The Role of Financial Inclusion in Sustainable Development Goals

Introduction

Financial inclusion has been the policy priority and is regarded as a significant tool for the development of the economy. It was instigated with the nationalisation of banks in the 1960s and with time, efforts were more focussed on the objective of inclusive growth in its eleventh and twelfth five-year plan and had the target to bring excluded segment of the society under the formal financial umbrella. Various other initiatives were taken such as General Credit Cards, Pradhan Mantri Jan Dhan Yojana (PMJDY), Kisan Credit Cards, adoption of Business Correspondents (BCs) and the major revolution of digital payment system came in to force which pushed financial inclusion towards the centralised and formal system. Microfinance institutions have also taken a noteworthy step forward and played a vital role in improving inclusion at the ground level.

India and Financial Inclusion

The Global Findex data (2017) revealed that India has shown progress with time and people are included in the financial system. The report shows that 80 per cent of people in India have access to banking services in comparison to 53 per cent in 2014. The participation of women also increased from 43 per cent in 2014 to 77 per cent in 2017 in availing of financial services. Jan Dhan Yojana, Aadhar and Mobile number (JAM) was another initiative that enables Direct Benefit Transfer (DBT) to the unprivileged people who had Jan Dhan Yojana (JDY) accounts. However, by just having an account in a bank, the objective of financial inclusiveness cannot be attained. The usage of financial services is the major concern which will in turn help to overcome unexpected emergencies and play an influential role in inclusive growth and economic progress.

Financial inclusion and Sustainable Development Goals

The new set of goals known as Sustainable development goals were given in 2015 by United Nations General Assembly. The purpose of SDG’s which are to be achieved by 2030 will help in achieving a sustainable future for one and all by eradicating the problems of poverty, inequality, gender gap, protecting the environment and so on. Despite the fact that financial inclusion is not the direct goal of sustainable development but the use of financial services will have spillover effects on other factors. So financial inclusion has been recognised as a core driver in achieving seven out of seventeen sustainable development goals which are explained as follows:

Eliminating Extreme Poverty (SDG 1) – This goal can be attained when people have access to financial services and can avail basic amenities by saving the money for contingencies. Increase in savings will benefit in smooth consumption, better health facilities, investment in education etc and will help people to attain a standard of living.

Reducing hunger and promoting food security (SDG 2) – Financial services can directly help the farmers in increasing their production to meet the needs of the population. Access to insurance facilities will make them invest in more risky investments and help them in earning more.

Good Health and Well-being (SDG 3) – Formal financial services will enable people to overcome from health crisis which otherwise results in taking loans from informal sources and ending up in heavy debts. Health insurance products will give more safety in case of contingencies.

Fostering Quality Education (SDG 4) – The role of education is very important in the economy’s development. Access to financial services will improve the gross enrolment ratio and hence will reduce child labour. The improvement in the literacy rate will help people in understanding the importance of the formal financial system and will improve their standard of living.

Promoting Gender equality (SDG 5) – To achieve these goals women should have equal participation in economic and social activities. So, giving them equal opportunities to access financial services will help in improving their decision-making capability and will remove the gender gap.

Decent Work and Economic Growth (SDG 8) – Inclusion of unbanked people into the formal financial system will mobilise savings into profitable ventures and will improve job opportunities.

Industry, innovation and Infrastructure (SDG 9) – Easy access to financial services will facilitate investment opportunities and will promote industrialisation. Limited accessibility to financial services has been a constraint to the growth of infrastructure. The finance will help in expanding investment and will help in increasing MSME’s which will create job opportunities.

Conclusions

Hence, access to financial instruments for everyone can be a game-changer and will help in bringing some of the Sustainable Development Goals closer to reality. Thus, people who have bank accounts and with active users can get the credit facility to start or expand the business, invest in health, education and also manage risk and financial tremors which will definitely raise their overall quality of life.

In India, a series of government initiatives took place in improving the banking penetration which includes demonetisation, Jan Dhan Accounts, Adhaar cards and UPI (digital payment platform). Digital innovation has also proved as a boon in times of pandemic when the government transferred the money directly to the accounts of women and farmers under the DBT scheme. Various digital methods such as mobile banking, UPI, electronic funds transfer, payment cards etc has progressed over the years. Thus, Fintech can bring a great revolution in achieving the objective of inclusiveness and bringing the unbanked people under the blanket of the formal financial service.

References

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Written by Ms Sukhvinder Kaur, Research Scholar, Department of Economics, Faculty of Behavioural and Social Sciences, Manav Rachna International Institute of Research & Studies