Rising global inequality is one of the most serious social and economic challenges of the 21 century, and it has been exacerbated by the COVID-19 pandemic. While inequality is a global challenge, it is often felt more acutely in developing countries right from a larger informal sector, greater regional divisions, wider gaps in educational access, and more significant obstacles to employment for women. Financial inclusion is frequently considered an important factor in closing these gaps while also promoting better socio-economic outcomes.
Financial inclusion is becoming a top priority for governments and, as a result, will likely become more important to businesses and investors. Finance and technology integration is accelerating financial inclusion and creating compelling investment options in fast-growing economies. Improving the financial status of the country’s people is the very first step to driving the change and here’s how financial institutions are striving for it.
Why Financial Inclusion Is An Opportunity for Banks?
Banks’ strategic agendas have included two seemingly contradictory priorities over the last decade. On the one hand, repairing their reputations has been an ongoing imperative in the aftermath of high-profile scandals, rising public scepticism, and the emergence of compelling new players and services in the industry. Growth and profitability, on the other hand, have risen to the top of the priority list as the industry has recovered from the global financial crisis.
With opportunities all over the world, prioritising those with the greatest social impact and/or financial returns is a good place to start. Financial inclusion will be most beneficial in markets that embrace technology-led innovation and have a straightforward and supportive policy approach to financial stability. When focusing on improving their investments in financial inclusion, banks should look for potential indicators.
How India’s Economy Is Likely To Strengthen With This Change?
India is one of the fastest-growing markets for financial inclusion, thanks to government initiatives and public-private partnerships. The PM Jan Dhan Yojana (PMJDY) scheme, priority sector lending directives to all financial institutions, and the government’s Unified Payments Interface (UPI) platform are all examples.
The JD scheme allowed Indians to open a Jan Dhan bank account using the Adhar biometric ID system. This, combined with rapidly increasing mobile usage, has accelerated digital adoption. As a result, as of May 2021, PMJDY had served 424 million Indian citizens, including 234 million female customers. In addition, the scheme increased the number of financial services outlets in rural Indian villages from 67,694 in March 2010 to nearly 13 million by the end of 2020.
The introduction of the UPI, an instant real-time payment system, has also increased the use of cashless payments, with major telecom companies assisting in driving adoption.