Guwahati  
 
logo
  Guwahati,
North East »» Manipur territorial integrity will be protected, says CM•••ONGC's exploration mission begins in Northeast: Official•••NH 44 will remain open during monsoon, assures Assam •••State »» Ex-Servicemen rally organized by Army•••KSA seeks early solution to Assam-Meghalaya border dispute •••Stress laid on improving tea industry, role of small tea growers lauded •••National »» Hizbul commander killed in J&K shootout •••Hyderabad police foil protest over 'dharna chowk'•••Indians regard nature as mother: Rajnath•••International »» Six killed in blasts in Bangladesh •••Trump promises new healthcare plan once Obamacare 'explodes'•••'Pakistan's ties with China not a zero-sum game'•••    
  Home » Editorial » Story
 
Financial Inclusion: Looking beyond four walls

Dr B K Mukhopadhyay

The reality - As of now around 2 billion people don’t use formal financial services and more than 50 percent of adults in the poorest households are unbanked. Under the ongoing situation it is heartening that financial inclusion has steadily been turning as a key enabler to reducing poverty and boosting prosperity. WBG President Kim rightly called for Universal Financial Access (UFA) by 2020. ‘We’re scaling up support to reach an additional 1bn people, and are working with partners to achieve UFA’.

Not only in India or Bangladesh but also globally now the very fact is recognized that without inclusive financial systems poor individuals and small enterprises are left to rely on their own resources / borrowing from others [usury] to invest in education, health or take advantage of promising growth opportunities. People outside the mainstream financial services  - who have access to none of the products in the full suite of basic services like savings, credit, insurance, and payment services - suffer financial disadvantages, which include, among others, usury, lack of insurance, higher interest credit, higher cost utilities and no account into which wages, income, payments can be routed.

Exactly, financial inclusion is a state in which all people who can use them have access to a full suite of quality financial services, provide at affordable prices, in a convenient manner and with dignity for the clients. Financial services that are delivered by a range of formal providers [all institutions that provide formal financial services recognized by the Government – commercial banks, savings banks, rural banks, state banks, non-bank financial institutions and other financial institutions like microfinance NGOs, credit unions] have to reach everyone [inclusive of the poor, disabled, rural and other excluded populations], who, in turn, can use them. Here fully included is a term describing individuals who have access to the full suite of basic services, which, in turn, refers to savings, credit, and insurance and payment service.

Here, naturally, financial literacy comes into play – the very ability to understand how to use financial products and services as well as how to manage personal, household or micro-enterprise finances over time. And thus improvements in literary levels can be achieved through financial education. This financial education is important in the context of financial inclusion since as previously excluded populations gain access to formal financial services they nee to be able to use these services in a productive and responsible manner that will not cause them any harm.

Banking On Fast and Consistent Experience Sharing

As a global hot topic it is emerging, the causes of financial exclusion are being located while at the same time efforts are on to design strategies to ensure financial inclusion of the poor and disadvantaged, which, in turn, has smoothened the road to reach at the MDG [Millennium Development Goal of eradication of poverty by 2020].

Financial inclusion is a concern even in the developed countries and legislative or regulatory measures to achieve the same are a common feature. Typically, countries with low levels of income inequality tend to have lower levels of financial exclusion, while countries with high levels of inequality record higher levels of financial exclusion.

To illustrate, in Portugal, about 17 per cent of the adult population had no bank account of any kind in 2000, while less than four per cent of adults in Canada and five per cent in Belgium lacked a bank account. In France it is termed as ‘right to banking’ – Article 58 of the Banking Act 1984 recognized the principle of the right to a bank account. In U K [where the number of adults without a bank account fell from 2.8 million in 2002-03 to even 2 million in 2005-06] the accessibility is also through the Post Offices. In Sweden - where lower than 2 per cent of adults did not have a bank account in the year 2000 [compared to Germany where the same was around 3 per cent] - banks cannot refuse to open a saving or deposit account under Section 2 of the Banking business Act of 1987.

What is more, two major kinds of policy responses have been implemented by Central Banks in response to financial exclusion: codes of practice and specific legislation. First, countries such as France and Belgium have undertaken initiatives to committing banks to open an affordable account with bare minimum facilities. Termed ‘call deposit account’ in Belgium, it offers three basic types of transactions: money transfers, deposits and withdrawals, and bank statements. However, individual banks may opt to offer other services if they wish. In Germany, a voluntary code was introduced by the German Bankers Association dating back to 1996 which makes provision for an ‘everyman’ current account, offering basic banking transactions, without an overdraft facility. Likewise, access to basic banking in the United Kingdom and Australia has been achieved through voluntary arrangements with banks and has not involved formal charters. U K, for instance, has drafted a Banking Code, which requires banks to inform customers about their basic bank account and its suitability for their needs. A Financial Inclusion Taskforce, instituted in April 2005, monitors access to basic banking services.

Some other countries have introduced specific legislation that gives both, a universal right to a bank account and, spells out the precise nature of banking services to be provided.

Wanted Newer Strategies to Forge Ahead

It is being rightly observed that by 2020 full inclusion is a big possibility keeping in view the ongoing efforts.

