Inclusive Growth

  • IASbaba
  • November 17, 2022
  • 0
Economics, Science and Technology
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  • The use of technology in financial inclusion stands to be pertinent in today’s context as it paves the way towards inclusive growth through the upliftment of disadvantaged sections of society.
  • Globally, from 51 percent in 2011, over 76 percent of adults now have a bank or mobile account. In addition, more than 80 nations have introduced digital financial services, some of which have attained a sizable market, including those utilising mobile devices.
  • As a result, millions of formerly excluded clients are switching from only using cash for formal financial transactions to using digital banking services over mobile phones or other devices.

What is financial inclusion:

  • Financial inclusion refers to the availability to both individuals and companies of useful and cost-effective financial goods and services.
  • This includes payments, transactions, savings, credit, and insurance, that are sustainably and ethically provided.
  • It allows social mobility and empower individuals and foster communities.
  • It aids in promoting economic growth by launching and grow enterprises through utilising credit and insurance.
  • Enhance overall quality of life by making investments in their children’s or own health or education, manage risk, and recover from financial setbacks, all of which can

Impediments to financial inclusion:

  • Urban-Rural Digital Divide:
  • Only 4.4% rural families have computers, compared to 14.4% of urban households and 14.9 percent of rural homes have internet connectivity, compared to 42 percent of families in metropolitan regions.
  • Only 13 percent of adults in rural regions have access to the internet, compared to 37 percent in metropolitan areas.
  • Nearly 80% of the population has a bank account but Indians are still not fully integrated into the formal banking system.
  • Almost 18 percent (81.38 million) of bank accounts are inoperative, having “zero balance”
  • 38 percent of accounts are inactive, which means that there have been no deposits or withdrawals in the past year
  • more than 310 million individuals needing a basic cell phone which prevents account holders from receiving crucial information, such as details relating to account transactions.
  • Increasing dependency on local agents because financial institutions are less willing to deliver messages for transactions of small quantities.
  • Complicated banking procedures such as requiring identity credentials and maintaining a specific balance in an account.
  • Access to credit is low
  • small-time lenders charge high-interest rates in rural regions.
  • Government programmes are yet to reach more remote areas to improve loan availability efficiently.
  • Individuals find that online loans need more options from reliable financial institutions or digital lending.
  • Limited access to computer and communication technologies due to low affordability and knowledgeable to utilise the internet.
  • Lack of financial literacy causes low potential to maximise technological interventions.
  • About 266 million adults are illiterate.
  • Financial cyber-crimes are peaking in proportion to the growing distrust among rural residents, leading to lower adoption rates and a 6-percent jump in cybercrimes in the same year.
  • Burden of providing diversified content across different regions, as individuals across India have different mother tongues.
  • Personal Identifiable Information (PII) guidelines are not strictly enforced, causing large quantities of data readily accessible to numerous parties, raising serious concerns about data privacy.
  • This includes Mobile numbers and Know Your Customer (KYC) Data.
  • Few business correspondents’ (BCs) agents secretly record biometric information in clay, where they would subsequently recreate it for fraudulent purposes.

Suggestions towards inclusion:

  • Technological advancements through various e-governance schemes such as GeM portal.
  • Robust policy framework focused on the needs of citizens and the disadvantaged:
  • Information and Communication Technology policies are primarily top-down and supply-focused.
  • These policies should focus on digital inclusion strategies to ensure that rural areas can access proper internet connectivity.
  • To ensure digital financial inclusion
  • encourage the middle-aged bracket to educate themselves in reading and writing to use the various facilities they provide.
  • Government websites to have information in multiple tongues, keeping in mind the language barrier and access to technology.
  • To combat financial fraud, implementing a one-to-one Management of Financial Services (MFS) agent mentorship programme that focuses on vulnerable populations and teaches them the fundamentals of mobile and online interaction is possible.
  • Removing barriers to financial service access for low-income persons by reducing transaction costs could facilitate increased participation, as observed in Nepal, where free and easily accessible accounts were more prevalent among women.

Way forward:

  • The inability of the country to adapt to robust telecommunication infrastructure with a stable broadband internet connection and lack of access to technology has widened social exclusions already present and deprive people of necessary resources.
  • The digital divide affects every area of life, including literacy, wellness, mobility, security, access to financial services, etc.
  • Therefore, for a fast-growing nation such as India, the focus needs to shift from simple economic growth to equitable and inclusive growth.

Source ORF Online

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