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World Bank releases Global Findex database 2021

GS Paper 3:

Syllabus: Financial Inclusion

 

Context:

World Bank’s Global Findex database surveyed how people in 123 economies use formal and informal financial services e.g., cards, ATMs, mobile phones, and the internet.

Global specific findings:

  • Account ownership: Globally, in 2021, 76 per cent of adults had an account at a bank or regulated institution such as a credit union, microfinance institution, or a mobile money service provider
  • Women empowerment: Mobile money has become an important enabler of financial inclusion—especially for women e.g., in Sub-Saharan Africa
  • High financial stress: Despite promising growth in account ownership and use, about half of adults in developing economies are worried about at least one area of financial stress e.g., an emergency fund for health.
  • Low financial literacy: About two-thirds of unbanked adults said that if they opened an account (excluding mobile money) at a financial institution, they could not use it without help.

India-specific findings:

  • Low access to formal banking in India and there is a lack of trust.
  • Aadhar contributed to account ownership in about 80% of adults (from 35% in 2011)
  • Drop-in fraud and leakage: Transitioning from cash to biometric smart cards has reduced leakage by 47% in pension payments.

 

Current Affairs

 

<strong>Financial Inclusion </strong>

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.

  • Financial inclusion has been identified as an enabler for 7 of the 17 Sustainable Development Goals.
  • The World Bank Group considers financial inclusion a key enabler to reduce extreme poverty and boost shared prosperity.

 

Insta Links

How to boost financial inclusion

 

Practice Questions

Q. Financial inclusion is increasingly being recognized as a key driver of economic growth and poverty alleviation the world over. Discuss the efforts being made by India in this direction. (250 Words)

 

Q. Consider the following statements: (UPSC CSE 2017)

  1. National Payments Corporation of India (NPCI) helps in promoting financial inclusion in the country
  2. NPCI has launched RuPay, a card payment scheme.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither1 nor 2

Answer: C

National Payments Corporation of India (NPCI), an umbrella organisation for operating retail payments and settlement systems in India, is an initiative of the Reserve Bank of India (RBI) and the Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007. RuPay and other card payment system comes under NPCI

 

Q. ‘The establishment of ‘Payment Banks’ is being allowed in India to promote financial inclusion. Which of the following statements is/are correct in this context? (UPSC CSE 2016)

 

Q. Mobile telephone companies and supermarket chains that are owned and controlled by residents are eligible to be promoters of Payment Banks.

  1. Payment Banks can issue both credit cards and debit cards.
  2. Payment Banks cannot undertake lending activities.

Select the correct answer using the code given below

(a) 1 and 2 only

(b) 1 and 3 only

(c) 2 only

(d) 1, 2 and 3

Answer: B

A payments bank is like any other bank but operates on a smaller scale without involving any credit risk. In simple words, it can carry out most banking operations but can’t advance loans (cannot lend) or issue credit cards.

 

Q. Which one of the following statements appropriately describes the “fiscal stimulus”? (UPSC CSE 2011)

(a) It is a massive investment by the Government in the manufacturing sector to ensure the supply of goods to meet the demand surge caused by rapid economic growth

(b) It is an intense affirmative action of the Government to boost economic activity in the country

(c) It is the Government’s intensive action on financial institutions to ensure the disbursement of loans to agriculture and allied sectors to promote greater food production and contain food inflation

(d) It is an extreme affirmative action by the Government to pursue its policy of financial, inclusion

Answer: B

Fiscal stimulus refers to increasing government consumption or transfers or lowering taxes, increasing the rate of growth of public debt. Supporters of Keynesian economics assume the stimulus will cause sufficient economic growth to fill that gap partially or completely via the multiplier effect.

Source: World Bank