which would have helped them achieve such a goal.
There are several benefits of financial inclusion and some of the essential ones are:
- Reduction in cash economy since with such monetary inclusion it becomes possible to bring more and more money into the banking ecosystem
- It helps to form the habit to save and thereby assist in enhancing the capital formation in a country and hence with such inclusion it becomes possible to have an economic boost in the country
- It enables to transfer the cash directly to the beneficiary bank account rather than physical cash payment against the subsidies. Hence it ensures that funds will reach the intended recipient.
- With such a monetary inclusion the rural mass will also be able to get access to banking such as cash receipts, cash payments, checking the bank statement, doing balance inquiry, etc. and all these functions can be done by using finger authentication.
It has been shown that owners of small enterprises in most parts of the world can make further investment into their assets if they had access to credit facilities. The investment would lead to more profitable businesses. Stall partners can also increase their existing stock and product range if they had access to credit. Producers can invest in more livestock and produce animal products which are the raw material for fundamental food products, such as meat and milk, worldwide. They can also buy more raw supplies and make more products if they had a way to credit. The poor financial inclusion has limited the growth of businesses and enterprises by people from the informal sector.