Chapter 1 .

Chapter -1
Introduction
 Background of the study :
Background of the StudyFinancial inclusion is a term that has multidimensional meanings.

(Thouraya Triki & Issa Faye,2013). Financial inclusion or inclusive financing encompasses
initiatives from both the supply(access) and demand (usage) side within the financial sector.
The key indicators of financialinclusion include; accessibility usage and quality of financial
services to low income andvulnerable households.
(Demirguc-Kunt and Klapper, 2013 World Bank Report No 6416). Theprincipals of financial
inclusion include access, consumer financial education, innovation, usage,quality, diversity
and simplicity (South African Banking Association, 2013).The concept of financial inclusion
has grown over the last 5 years to encompass a combination offinancial access, financial
capability and engagement with the financial system (Anamitra Deband Mike Kubzansky,
2012). It recognizes that poor people and small enterprises requirefinancial services such as
savings accounts, loans, insurance, payments, pension plans, andremittance facilities that
can help them generate income, invest in opportunities and strengthenresilience to
economic setbacks. The services must be at reasonable cost and provided by
diverseresponsible and sustainable institutions. There are many barriers to financial
inclusion such as; geographic distance, lack of financialinfrastructure, restrictive regulations,
governance failures, and lack of suitable products that caterfor the needs of poor people.
Various countries have dealt with the barriers in different ways.Financial inclusion is a
means to an end and not an end in itself (Global Financial Inclusion(Global Findex). It ceased
from being a fringe subject to a driver of development, povertyeradication and wealth
creation. (Alfred Hanning, 2013)Financial inclusion has an impactfuleffect when combined to
basic services. Credit and savings for example can help poor ruralwomen obtain improved
cooking stoves, solar panels , safe and decent housing, connections toclean water, health
and education for their Children.
 Objective of the study :
 Financial Inclusion can help the society and the economy. Financial Inclusion has the
ability to generate positive externalities: it leads to increase in savings, investment
and Thereby, spurs the processes of economic growth.
 It also provides a platform for inculcating the habit of saving money, especially
amongst The lower income category that has been living under the constant shadow
of financial Duress, mainly because of absence of savings, which makes them a
vulnerable lot.
 Presence of banking services and products aims to provide a critical tool to inculcate
The savings habit. It also creates avenues of formal credit to the unbanked
population Who are otherwise dependent on informal channels of credit like family,
friends and Moneylenders.
 Availability of timely, adequate and transparent credit from formal banking channels
will Allow the entrepreneurial spirit of the masses to increase outputs and prosperity
in the Countryside. It will open the doors of formal remittance facilities to the low
income and Unbanked populace who, presently, are forced to use all kinds of
informal and costly Ways of sending money from one place to another.
 Financial Inclusion has now been viewed as a remedy to plug gaps and leaks in
Distribution of government benefits and subsidies through direct benefit transfers to
Beneficiaries’ bank accounts rather than through subsidizing products and making
cash Payments.
 Thus, on the whole, Financial Inclusion has the potential to bring in the unbanked
Masses into the formal banking system, channelize their savings, stoke their
Entrepreneurial ambitions by making available credit and thus give a fillip to the
Economy.
 Statement of the problem :
Every research paper describes the investigation of a problem: by adding

