“Poverty is the deprivation of opportunity”, said economist Dr. Amartya Sen. Financial inclusion gives the financially weak the chance to change their economic circumstances and lead better lives.
Why does financial inclusion matter for the economic prosperity of a nation? Put simply, once the financially weak are part of the mainstream financial system, they have access to microcredit to generate additional income streams; to channel their savings into investments and create assets; to buy insurance products that protect them financially in times of disease, disability and death; and to help fund their children’s education.
In the last seven years, India has taken massive strides towards financial inclusion. When the first Global Findex Database was released by the World Bank in 2011, it stated that 40% of adult Indians had a bank account. An overwhelming majority of Indians, especially in rural areas, were financially weak and were effectively excluded from the formal economy. Seven years later, almost 80% of adult Indians have bank accounts, according to theGlobal Findex Databasepublished in April 2018.
Powering this dramatic rise has been a series of financial inclusion measures launched by the government. These include Aadhar, a biometric database that provides a unique identity to each Indian citizen; no-frills savings bank accounts called Jan Dhan; the direct transfer of social benefit payments into these Jan Dhan accounts; and a digital payment infrastructure called BHIM.
These are creditable achievements for the country. However, getting a unique identity, having a bank account and using digital payments are just the foundations of financial inclusion. Now these basics have been addressed, the government and private sector must take the next steps to build a superstructure of economic prosperity.