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Breaking barriers, building inclusion

GS Paper 3

Syllabus: Economy – Inclusive growth and associated issues/challenges

Source: Business Standard

Context: According to the latest Findex Report – 2021 by the World Bank, around one-third of adults still lack access to formal financial services.

 

About financial inclusion:

  • 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.

 

Importance of financial inclusion:

  • Financial inclusion has been identified as an enabler for 7 of the 17 Sustainable Development Goals.  
  • The G20 committed to advancing financial inclusion worldwide and reaffirmed its commitment to implement the G20 High-Level Principles for Digital Financial Inclusion. 
  • The World Bank Group considers financial inclusion a key enabler to reduce extreme poverty and boost shared prosperity.
  • Financial inclusion has been linked to up to 14% growth in the gross domestic product in developing economies.

Challenges in achieving financial inclusion:

  • Lack of access to basic infrastructure
  • Low financial literacy
  • Limited trust in formal financial institutions
  • Insufficient regulatory framework
  • High transaction costs
  • Lack of diversity in financial services

 

How India’s G-20 presidency helps in improving financial inclusion:

  • The theme of India’s G20 Presidency, “Vasudhaiv Kutumbakam,” underlines the message of equitable growth and a shared future for all.
  • The G20 Global Partnership for Financial Inclusion working group met under the grouping’s Global Partnership for Financial Inclusion (GPFI) initiative.
  • The G20 Financial Inclusion Action Plan (FIAP)aims to prevent future economic crises by encouraging conditions that promote its objectives of financial inclusion and stability.
  • Four major drivers have been highlighted in the new G20 FIAP to lay the groundwork for further progress toward financial inclusion.
    • the acceptance of the 2030 Agenda for sustainable development as a worldwide framework for sustainable development
    • rapid development and penetration of digital breakthroughs,
    • greater emphasis on underprivileged populations,
    • mainstreaming financial inclusion.

 

Financial Inclusion Schemes in India

  • Pradhan Mantri Jan Dhan Yojana (PMJDY)
  • Atal Pension Yojana (APY)
  • Pradhan Mantri Vaya Vandana Yojana (PMVVY)
  • Stand Up India Scheme
  • Pradhan Mantri Mudra Yojana (PMMY)
  • Pradhan Mantri Suraksha Bima Yojana (PMSBY)
  • Sukanya Samriddhi Yojana
  • Jeevan Suraksha Bandhan Yojana
  • Credit Enhancement Guarantee Scheme (CEGS) for Scheduled Castes (SCs)
  • Venture Capital Fund for Scheduled Castes under the Social Sector Initiatives
  • Varishtha Pension Bima Yojana (VPBY)

 

Insta Links:

Financial Inclusion

 

Mains Link: UPSC 2016

Pradhan Mantri Jan Dhan Yojana (PMJDY) is necessary for bringing the unbanked to the institutional finance fold. Do you agree with this for the financial inclusion of the poor section of Indian society? Give arguments to justify your opinion.

 

Prelims Link: UPSC 2015

Pradhan Mantri Jan-Dhan Yojana’ has been launched for

(a) providing housing loans to poor people at cheaper interest rates

(b) promoting women’s Self-Help Groups in backward areas

(c) promoting financial inclusion in the country

(d) providing financial help to the marginalized communities

Answer: C