Course Code: 508 Inclusive Finance

What is inclusive finance?

Financial Inclusion is the delivery of banking and financial services to disadvantaged and low
income segments of society at affordable costs. The primary objective to this policy is to provide
these services to the entire population without discrimination.

United Nations defines financial inclusion as the “access to the range of financial services at a
reasonable cost for the bankable people and farms”.

Inclusive finance includes but is not limited to microfinance. In laymen’s terms, inclusive finance
equals microfinance plus small business financial services.

Financial inclusion means credit for productive purposes, credit for healthcare emergencies, safe
means of remunerated savings, an easy way to make payments and remittances. It means
insurance, pensions, leasing and factoring, mortgages, and short and long term credit. It means
financial literacy and consumer protection.

Financial Inclusion Enables People to the Following Things

 Access financial markets

 Access credit market for productive purpose
 Learn financial matters ( financial education)

Financially Excluded Sections Largely Comprise Of the Following:

 Women
 Marginal farmers
 Landless laborers
 Self-employed and unorganized sector enterprises
 Migrants
 Senior citizens
 Socially excluded groups etc.

Benefits of Inclusive Finance:

A financial system becomes more efficient and functions better when it is more inclusive,
because an inclusive financial system provides more growth opportunities to more individuals
and entrepreneurs. Inclusive finance has many benefits. Following are some of the benefits
summed up.

1. Equal growth of society: An economy could become developed only when the society
grows up equally. Financial Inclusion helps the society to grow equally by including
disadvantaged and low income segments of society. In this way, it also helps to remove
the poverty from the society and ensures equal growth of society.

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Md. Saiful Islam, Lecturer-Finance and Banking- University of Barishal.
Course Code: 508 Inclusive Finance

2. Access to a full suite of financial services: Financial inclusion paves the way for
establishment of an account relationship which helps the poor to avail a variety of
financial products and services including savings products, loan products for
consumption and housing, short and long term credit, remittances, insurance and
payments.

3. Improve management of Finance: Access to appropriate financial services can

significantly improve the day to day management of finances. For example, bills for daily
utilities (water, electricity, gas, telephone) can be more easily paid by using cheques or
through internet banking, rather than standing in the queue in the offices of the service.

4. Easy Financial Transactions: Inclusive finance provides banking related financial

transaction in an easy and speedy way.

5. Safe & Easy Transfer of Money: Transfer of money can be done more safely and easily
through cheque, demand draft, or internet banking.

6. Reduce Cost of Capital: An inclusive financial system facilitates efficient allocation of

productive resources and thus can potentially reduce the cost of capital.

7. Low Cost of Fund Transfer: This also enables the customer to remit funds at low cost.

8. Services related to saving and financial products: People get safe saving along with
other related services like insurance cover, entrepreneurial loans, payment and settlement
facility etc.

9. Provided with quality: Services are convenient, affordable, suitable, provided with
dignity and client protection.

10. Increasing national income: our national income growth increases with increased
business opportunities.

11. Increased Employment and Business Opportunities: Financial access attracts global
market players to our country that result in increased employment and business
opportunities.

Roadblocks to inclusive Finance:

To reduce the breach that exists between unmet supply and demand requires overcoming diverse
barriers such as: accessibility, trust, relevance and usability, which are described below.

1) Accessibility: Refers to the existence of conveniently located infrastructure, to people’s

awareness of the existence of the service, to convenient hours of operation, and to affordably
priced products.

2) Trust: Refers to certainty that the institution and its services are trustworthy, and to

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Md. Saiful Islam, Lecturer-Finance and Banking- University of Barishal.
Course Code: 508 Inclusive Finance

knowledge and understanding of the functions of the products.

3) Relevance: Refers to providing products that are appropriate for the population in question.

4) Usability: Refers to a client’s intuitive, friendly and convenient interactive experience with
the service/product.

Besides, there are some other roadblocks to implement inclusive finance. Some of the problems
or roadblocks are listed below:

1. Limited Financial Literacy

2. Limited MFI capacity
3. MFI’s single-product approach
4. Limited understanding of client needs
5. Political interference
6. Lack of credit bureaus
7. Faulty product cost structure
8. Inadequate MF regulatory framework
9. Insufficient infrastructure
10. Inadequate client protection

Ways to overcome barriers of Financial Inclusion:

The following action agenda has been established by UN to move to full financial inclusion by
2020:

1. Financial education
2. Expanding product range by understanding client needs
3. Technology-enhanced delivery channels
4. Credit bureaus
5. Client protection
6. Institutional capacity building
7. A sound regulatory framework
8. Fully-inclusion financial institutions
9. Introducing and strengthening Agent Banking
10. Improving demand information

Financial Inclusion: Bangladesh Scenario:

Bangladesh Bank has instructed private banks to introduce new products and services under
financial inclusion. Some of these products and services are listed below

1. Bank account for farmers: A farmer can open an account by depositing BDT 10
(equivalent 12 cents only) at any state owned commercial and specialized bank
against national ID card/birth registration card and 'agricultural equipment assistance
card' issued by the Department of Agricultural Extension. More than 10 million

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Md. Saiful Islam, Lecturer-Finance and Banking- University of Barishal.
Course Code: 508 Inclusive Finance

accounts of farmers have been opened at State-owned Commercial Banks with an initial
deposit of BDT 10 (equivalent 12 cents only).

2. Bank account for unemployed youth: An unemployed youth can open a bank account
by depositing BDT 50 (equivalent 60 cents only) at any scheduled bank under National
Services Program.

3. Bank account for hardcore poor: A hardcore poor can open bank account by
depositing BDT 10 (equivalent 12 cents only) at any state owned commercial and
specialized bank against national ID card and registration card issued by the
Ministry of Food & Disaster Management. There will be no bindings for maintaining
minimum balance on the said account and banks shall not impose any charges/fees on
these accounts.

4. Banking service for physically handicapped people: Banks have been advised to
designate an official as 'Focal Point' at each branch of their bank with a view to
making the banking services beneficial and easily accessible to the physically
handi-capped people.

5. Bank accounts for Freedom Fighters: A freedom fighter can open bank account by
depositing BDT 10 (equivalent 12 cents only) at any state owned commercial and
specialized bank against national ID card and Payment Receipt Book for freedom
fighter's allowance. There are no bindings for maintain-ing minimum balance on the
said account and banks shall not impose any charges/fees on these accounts. Total
number of freedom fighters' accounts is 92,693 as of March 29, 2012.

6. Bank accounts for beneficiaries under Social Security Program: Beneficiaries under
Social Security Program can open bank account by depositing BDT 10 (equivalent 12
cents only) at any state owned commercial and specialized bank against national
ID card and Payment Receipt Book containing Pension Payment Order (PPO) for the
beneficiaries. There are no bindings for maintaining minimum balance on the said
accounts and banks shall not impose any charges/fees on these accounts. Total
number of accounts for Beneficiaries under Social Security Program is 25,80,668 as of
March 29, 2012.

7. Others:

 Bank account for distressed people

 Bank account for small life insurance policy holder
 Bank account for Aila affected people
 Loan to farmers of spice cultivation
 Agent banking
 School banking
 Mobile phone based financial services

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Md. Saiful Islam, Lecturer-Finance and Banking- University of Barishal.