Financial inclusion tools and way forward

Financial inclusion has been increasingly recognised as an important instrument for increasing savings habit, alleviating poverty, improving household welfare, and promoting micro and small business activities. Despite of ample opportunity yet, nearly 40 per cent of the adults (15 years and above) in the world do not have an account in a financial institution (World Bank 2015). In Bangladesh, currently supports a large number of financial institutions (57 Banks with around 10,000 branches and 33 NBFIs), both formal and semiformal, providing a range of different financial services such as savings, loans, remittances, money transfer etc to its population. 

But still the adult banking population remain low (less than 60per cent ). Here is the scope for development through financial inclusion.   
Though there is no universally accepted definition of financial inclusion but some well-known institutions tried to define Financial Inclusion in different aspects. The United Nations (UN) Millennium Development Goal Summit of 2010 defines financial inclusion as “universal access, at a reasonable cost, to a wide range of financial services, provided by a variety of sound and sustainable institutions.” According to the Consultative Group to Assist the Poor (CGAP), “financial inclusion means that households and businesses have access and can effectively use appropriate financial services. Such services must be provided responsibly and sustainably, in a well regulated environment.” (CGAP 2014).
Different studies and expert opined that financial inclusion requires provision of access to a range of financial products that goes beyond micro-credit to include savings, micro-insurance, payment facilities, remittances, money transfer, stressed the need for providing quality financial services at affordable prices in a convenient manner through a range of delivery channels including bank branches, non-bank institutions and insurance companies.  
Financial inclusion has several benefits for individuals and households and for the economy as a whole. Higher levels of financial inclusion increase both economic efficiency and equity. Moreover, financial inclusion can help the poor to manage their day-to-day needs, to better cope with risks, and to undertake investment opportunities that enable them to improve their income and assets. Bangladesh Bank has taken strong initiatives in the last few years to widen the coverage of banking services, especially by including the unbanked and disadvantaged section of the society in the formal financial system.Recent initiatives, such as the provision for 2.5 percent credit for agriculture, opening of more rural banking branches (1:1), having the post office conduct financial services, agent Banking, mobile banking and technology have also contributed to financial inclusion.  
 The role of the Bangladesh Bank as a facilitator of financial services, the diversity of financial institutions and services, encouraging technology based banking services, Mobile Banking, Agent Banking and infrastructure facilities, are among the key contributory factors for increasing the financial inclusion.
Despite the strong presences of NGOs in rural level still financial inclusion remain costly to the rural peoples. Banks and NBFIs can play vital role which will create a win-win situation for both service providers and receivers. Technological innovations, such as use of POS (Point of Sale) banking can help increase financial inclusion in the country by reducing the transaction costs of reaching out to remote areas. It is true that the transaction cost of taking financial services to un-banked communities is high due to various factors such as small pockets of communities, wide geographical spread, lack of manpower, and lack of supervision. The challenge for banks will be to identify cost-effective and user-friendly delivery channels. For instance, if the commercial banks use Agent Banking, a cost-effective approach could be a feasible solution towards Financial Inclusion. For further development financial literacy at a policy level, so that people would make use of techno based services and manage their finances to gain the maximum benefit, and concurrently introduce measures such as SMS banking in local languages to further promote banking in rural areas and reduce transaction costs.
The World Bank identified financial inclusion is becoming a priority for policymakers, regulators and development agencies globally. Financial inclusion has been identified as an enabler for 7 of the 17 Sustainable Development Goals. The G20 committed to advance 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 and has put forward an ambitious global goal to reach Universal Financial Access (UFA) by 2020.

The writer is Banker and Economic Analyst

Financial inclusion tools and way forward

Financial inclusion has been increasingly recognised as an important instrument for increasing savings habit, alleviating poverty, improving household welfare, and promoting micro and small business activities. Despite of ample opportunity yet, nearly 40 per cent of the adults (15 years and above) in the world do not have an account in a financial institution (World Bank 2015). In Bangladesh, currently supports a large number of financial institutions (57 Banks with around 10,000 branches and 33 NBFIs), both formal and semiformal, providing a range of different financial services such as savings, loans, remittances, money transfer etc to its population. But still the adult banking population remain low (less than 60per cent ). Here is the scope for development through financial inclusion. Though there is no universally accepted definition of financial inclusion but some well-known institutions tried to define Financial Inclusion in different aspects. The United Nations (UN) Millennium Development Goal Summit of 2010 defines financial inclusion as universal access, at a reasonable cost, to a wide range of financial services, provided by a variety of sound and sustainable institutions. According to the Consultative Group to Assist the Poor (CGAP), financial inclusion means that households and businesses have access and can effectively use appropriate financial services. Such services must be provided responsibly and sustainably, in a well regulated environment. (CGAP 2014). Different studies and expert opined that financial inclusion requires provision of access to a range of financial products that goes beyond micro-credit to include savings, micro-insurance, payment facilities, remittances, money transfer, stressed the need for providing quality financial services at affordable prices in a convenient manner through a range of delivery channels including bank branches, non-bank institutions and insurance companies. Financial inclusion has several benefits for individuals and households and for the economy as a whole. Higher levels of financial inclusion increase both economic efficiency and equity. Moreover, financial inclusion can help the poor to manage their day-to-day needs, to better cope with risks, and to undertake investment opportunities that enable them to improve their income and assets. Bangladesh Bank has taken strong initiatives in the last few years to widen the coverage of banking services, especially by including the unbanked and disadvantaged section of the society in the formal financial system.Recent initiatives, such as the provision for 2.5 percent credit for agriculture, opening of more rural banking branches (1:1), having the post office conduct financial services, agent Banking, mobile banking and technology have also contributed to financial inclusion. The role of the Bangladesh Bank as a facilitator of financial services, the diversity of financial institutions and services, encouraging technology based banking services, Mobile Banking, Agent Banking and infrastructure facilities, are among the key contributory factors for increasing the financial inclusion. Despite the strong presences of NGOs in rural level still financial inclusion remain costly to the rural peoples. Banks and NBFIs can play vital role which will create a win-win situation for both service providers and receivers. Technological innovations, such as use of POS (Point of Sale) banking can help increase financial inclusion in the country by reducing the transaction costs of reaching out to remote areas. It is true that the transaction cost of taking financial services to un-banked communities is high due to various factors such as small pockets of communities, wide geographical spread, lack of manpower, and lack of supervision. The challenge for banks will be to identify cost-effective and user-friendly delivery channels. For instance, if the commercial banks use Agent Banking, a cost-effective approach could be a feasible solution towards Financial Inclusion. For further development financial literacy at a policy level, so that people would make use of techno based services and manage their finances to gain the maximum benefit, and concurrently introduce measures such as SMS banking in local languages to further promote banking in rural areas and reduce transaction costs. The World Bank identified financial inclusion is becoming a priority for policymakers, regulators and development agencies globally. Financial inclusion has been identified as an enabler for 7 of the 17 Sustainable Development Goals. The G20 committed to advance 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 and has put forward an ambitious global goal to reach Universal Financial Access (UFA) by 2020. The writer is Banker and Economic Analyst