Financial inclusion refers to delivery of financial services, including banking services and credit, at an affordable cost to the vast sections of disadvantaged and low-income groups who tend to be excluding.
Financial inclusion can lead to inclusive growth in following ways:
Formalization of economy: A well spread out financial system engenders economic activity by mobilizing savings into the formal financial system. This boosts overall GDP, thereby helping increase government’s expenditure on social welfare.
Remittance: FI provides an avenue to urban workers to remit money to their families in villages, thereby allows moving freely according to the availability of job opportunities.
Formal Credit: It helps poor clutches of usurious moneylenders.
Effective and efficient Social security: Ensuring that the poor have access to a variety of social security products, like micro-savings, micro-credit, micro-insurance, and micro-pension products. It can be done through schemes like Atal Pension Yojana.
Habit of saving: Financial Inclusion provides an avenue to the poor for bringing their savings into the formal financial system. There by promoting the habit of savings which overtime may help in capital formation for the poor.
Prevent Leakages and timely benefits: With government promoting DBT through JAM trinity, FI can help poor in availing benefits of various schemes like MUDRA yojana directly.