Thus, inclusive growth can be fostered through policies that reduce financial inequalities. Financial inclusion is therefore a key to economic growth. No systemic framework has emerged to guide policy and practice. It plays a very crucial role in the process of economic growth. Financial inclusion is a necessary condition for financial deepening, which helps to address the basic issue of growth with equity. The g20 made the topic one of its pillars at the 2009 pittsburgh summit g20 2009. Financial inclusion holds the promise of boosting growth and reducing poverty and.
Nexus between financial inclusion and economic growth. Financial inclusion in india an assessment1 overcoming poverty is not a gesture of charity. Committee on financial inclusion in 2008 rangarajan committee observed that financial inclusion to hitherto. It is in this background that present study intends to make a comprehensive analysis of various extents of financial inclusion in relation to inclusive growth in. Financial inclusion measures the delivery and reach of banking services at reasonable cost to the vast sections of low income and disadvantaged groups. Financial literacy can contribute to global economic growth and sustainable development by improving financial inclusion and wellbeing outcomes. For sustained and inclusive development to thrive, a great deal of innovation. The importance of financial inclusion arises from the problem of financial.
The concept of inclusive growth is multifaceted and has financial inclusion as one of its main building blocks. However, inclusive growth and development remain primarily an aspiration. What do we know about the link between financial inclusion. Pdf financial inclusion a way towards inclusive growth. In addition, the results suggest positive relationships between financial inclusion and inclusive growth. Financial inclusion and inclusive growth world bank documents. Further, we investigate how interaction among mobile penetration, financial inclusion, and growth is at play in countries where mobile financial services take hold. Banks financial inclusion growth opportunities will be the greatest in markets that embrace technologyled innovation, and which have a clear and supportive policy framework for financial stability. Khan 2 opines that policy makers in nigeria have identified financial inclusion as a. Inclusive growth is an objective that resonates globally today. Digital finance for financial inclusion and inclusive growth.
Inclusive growth is the buzz word for developing economies and key to inclusive growth is financial inclusion. Thus inclusive growth is the outcome as well as a process. The financial system in kenya still remains underdeveloped as compared to other developing economies. The center for inclusive growth advances sustainable and equitable economic growth and financial inclusion around the world. Indeed, the report begins by detailing the various dimensions of inequality that affect peoples wellbeing. Ever since indias independence in 1947, the biggest priority for the nation has been its economic growth, education for all and financial inclusion for the vast population of the country. Strong inclusive financial systems allow people with limited funds, an. This study is an attempt to integrate the results of existing literature on financial inclusion in india, role played by government, rbi and the banks in promoting inclusive growth and barriers and challenges on the demand as well as supply aspects of financial inclusion. There is growing evidence that appropriate financial services have substantial benefits for consumers, especially women and poor adults. Financial inclusion, poverty reduction and economic growth. Financial inclusion and economic growth by fgf ffg issuu. Making inclusive growth happen takes a comprehensive approach to examining growth, looking beyond traditional monetary indicators to dimensions that reflect the quality of life of all participants in an economy. An inclusive financial system mobilizes more resources for productive purposes leading to higher economic growth, better opportunities and reduction of poverty.
Financial inclusion is, after all, not a goal in itself but the means to many ends. Powering inclusive growth in emerging economies two billion individuals and 200 million businesses in emerging economies today lack access to savings and credit, and even those with access can pay dearly for a limited range of products. There is now a wealth of evidence from worldwide research that suggests financial inclusion plays a critically important role in poverty reduction, reducing income. The effects of fragility and financial inequalities on. Financial inclusion, poverty, and income inequality in. Inclusive finance for inclusive growth and development. Financial inclusion is an innovative concept which makes alternative techniques to promote the. The present paper focuses on to understanding inclusive growth phenomenon its need and financial. Financial inclusion and its impact on financial efficiency and. The pursuit of making financial services accessible at affordable costs to all individuals and businesses, irrespective of net worth and size respectively. Financial inclusion is a step toward inclusive development. A study of 37 developing asian economies by park and mercado 2015 showed that financial inclusion contributed significantly to reducing poverty and lowering income inequality in those countries.
The objective of the financial inclusion strategy fis peer learning group is to create a platform for afi members to develop and implement national financial inclusion strategies. On the other hand, in 2003, the rbi policy of financial inclusion was to provide access to financial service to the underprivileged could be earmarked as another bold initiative in serving the rural transects targeting inclusive growth. So when we push for inclusive growth, we are not advocating as role models either the former soviet union or present day north koreathose are examples of inclusive misery, not inclusive growth. Insight report the inclusive growth and development report. Financial inclusion as a driver for inclusive growth. As my colleague sonja put it, financial inclusion is an enabler of the sdgs. Financial inclusion for inclusive growth is a topic of contemporary. While india has made some noteworthy progress but on the. Inclusion is important, but so of course is growth.
