Day 22 – Q 3.How does financial inclusion help in addressing poverty? Illustrate.
3. How does financial inclusion help in addressing poverty? Illustrate.
गरीबी को संबोधित करने में वित्तीय समावेश कैसे मदद करता है? उदाहरण देकर स्पष्ट करें।
Approach:
- Introduction
- Role of financial inclusion in reducing poverty.
- Challenges, steps taken by government and way ahead- small reference is required. Even though not asked explicitly in question, dealing with these aspects makes the answer comprehensive.
- Conclusion
Introduction:
Financial inclusion refers to the access to financial services like savings, insurance, credit etc. In line with SDG 1, to end global poverty, financial inclusion will be key. The 2030 Agenda seeks to guarantee human beings, especially those in vulnerable situations, the right to financial services, including microfinancing.
Role of financial inclusion in reducing poverty:
- When the poor are able to save, it is most often in the form of cash which can be all too easy to spend under stress. This leaves the poor vulnerable, as an unplanned health emergency, theft or loss can push people into total poverty.
- Access to social benefits availed by government like DBT, insurance policies.
- Reduced dependence on informal sources like moneylenders in times of need. Rates charged are high making the poor enter into vicious cycle of indebtness.
- Empowering women who, with a credit line, could undertake labor activities unthinkable without economic aid; increase consumption and investment, and thus grow revenues; and increase spending on other social aspects, such as preventive health.
- Promotes habit of savings which eventually helps in capital investment.
- Financial inclusion boosts confidence of poor as it brings them the feeling of being part of mainstream. The risk-taking ability also increases. This overall promotes entrepreneurship.
Challenges:
- Low financial literacy and lack of awareness.
- Poor infrastructure- Lack of banks and ATMs in remote areas.
Way ahead: The CRISIL Inclusix index’s readings for fiscal 2016 show financial inclusion has improved significantly in India, with the all-India score rising to 58.0 in fiscal 2016, compared with 50.1 in fiscal 2013.
The government has come up with schemes such as Jeevan Jyoti Beema, Sukanya Samriddhi, Kisan Credit Card, MUDRA etc to promote financial inclusion.
However, more needs to be done.
- Promoting digital and financial literacy.
- Strengthening the banking correspondent model.
- Infrastructure building- Banks, ATMs in remote and rural areas.
- Developing products catering to specific needs of the poor like micro-pension.
- Sensitization of bank employees while dealing with the poor.
Conclusion:
A combination of effective public policy, public-private partnerships and the thoughtful application of the latest technology can help deliver financial services to all including the poor.
Best answer: only ias
