Financial Literacy – A preferred vehicle for Financial Inclusion
In recent times India
is one of the fastest growing economies of the world. Despite such a high
economic growth of the country the growth is mostly limited to urban areas and our
rural population seems to miss the benefits of this growth. At around 470 million
people or some 75 million rural households, India has the country has dubious distinction
of largest absolute number of world’s
poor as reported in Human Development Report (2006).
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| Financial Inclusion- Status Report |
The major contentious issue
remains to be the fact that the rural poor have benefited very little from the
fast pace economic growth. The lopsided growth story of the country has set the
trend for migration of rural poor to urban areas has increased the urban
poverty and migration related social problems. Faster globalization and limited
barriers in movements of people, information throws tremendous opportunities to grow but
this progress will likely to benefit the society only if the growth is
inclusive and the wealth distribution is not limited to fewer strata of social
groups. It is however reported through various literature, research, studies
that there has been every increasing widening gap between have and have not of
the society. This disparity of unequal growth distribution is attributed to one
major factor financial exclusion.
Financial exclusion can be mainstreamed through the inclusion of the rural sector of the society in the financial system, that is, financial inclusion. Rangarajan Committee (2008) on financial inclusion commented financial inclusion as the process of ensuring access to financial services as well timely and adequate credit at affordable cost at location of preference by the vulnerable group such as weaker sections and low income groups.
Financial
exclusion within our financial system is prevalent trend with an increased multiple
ranges of personal finance options for a segment of high and upper middle
income mostly urban population and simultaneously lack of even the most basic banking services to a significantly large section of the not
so well off or economically poor population. Large percentages of rural
population have significant issues in accessing formal financial services.
The extent of financial exclusion can be analyzed
from a matrix of supply of financial services and demand of financial services.
Supply of financial services comprise adequate supply of finance alternatives
like loan facilities, credit cards, debit cards, saving accounts, saving-investment
option, loan facilities in rural areas. The demand side of financial services
means the acceptability and use of financial products by the rural poor. The
demand side is propelled by the level of awareness and understanding the
advantages of the financial product that basically means adequate financial
literacy.
In a country like India with such large financially excluded population,
the geographic dimension like - inaccessibility, distances, and lack of proper
infrastructure hinder financial inclusion. The Census 2011 mentions as, in
India only 36% of the people use some kind of banking services. Financial
Inclusion study by The Boston Consulting Group as indicates that financial exclusion
reflects the stark socioeconomic divide that characterizes the emerging markets
like India.
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| Photo Courtesy-GOI |
