The Current State of Financial Inclusion in India
In India, financial inclusion has definitely improved over the years. And as a result, many people from low-income backgrounds have benefited from it over the years. Here’s an overview of the current state of financial inclusion in India.
What is Financial Inclusion?
Financial inclusion is a process through which people from low-income groups or other vulnerable communities can receive affordable financial services. The aim of this process is to provide more people with opportunities to manage their finances and help improve their current situations. In turn, this will help society grow, as more people are able to improve their financial situations in the long run.
In most cases, people from high-income groups have more opportunities when it comes to financial services. This is because lenders are more willing to offer better financial options to those who can repay it back more easily.
Some of the services of financial inclusion include opening savings accounts for people from low-income groups, market-based loan repayment plans, need-based credit facilities, affordable insurance plans, remittances facilities, and much more. Financial inclusion plays a huge role in helping an economy and a particular society grow. In the long run, financial inclusion aims to reduce poverty as much as possible so that more people can generate income for a country. An important factor that affects this is the education level, which, unfortunately, is still something India needs to work on. We will discuss this in more detail in the article later on.
Pradhan Mantri Jan Dhan Yojana (PMJDY) Scheme
The PMJDY scheme’s aim is to encourage state-banks to provide a few financial services that include a basic savings account for at least one person in a household, remittances facilities, need-based credit, and more.
A lot of people from low-income groups don’t have a savings account, which prevents them from using various financial services available. Therefore, this scheme was necessary, and it has been successful since its inception in 2014. Shortly after the scheme came into effect, there was a large increase in the number of savings bank accounts in state-banks.
People who created savings accounts under the PMJDY scheme also received RuPay debit cards. This allowed cardholders to retrieve money from ATM machines of more than 1500 banks in India. This way, more people had easier methods of managing their finances.
Market-Based Loan Repayment Plans
Agriculture is an important part of India’s economy. A high percentage of people living in rural areas depend on agriculture as a source of income. This means that most people working in the agriculture market are from low-income groups. Therefore, financial inclusion in India has made it easy for people working in the agriculture market to use financial services. Financial services companies are keeping the structure of the market in mind when creating loan repayment plans.
For example, if a farmer wants to use a loan to purchase important equipment to help them cultivate great produce, they should be able to repay the loan when they have money. Farmers in India generally make their income at the end of a season when fresh produce is ready to be sold. They don’t have steady monthly incomes. Therefore, a loan plan that allows them to repay the markup at the end of each season instead of each month is an excellent example of financial inclusion. It gives people from low-income groups the opportunity to affordably expand their trade.
Mahindra Finance is a financial service company that provides tractor loans to people working in the agriculture market. They’ve set up their branches in every Indian state, allowing more people to access their services. The only way that financial inclusion will improve is if financial services companies like Mahindra Finance expand their business and increase accessibility on every level.
The Lack of Education Is Still a Problem
One of the main reasons why a lot of people from low-income groups don’t avail affordable financial services is that they aren’t aware of those services. A lot of people from low-income groups in India don’t have access to basic and affordable education. Because of that, they’re unable to understand how these financial services operate – which is why they don’t make use of them.
The lack of education can restrict the growth of society on the whole. Therefore, certain initiatives must be taken to educate people on the benefits of these financial services. Everyone deserves to know about these opportunities so that they can decide whether to use them or not.
What Are the Benefits of Financial Inclusion?
Financial inclusion is necessary for the growth of the nation and society. Here are some of the benefits of financial inclusion in India.
Improves People’s Standard of Living
One of the biggest benefits of financial inclusion is that it improves the standard of living for a lot of people in a particular society. It provides them with more opportunities to expand their trade and build better lives for themselves.
Smaller Division Between People from Urban and Rural Areas
As more people from rural areas learn about financial services and begin to use them, there will be a smaller division between people from urban areas and people from rural areas. This will help build a more inclusive society in which more people will have relatively the same opportunities as others.
Improves Banks’ Business
One last benefit of financial inclusion is that it improves the business of banks. This is because financial inclusion facilitates more customers at banks. As a result, banks have more clientele and increase their profit as a result.
While financial inclusion in India is improving, there are still factors, like the lack of financial education, that are preventing it from taking full effect. In order to improve the effects of financial inclusion, we should be able to analyze data we have effectively. If you’re looking for useful tools to help you analyze data, get in touch with us Winjit now.