The vision is to put the customer at the forefront rather than technologies recognizing the fact that the financial-service needs of the poor have similarities to those of the better off. Hence, the focus is on four major planks – what is provided [savings, credit, insurance, payments mainly]; how it is provided [affordability, safety, convenience and then obviously dignity of treatment]; who are the recipients [each and everyone – poor, rural, informal, groups, women, disabled, ethnic minorities and the like]; and finally who provides [mainstream financial players reflecting transparency – the characteristic of quality financial inclusion via complete disclosure of information by the financial service provider] the same.

A supportive well coordinated environment can ensure protection of the customer since the latter is the key element in a market-led system. In fact, financial inclusion, in true sense of the term, has to fold both the demand [good financial decision making] and supply [access to suitable products and services] factors to reach the equilibrium.

Thus, addressing financial exclusion will require a holistic approach on the part of the banks in creating awareness about financial products, education, and advice on money management, debt counseling, savings and affordable credit.  

The vision of achieving cent percent economic inclusion – shaped by the very recognition of the fact that access to suitable financial services is the critical enabler of quality-of-life betterment paving the way for overall development - is rightly slated to receive top priority.

Last but not the least, the role of the State Governments in facilitating financial inclusion is critical. Land settlement rights, computerization of land records, and providing economic and social infrastructure with pro-active agricultural extension machinery will greatly help in using financial inclusion for sustainable development. Also leveraging the use of IT by collaborative efforts between banks and State Governments can prove to be a win-win situation.

(The Writer,  a noted Management Economist, an international Commentator on Business and Economic Affairs and Principal, Eminent College of Management and Technology, can be reached atm.bibhas@gmail.com)


.
       
Maximum
 
Minimum
 
oC
oC
oC
oC
oC
oC
oC
oC
oC
oC
oC
oC
 Arunachal News
 Meghalaya News
CM inaugurates Kharkutta Police Station
State has alarming proportion of untrained teachers: CAG
JACATAM serves State government deadline
Birth anniversary celebrated
 Northeast News
Manipur territorial integrity will be protected, says CM
ONGC's exploration mission begins in Northeast: Official
NH 44 will remain open during monsoon, assures Assam
No agreement to carve out larger Nagaland, says government
 Cachar News
Garbage is not a waste but a resource: C Srinivasan
Primates face struggle for survival in Cachar
 National News
Hizbul commander killed in J&K shootout
Hyderabad police foil protest over 'dharna chowk'
Indians regard nature as mother: Rajnath
Allow us to build Ram temple, Swamy tells Muslims
 International News
Six killed in blasts in Bangladesh
Trump promises new healthcare plan once Obamacare 'explodes'
'Pakistan's ties with China not a zero-sum game'
'Turkey may hold referendum on EU accession process'
 State-1
Ex-Servicemen rally organized by Army
KSA seeks early solution to Assam-Meghalaya border dispute 
Stress laid on improving tea industry, role of small tea growers lauded
ATASU to organize Mukoli Bihu
 State-2
Peace and unity among different tribal communities underscored
'Low back pain is a major health problem in all developed countries'
Puthimari Bapubheti farmers set an example in organic farming
Workers in Gohpur tea gardens demand wages in cash
 Local Sports
Time to work on publicity and better transport facilities: Yarza
Barpeta, Dhemaji win titles
Neelabh causes major upset
 Sports
Lyon leads Australia's comeback on see-saw day
Lyon revels at extracting bounce at Dharamsala pitch
Pandey's 104 helps India 'Red' beat Tamil Nadu by 32 runs
Indian eves play 2-2 draw against Chile
 Editorial
Celebrating our rivers
Towards ensuring quality education
'Over 70% aquifers overdrawn, water crisis looming'
Letters to the Editor
 Op-Ed (Sunday)
Of kebabs, slaughterhouses and crocodile meat
Ownership: A Sinking Ship
Religion and Humanity
 
Assam
 
Assam is a northeastern state of India with its capital at Dispur located in the city of Guwahati.
 
more...
Nagaland
 
Nagaland is a northeastern state of India with its capital at Kohima. located in the Guwahati city.
 
more...
Mizoram
 
Mizoram is a northeastern state of India with its capital at Aizwal. located in the Guwahati city.
 
more...
Meghalaya
 
Meghalaya is a northeastern state of India with its capital at Shillong. located in the Guwahati.
 
more...
Manipur
 
Manipur is a northeastern state of India with its capital at Imphal.
 
more...
Tripura
 
Tripura is a northeastern state of India with its capital at Agartala.
 
more...
Arunachal Pradesh
 
Arunachal Pradesh is a northeastern state of India with its capital at Itanagar.
 
more...
Sikkim
 
Sikkim is a northeastern state of India with its capital at Gangtok.
 
more...
Home  |  Guwahati City  |  Editorial  |  International  |  National  |  Business  |  Arunachal  |  Meghalaya   |  Northeast  |  State  |  Cachar  |  Sports   |  Local Sports
 Archive  |  Melange  |  Saturday Fare  |  Junior Sentinel  |  Multilingual  |  About Us  |  Contact Us  |  Advertise with us  |  Dongmusa