Objectives And Objectives Of The Objectives Of Financial Inclusion

The fact that banks control 97% of the world's money supply makes them a vital institution. Banks are the engine of our modern financial system and a source for economic growth. The bank's ability to create credit can have destructive effects; the Great Depression of 1929 and the Great Recession of 2008. In both cases, banks spurred on an asset bubble through overextending credit to aid the purchase of assets. The result was an economic collapse that wiped out wealth and reduced credit creation which stalled productive investments. The lessons of the two great economic collapse support the notion proposed by the author, that bank credit for transactions that do not contribute to the economy should be restricted.

269). There is no easy way for those with little money to begin earning interest on savings or obtain loans with reasonable interest rates: the banking community is failing the poorest people (Banerjee & Duflo, 2012, p. 269). Also, Banerjee and Duflo (2012) assert that medical and agricultural insurance are not favored by the poor in spite of the fact that they could benefit greatly from such products (269). Their proposed solutions come in the form of microcredit (to provide access to more reasonable loans), electronic money transfer systems (to reduce the fixed costs of saving), and rewarding people for making good financial decisions (either via markets or the government if needed) (Banerjee & Duflo, 2012, p. 270). The incentives could even be something unrelated, such as bed nets, which then help the recipients in more than one way (Banerjee & Duflo, 2012, p. 270). This would need to be coupled with government regulation so that unscrupulous individuals wouldn’t have a way to easily game the system (Banerjee & Duflo, 2012, p. 270).

There are some policy recommendations based the findings of this essay. It is a positive thing that enlarges the coverage of financial services, increasing the opportunities of access in financial services and activities. It will benefit for decrease the level of inequality. It claims that by allowing the poor an opportunity to get access into the financial

• Promote sustainable growth by supervising banks and other financial institutions to ensure the soundness of the nation’s financial system.

Financial markets are crucial to promoting greater economic efficiency by channeling funds from people who do not have a productive use for them to those who do. Well functioning financial markets are a key factor in producing high economic growth, and poorly performing financial markets, vice versa. Financial markets and intermediaries have the basic function of getting people together by moving funds from those who have a surplus of funds to those who have a shortage of funds.

4. The creation of a financial credit system would help states to improve their economy and promote activities to increase their developments. But if the credit system is managed by a powerful

* Direct finance: borrowers borrow funds from lenders in the financial market by selling them securities (no intermediaries)

The idea of microfinance business was pioneered in 1970s by Prof. Yunus in Bangladesh, later on followed by countries such as Bolivia, Indonesia and others. The idea was to setup a financial inclusion system which can benefit the poor and to prove that the poor can be creditworthy and can run productive microenterprises if adequate and applicable system is designed (Callaghan et al. 2007). As a result, microfinance innovation spread to different countries in the world and strongly targeted as tool of poverty alleviation and development priority to empower the poor. The industry has registered a tremendous growth since its emancipation, now it is an industry of more than 10,000 microfinance institutions which mobilize around US$70 billion assets and serves about 150 million customers around the world (Augustine, 2012).

The study by Sapovadia (2007) explores that the typical micro finance clients are self employed, household-based entrepreneurs and low income persons that don‟t have access to formal financial institutions and also lack business skills. Micro entrepreneurs face many huddles in getting started. They sometimes lack the skills necessary to manage the financial aspect of their business line and in large number of cases they indulge in particular business by default. Various micro enterprise development programs have helped micro entrepreneurs in achieving great success and growth. These micro entrepreneur development programs have immensely helped micro entrepreneurs, who look for collateral security, or are in capable to find such collateral needed to secure alone or those who have low credit. They providing them with training support, help in

Microfinance programmes are intended to reach poor segments of society as they lack access to formal financial services. It, therefore, holds greater promise to further the agenda of FI as it seeks to reach out to this excluded category of population. India has adopted the Bangladesh’s model in a modified form. The Apex-Bank NABARD started ‘SHG bank linkage programme’ during the last decade of by-gone century, is by far the major programme initiative without parallel in any parts of the world for achieving the FI. The programme has demonstrated across the country its effectiveness in linking banks with excluded category of poor segments of population. In this process role of NGOs in development is quite pronounced in providing the last mile connectivity as enablers and catalyst between the SHGs and Village level co-operatives/banks. This is also supplemented by the MFIs delivering credit. To alleviate poverty and to empower particularly women, the micro-finance has emerged as a powerful instrument to serve the objective of FI in India. With availability of micro-finance, self-help groups and credit management groups have also started in India. More importance is being given to SHGs, since the micro lending to the group rather than individual borrowers is more successful and in the process also making it to reach the goal of FI. All the members of the group are equally benefitted and also the repayment by each member is guaranteed by

Microfinance is the provision of small scale financial services to low income or unbanked people. It is about provision of “a broad range of financial services such as deposits, loans, payments services, money transfers and insurance, to the poor and low-income households and their farm or non-farm micro-enterprises” (Mwenda and Muuka, 2004:145) . This agrees with the Asian Development Bank (ADB) which defines microfinance as the provision of a broad range of financial services such as deposits, loans, payment services, money transfers, and insurance to poor and low-income households and their micro-enterprises . From the above definitions, microfinance is more than just provision of small loans also known as microcredit. It is about provision of various small scale financial services. Thus for this study, consistent with the above definitions, we use the term microfinance to mean the provision of small scale loans, savings, deposits, and other financial services to the poor. Institutions that provide these small (micro)

◙ The bank aims to help the fixed imcome group in rising standard of living through financing to consumers &

Financial inclusion started with zero balance account i.e. without frills. But later it was not fruitful to just have an zero balance account because there was no such services added to these accounts and people even forgot when they opened accounts in banks. Zero balance account couldn’t attract customers because there were no services attached to the account. Finally Rbi with the help of Govt. came with many schemes to attract people towards banks and provide them better financial services. And people also got attracted to these services and that’s why financial in is moving so fast in India.

Financial inclusion is help to the sustainable societal and economic improvement of the country. It helps to the empowerment of underprivileged, poor and women of the society with the mission of creation them self-reliant and well informed to take superior financial decisions. Financial inclusion takes into the involvement of vulnerable groups such as weaker sections of the society and low income groups, based on the extent of their access to financial services such as savings and payment account, credit insurance, pensions etc. financial inclusion implement to easy accessibility of financial services which allows maximum investment in business, education, insurance against risks, save for retirement etc. by the rural individuals and firms.(source: www.wikipedia.org/wikifiancialinclusion.html)

As per RBI guideline every bank will offer no frill account and various service and awareness program to promote financial inclusion program.