The relationship between financial inclusion and gdp. Financial inclusion for inclusive growth of indiaa study of indian states 149 penetration bp, availa bility of the ban king services bs and usage of the banking system b u. Role of banks in financial inclusion in india sciencedirect. Financial inclusion is not only a result of economic growth but also its driver. In a new paper, we summarize the recent empirical literature on the benefits of financial inclusion and how they can contribute to inclusive growth and economic development. Leveraging technology technology plays the biggest enabler to the achieving the goal of financial inclusion. Financial inclusion in africa african development bank. Financial inclusion offers a platform for both low and high income earners to be integrated into the financial system for inclusive growth. Financial inclusion has been identified as a priority sector in the governments efforts to make the growth process more equitable and inclusive, and technology is playing a pivotal role in this process by reducing the cost of delivery while increasing the sectors efficiency and productivity. The strategy articulated the demandside, supplyside and regulatory barriers to.
The central bank of nigeria cbn adopted the national financial inclusion strategy nfis in 2012. Then we add to the model an indicator of financial inclusion to assess whether mobile phone penetration influences growth by improving financial inclusion. Thus, financial inclusion is needed for achieving inclusive growth, economic development, social development and equal opportunities to all sections of the society. Financial inclusion is one of the systems through which inclusive growth can be achieved in.
Financial inclusion is the process of ensuring access to financial services to vulnerable groups at affordable costs. Developing a financial inclusion index and inclusive growth in india. This study besides establishing the growth enhancing role of bankbased financial intermediation through empirical evidence has also found that access to finance by the poor is a prerequisite for poverty reduction in order to achieve inclusive growth. Financial inclusion, financial literacy and inclusive growth in africa. This study besides establishing the growth enhancing role of bankbased financial intermediation.
An overview of financial inclusion and rural development. Pdf financial inclusion entails access of the populace to financial services to tackle poverty, improve welfare and general standard of living. The term financial inclusion has gained importance since the early 2000s, a result of identifying financial exclusion and it is a direct correlation to poverty according to the world bank. Research shows that when people participate in the financial system, they are better able to manage risk, start or invest in a business, and fund large expenditures. Access at a reasonable cost for all households to a full range of financial services, including savings or deposit. Inclusive growth and financial inclusion issues and. The paper is organized around four major types of financial products offered through formal institutions. A larger slice of the pie for everyone calls for a bigger pie lipton, 2016. The data were collected on various dimensions of financial inclusion and. Financial inclusion is necessary for inclusive growth as it leads to the culture of saving, which initiates a virtuous cycle of. Financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs transactions, payments, savings, credit and insurance delivered in a responsible and sustainable way. The united nations defines the goals of financial inclusion as follows.
Inclusive finance is a key tool for inclusive development since it provides access to financial facilities in a fair. Request pdf digital finance for financial inclusion and inclusive growth this research contributes to financial inclusion campaigns initiated by the world bank as an operational solution for. Access to a transaction account is a first step toward broader financial inclusion. By fall 20, more than 50 nationallevel policymaking and regulatory bodies had publicly committed to financial inclusion strategies for their countries world bank 20a, afi 20. Bankbased financial intermediation for financial inclusion and. This document is published on the responsibility of the. The data analysis suggested negative relationships between fragility and inclusive growth in african countries. Balancing inclusive growth with financial stability i table of contents acknowledgements ii list of figures and tables ii 1 introduction 1 2 structure and role of the financial sector in the ghanaian economy 2 2. Financial inclusion and economic growth in india for the first time, global corporates realized the importance of indian it because of the y2k phenomenon. Furthermore, the impact of financial inclusion on financial efficiency and. In a nutshell, inclusive growth is a broad sharing of the benefits of, and the opportunities for, economic growth.
Financial inclusion for inclusive growth is a topic of contemporary significance and relevance. The study uses a modified version of sarma 2008 approach to compute an index of financial inclusion and inclusive growth. Womens economic empowerment through financial inclusion. The group is dedicated to supporting afi members in fulfilling commitments to the maya declaration and the g20 financial inclusion peer learning program. The inclusive growth and development report 2017 v over the past several years, a worldwide consensus has emerged on the need for a more sociallyinclusive approach to generating economic growth. Inclusive development is, instead, defined as development that includes marginalized people, sectors and countries in social, political and economic processes for increased human wellbeing, social and environmental sustainability, and empowerment 27,p. Inclusive growth is possible only through proper allocation and accessing of all the resources from top to bottom. It is the protection of a fundamental human right, the right to dignity and a decent life.