knowledge to the existing literature, by revisiting known observations, or by
finding concrete solutions. What contribution your publication makes to your
field or the scientific community at large depends on whether your research is
“basic” (i.e., mainly interested in providing further knowledge that researchers
can later apply to specific problems) or “applied” (i.e., developing new
techniques, processes, and products).
In any case, a research proposal or research paper must clearly identify and
describe the “problem” that is being investigated, so that the reader
understands where the research comes from, why the study is relevant, if the
applied methods are appropriate, and if the presented results are valid and
answer the stated questions. This is known as the “statement of the problem.
Lack of financial inclusion is costly to society and the individual, he opined
adding that, “As far as the individual is coconnecte
 Scope of the study :
Scope of the financial inclusion is not limited to only banking services, but also
extends to other financial services such as insurance, equity products and
pension products, Minister of State for Finance and Corporate Affairs, Arjun
Ram Meghwal, has said.
In an article penned by him on “Financial Inclusion in Rising India” the Minister
said: “Thus, financial inclusion is not just about opening a simple bank account
with a branch in an unbanked area.
The government is committed to its target of increasing the inclusion of every
household in the financial system so that the masses can get all the legitimate
benefits, and the funds mobilised from the people not earlier in the formal
channel could also be brought in the formal channel, he wrote adding that
“thereby giving the economy of the country an extra thrust to lead the path of
growth.”
Lack of financial inclusion is costly to society and the individual, he opined
adding that, “As far as the individual is concerned, lack of financial inclusion
forces the unbanked into informal banking sectors where interest rates are
higher and the amount of available funds much smaller. Because the informal
banking structure is outside any legislative framework, any dispute between
lenders and borrowers cannot be settled legally.”
 Limitations of the study :
One of the key factors which prevent the unbanked from getting access to
basic banking services is the lack of formal identification documents. In most
countries, a proper ID is required before an individual can open a bank
account. Ids are also needed for claiming social benefits and the transfers of
funds.
The Indian financial and banking eco-system has undergone and is undergoing
a major transition with the advent of digital finance initiatives across lending
and saving products. Financial inclusion has gained importance as a means to
provide greater access to financial services including savings, deposits,
payments and transfers, credit and insurance at affordable cost, increasingly
with the help of technology. Furthering financial inclusion is regarded as an
important factor to increase opportunities and reduce vulnerabilities for those
belonging to economically weaker sections. Similarly access to formal credit
systems for micro enterprises is seen as critical for inclusive economic growth.
The Indian government and the RBI have been at the forefront of advancing
financial inclusion as well as technology led solutions for enhancing access and
use of financial services (Jan Dhan Yojna, Aadhaar enabled payments, DBT
linkage to bank accounts).
 Keywords :
1. Employment
2. Finance
3. Design
4. Inclusion
5. Heritage
6. Culture
7. Agency
8. Financial inclusion
9. Assessibility
10. Document analysis
11. Esat
12. Business
13. Terminates
14. Fiminism
15. Document
16. Central group
17. Various businesses
 What Is financial inclusion ?
Financial inclusion refers to efforts to make financial products and services accessible
and affordable to all individuals and businesses, regardless of their personal net
worth or company size. Financial inclusion strives to remove the barriers that
exclude people from participating in the financial sector and using these services to
improve their lives. It is also called inclusive finance.
 Financial inclusion is an effort to make everyday financial services available to
more of the world’s population at a reasonable cost.
 Advancements in fintech, such as digital transactions, are making financial
inclusion easier to achieve.
 However, the World Bank estimates that some 1.7 billion adults worldwide
still lack access to even a basic bank account.
Financial inclusion is a method of offering banking and financial services to
individuals. It aims to include everybody in society by giving them basic financial
services regardless of their income or savings. It focuses on providing financial
solutions to the economically underprivileged. The term is broadly used to describe
the provision of savings and loan services to the poor in an inexpensive and easy-to-
use form. It aims to ensure that the poor and marginalised make the best use of
their money and attain financial education. With advances in financial technology
and digital transactions, more and more startups are now making financial inclusion
simpler to achieve.
 Recent evidence on macro economic effects :
Since financial inclusion is a multidimensional concept, its macroeconomic effects depend

on its Nature. This paper examines the linkages of financial inclusion with economic growth,
financial and Economic stability, and inequality; it offers three key policy-relevant findings.
First, financial inclusion increases economic growth up to a point. Greater access of firms
and Households to various banking services, as well as increasing women users of these
services, lead to Higher growth. Further, sectors dependent on external finance grow more
rapidly in countries with Greater financial inclusion. However, the marginal benefits for
growth wane as both inclusion and Depth increase. As such, these benefits could be low,
and even negative, for some advanced Economies. Second, new evidence shows that
financial stability risks increase when access to credit is expanded Without proper
supervision. Financial buffers decline with broader access to credit, other things Being equal.
In countries with weaker supervision, the erosion of buffers is larger. On the other hand,
Countries with strong supervision could see some financial stability gains from higher
inclusion. The Paper also reveals large supervisory gaps across countries, signaling the
potential risks to financial Stability from an unchecked broadening of access to credit. And
finally, in contrast to credit access, increasing other types of access to financial services does
Not impact financial stability adversely. Increasing access to automated teller machines
(ATMs), Branches, and transaction accounts fall in this category. Moreover, closing gender
gaps in account Usage and promoting diversity in the depositor base would help to improve
growth without Impairing financial stability. Therefore, these services can be promoted
extensively, from a financial Stability perspective. Overall, financial inclusion can meet
multiple macroeconomic goals, but macroeconomic gains wane As both financial inclusion
and depth increase, and there are trade-offs with financial stability.

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Chapter -1

Background of the StudyFinancial inclusion is a term that has multidimensional meanings.

 Statement of the problem :

Every research paper describes the investigation of a problem: by adding

 Scope of the study :

 Limitations of the study :

 Recent evidence on macro economic effects :

Since financial inclusion is a multidimensional concept, its macroeconomic effects depend

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