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Financial Inclusion: Obligation or Opportunity

Posted in Finance Articles, Total Reads: 4142 , Published on May 17, 2013

“Your net worth to the world is usually determined by what remains after your bad habits are subtracted from your good ones.”
Benjamin Franklin

Over 2 billion adults over the world do not use formal financial services to save or borrow. In India, almost half of the country is unbanked; with over 50% of the population not having deposit account. Less than ¼ of the India’s population has debit cards and less than 2% has credit cards. These people just need access to the financial services.


Financial Inclusion is the need of the hour; finance is no longer the life blood of only business but of the entire economy, the economy where majority are disadvantaged and belong to the low income category. Financial inclusion is not only about providing financial services to the vulnerable groups of the society but also ensuring it is been provided in a fair and transparent manner.

Swabhimaan “the financial inclusion campaign”, was started to extend the reach of banking to the rural hinterland, banks were advised to provide appropriate banking facilities to habitations having a population in excess of 2000 (as per 2001 census) by March 2012. Swabhimaan aimed at providing branchless banking through use of technology. As per reports, out of 74398 villages identified under the scheme, 74,194 villages have been covered.

There can’t be any instance where an agrarian economy can transform into post-industrial modern society, without broad based financial inclusion. The economy prosper when its people prosper. Lots of attempt has been made in this regard, and lot more is required to stand out as a powerful Indian Economy. Some of the significant steps were co-operative movement, nationalization of banks, and no-frills account.

Financial Inclusion: - More of a Opportunity than an Obligation

The tale of financial inclusion in India is akin to that of the blind men and the elephant. You all know the story. A bunch of blind men chance upon an elephant. The one who catches hold of its tail says the elephant is like a rope. The one who touches the trunk says the elephant is like a snake, while the one touching the animal's leg insists it's like a tree. Empirical evidence clearly indicates economic growth follows financial inclusion. Financial Inclusion has the capability to provide long needed growth to the financial sector. It can very well be that road which India needs to travel to attract global market players into the country with employment and business opportunities.

Credit to undesirable but profitable

Apart from poverty alleviation and literacy, Credit of late became one of the major ingredients to boost the economy. With majority of people in rural areas, with no formal banking system, there is huge growth potential. The business of banking sector can see new heights, if they could penetrate themselves in the rural areas. The daily/monthly wage earners are simply excluded from the financial sector; they spend their entire income on consumption with no savings. They just had to mobilize the savings of otherwise ignorant rural dwellers into productive use in the form of investments. Dharavi, biggest slum of Asia, is also the wealthiest slum in the country. What it needs is just the identity, so as to bring that money productively in the economic system. This requires freedom from obduracy of financial world.

Small Pockets, huge potential

To be precise, financial inclusion is Rs.3500 crore opportunities. With significant mobile penetration among poor and rural masses, banks just have to design an integrated mobile banking solution for them, which shall even include teleconferencing awareness regarding the financial system. Moreover, with Government’s UID program, the customer acquisition cost drastically reduces; making the business model feasible. Financial Inclusion shall enable the banks to get deposits at a comparatively lower rate due to absence of stiff competition in this activity.

Social & Profitable

The main problem which India is facing today is lack of infrastructural development, due to inadequate investment. If the banking sector is successfully able to capture the savings of untapped rural and urban poor, this problem could be addressed to some extent. Almost every bank is in some way trying to incorporate financial inclusion in its agenda; as not only it reflects their contribution to the society but enhances the confidence of stakeholders on the bank being a Corporate Social Responsibility initiative; which in-turn brings them more business.

Microfinance with Macro opportunities

Microfinance is another successful venture which came out of financial inclusion. The total microfinance portfolio has grown more than fourfold in the last five years to more than 200 billion rupees, creating a whole new avenue for those in financial sector. Microfinance will even encourage the low-income individuals to use the bank’s credit facility to establish themselves. The scope of growth is immense; it just requires proper planning and right implementation framework.

Moral Consciousness

Every 12 hours, one farmer commits suicide in India. One of the several reasons of this is lack of financial support from the government, which prevents them from resorting to alternative occupation during slack agriculture season and also pushes them to take the help of ruthless moneylenders who entangle them in payment of huge interest charges. As death toll rises; food inflation and food crisis becomes prominent. With financial inclusion, these problems could be handled effectively. They provide us the sustenance of life (food); this is the least which we can do for them. It depends on our perception whether we take it as our responsibility or as an obligation.

From Obligation to Opportunity

We start financial inclusion as an obligation and then slowly it turns into a sustainable opportunity. Initially, costs shall be greater than revenues, but as this financial model establishes itself it becomes profitable. With financial inclusion, not only are the financial sector of the country is able to strengthen itself but also contribute back to the society. The poor shall get a chance to stand on their own feet; making them free from the clutches of unorganized money lenders. The poor gets themselves into debt-trap which continues to squander all their money in debt servicing, never allowing it to reach the economy in the efficient way through formal financial intermediary system.

Financial Inclusion is being taken very seriously by the Government, providing various incentives and support to the businesses engaged in the same. They are even allowed to design their own business model for the same taking into consideration their comparative advantage. With money in the hands of poor and underprivileged, they shall get a chance to contribute towards the economy by emerging as small entrepreneurs. As their business flourish, banks gets more business in form of deposits and accounts. Boosting the business opportunities will increase the gross domestic product, which will be reflected in our national income and consequently in the allied business activities of insurance and other companies in the financial sector. Financial inclusion service shall have the capability to become a cash-cow for the banks and other business engaged in it, but it requires patience and commitment to lift up the underprivileged.


Financial inclusion shall be a win-win opportunity for the poor, for the banks and for the nation. Due to growing income and improving awareness level, aspirations of the poor continue to rise exponentially. It is entirely upon the banks and others in the financial sector how to convert what they see as a dead-weight obligation into an exciting opportunity and move on aggressively with financial inclusion. The ultimate aim of financial inclusion shall be complete only when underprivileged are converted into micro-entrepreneurs across the country. Financial Inclusion shall always remain a journey and never a destination.

RBI aspires to achieve 100% financial inclusion in India. But the duty lies not only with the government and regulators but also with the service providers and end-customers by exploring the paradigms of opportunities.

“Banking on the poor can actually be a rich business proposition”

Dr. D. Subbarao, Governor, Reserve Bank of India

The Article has been authored by Harsh Arya, XIMB


  • http://en.wikipedia.org/wiki/Financial_inclusion
  • http://rbidocs.rbi.org.in/rdocs/Speeches/PDFs/FIC060911DG.pdf
  • http://articles.economictimes.indiatimes.com/2012-05-19/news/31778107_1_financial-inclusion-dharavi-visa
  • http://www.thehindubusinessline.com/opinion/article3473538.ece
  • http://www.cii.in/PolicyAdvocacyDetails.aspx?enc=Jrm2TfD6jjcPaihTEvxtziCbm4fT5tDN02X3GEbI2rmvLAxUgTkn74jZJuQ/JVoIt/AkxUcftv3EsnlEuZx64A==
  • http://rbi.org.in/scripts/BS_SpeechesView.aspx?Id=452
  • http://www.business-standard.com/india/news/financial-inclusion-india-scores-poorlyglobal-stage/484232/
  • http://www.thehindubusinessline.com/industry-and-economy/banking/article2604152.ece

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