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May 1, 2014

Financial inclusion Essay for Class 12

(605 Words):Financial inclusion is the discharging of financial Services to low-income group of people or unbanked people and to a section of disadvantaged sections of society at an affordable cost. 
That means provision of saving or  deposit services, payment , transfer , loans, credit and insurance services is the basic goal of financial inclusion.
In rural area financial services is still unreachable in most of the developing nation. It is assessed that the financial exclusion is one of the reason for  world wide poverty of a section of the disadvantaged people. 
The fear of paper works and documentation had been a big barrier to bring low-income group of people in banking system.
But in recent time people are taking the advantages of financial services. This has become   viable because of strong and feasible effort of government of respective countries and also due to growth in education system and also because of new thinking and confidence of the parents in education . The role of AFI also cannot be ignored for guiding various countries with its unique policies.
Financial inclusion in India: If we analyse the reason of disparities in India. Then  it becomes evident that financial exclusion of certain group of people is one of the factors of their low income and poverty. Poor people remained poor and became pauper as they didn't get basic financial services at an affordable cost. So they had been excluded from banking system for a long time and  they have been trapped somehow by money lender by lending few and forced to pay interest ; which was used to be many times of the principal. Thus they are thrown in the vicious circle of poverty. The low-income households are excluded from financial inclusion because of red tappism activity of bank employ.The bank staffs were habituated to restrict unbanked people by demanding more paper works.  It kept these excluded people in fear and hesitation.
Government of India had been trying to include the excluded for many years, but partly succeeded to get strong solutions.  In this connection India started Grameen Bank (Grameen means rural) in 1976 launched by  Mohammad Younus Khan. In October1983 this project was transferred into an independent bank by government legislation. At present time India has 57 grameen banks with more than 17,000 branches across the country.
 In 2004 Reserve Bank of India(RBI)  set up the Khan commission to look into the financial inclusion and to submit recommendation. The recommendation of the commission was incorporated in the mid term review policy of 2005-06 to provide "no frill accounts" in which no deposit or minimum deposit will be needed. "Mangalam" is the first village where all households were provided banking facilities. Also General Credit Cards (GCC) were issued to the disadvantaged people with a view to provide them access of easy credit. 'No frill" bank accounts played better role to include maximum excluded people in recent time. No frill account, relaxation in Know Your Customer ( KYC) norms, Engaging  Business correspondents (BCs) and Business Facilitators(FCs), use of technology, Electronic transfers played  major roles in financial inclusion.

Few data: 
*Approximately 2.5 billion working-age adults globally have no access to the types of formal financial services delivered by regulated financial institutions

*The Alliance for Financial Inclusion (AFI) is the world's largest and most prominent network of financial inclusion policymakers from developing and emerging economies who work together to increase access to appropriate financial services for the poor.

*AFI was founded in 2008 as a Bill & Melinda Gates Foundation-funded project, supported by AusAid, in order to advance the development of smart financial inclusion policy in developing and emerging countries.
Source: wikipedia

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