WORLD ACADEMY OF INFORMATICS AND MANAGEMENT SCIENCES
ISSN : 2278-1315
leveraging on IT. However, illiteracy, low income savings
Financial inclusion and bank stability
and lack of bank branches in rural areas continue to be a
roadblock to financial inclusion in many states and there is
The theoretical and empirical evidences on the link between
inadequate legal and financial structure.
financial inclusion and bank stability are limited. Banking
Several Startups are working towards increasing Financial
literature indicates several potential channels through which
Inclusion in India by organizing various large unorganized
financial inclusion may influence bank stability. A recent
sectors where payments primarily happen in cash, instead of
study has appeared in Journal Economic Behavior &
a bank transaction.
Organization finds a robust positive association between
financial inclusion and bank stability. The authors show that
Recognizing that technology has the potential to address the
the positive association is more pronounced with those banks
issues of financial inclusion through outreach and credit
that have higher retail deposit funding share and lower
delivery in rural and remote areas in a viable manner, banks
marginal costs of providing banking services; and also with
have been advised to make effective use of information and
those that operate in countries with stronger institutional
communications technology (ICT), to provide doorstep
quality.
banking services, where the accounts can be operated by
even illiterate customers by using biometrics, thus ensuring
Progress and challenges of financial inclusion
the security of transactions and enhancing confidence in the
banking system.
The need for financial inclusion globally is indisputable.
Beyond the potential of being able to uplift the financially
underserved poor from poverty and inclusive financial system
FINANCIAL INCLUSION IN TANZANIA
With a population of 55.57 million people and only 19% of
will contribute towards greater social and economic stability.
its population enrolled into an account with a formal bank,
The fundamental objective of financial inclusion is inclusive
Tanzania remains largely unbanked. Poverty alleviation is
growth. Financial inclusion is one of the important
often linked with a given population’s access to formal
mechanisms for all participants in the economy to attain their
banking instruments, and mobile money can serve as a
true productive potential. Advances in technology, new
crucial bridge for offering savings, credit, and insurance to
products and services and innovative business models have
Tanzania’s rural population.
been driving rapid transformation across the globe’s financial
inclusion ecosystem.
In 2006 just 11% of Tanzanians had access to a financial
account, but with the advent of digital financial services that
The relationship between financial inclusion and equitable
number has increased to over 60%. The current situation in
growth has also been acknowledged, and major global
Tanzania has improved steadily over the past 12 years with
platform, including the United Nation’s Sustainable
the introduction of mobile money by Tanzania’s main
Development Goals, have incorporated the objective of
telecom providers. The quick expansion of financial
broader access to financial services. Likewise, policy leaders
inclusion in Tanzania is almost entirely due to the
and financial authorities all around have been making every
proliferation of mobile banking options. While a recent
effort to build the enabling conditions for inclusion. Their
cooling effect has taken place due to a government
endeavors are complemented by the experimentation of
crackdown on counterfeit SIM cards, over half of Tanzania's
services provider; banks, non-banks, fintechs and payments
population has access a degree of financial services through
companies. The aim is to provide previously excluded
mobile banking.
populations access to financial services to improve their
livelihoods.
Tracking financial inclusion through budget analysis
It should be understood that a number of benefits are accrued
While financial inclusion is an important issue, it may also
to the economy through financial inclusion. These are:
be interesting to assess whether such inclusion as earmarked
in policies are actually reaching the common beneficiaries.
It is an important instrument to lower income inequality in the
Since the 1990s, there has been serious efforts both in the
economy. Low income individuals are often those unable to
government agencies and in the civil society to monitor the
access financial services, and once access is provided, these
fund flow process and to track the outcome of public
individuals have bigger potential to improve their income
expenditure through budget tracking. Organizations like
levels.
International Budget Partnership (IBP) are undertaking
global surveys in more than 100 countries to study the
More financial resources become available for efficient
openness (transparency) in budget making process. There
intermediation and allocation. More financial stability may
are various tools used by different civil society groups to
arise if financial activity goes from unregulated to regulated
track public expenditure. Such tools may include
institutions.
performance monitoring of public services, social audit and
public
accountability
surveys.
In
India,
the
Access to finance encourages startup enterprises that often
institutionalization of Right to information (RTI) has been a
contribute to employment generation.
supporting tool for activists and citizen groups for budget
tracking and advocacy for social inclusion. This is
Financial inclusion also contributes to the growth of the real
encourage for others countries to be adopted
economy by generating higher productivity in agriculture and
SMESs especially those owned and managed by women, and
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ENDEAVOR 2019 | WAIMS ACADMIC PRESS
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