Financial Inclusions

Chapter Outlines

• Defining financial inclusions• Nepalese Case

Defining Financial Inclusion

• Financial Inclusion is the delivery of banking services at affordable costs to vast sections of disadvantaged and low income groups including households, enterprises, SMEs, traders.

Contd….

• Financial inclusion mainly focuses on the poor who do not have formal financial institutional support and getting them out of the clutches of local money lenders.

• Major Three Aspects Of Financial Inclusion Make people to:– Access financial markets– Access credit markets– Learn financial matters (financial education )

Model of Financial Inclusion

Financial Inclusion

Savings

Insurance

Affordable Credits/Fin

ancial Advise

Bank Accounts/Payments

and Remittanc

e

Financial products and services for increasing financial inclusion

• Savings facility• Credit and debit cards access• Electronic fund transfer• All kinds of commercial loans• Overdraft facility• Cheque facility• Payment and remittance services• Low cost financial services• Insurance (Medical insurance)• Financial advice• Pension for old age and investment schemes• Access to financial markets• Micro credit during emergency• Entrepreneurial credit

Financially Excluded People • Marginal farmers• Landless labourers• Self employed and unorganised sector enterprises• Migrants• Ethnic minorities and socially excluded groups• Senior citizens• Women• People living in remote area of the country like

Humla, Jumla etc.

Factors affecting access to financial services

• Legal identity • Limited literacy • Level of income • Terms and conditions• Complicated procedures • Psychological and cultural barriers• Place of living • Lack of awareness

Benefits Of Inclusive Financial Growth

• Growth with equity • Get rid of poverty• Financial Transactions Made Easy• Safe savings along with financial services • Increase in National Income• Becoming Global Player

Relationship between Financial Inclusion and Development Indicators

• Economic growth follows financial inclusion. In order to achieve the objective of growth with equity, it is imperative that infrastructure is developed with financial inclusion.

• Savings and credit accounts - indicators of financial inclusion.

• Per capita income - indicator of economic development

• Electricity consumption and road length -indicators of infrastructure development.

Status of Access to Finance in Nepal in 2009 and 2010

12

Fact Sheet of FIs of NepalFinancial Institutions as of May 2011

Commercial Banks 31

Development bank 89

Finance Companies 88Micro Credit Development- Banks 20

FI-NGOs 43

Financial cooperatives 8,000 Small farmers‟ cooperatives limited (SFCLs). 230

Savings and credit groups (SCGs)

Concentration of Commercial Banks ------------------------

Kathmandu Valley- 35.7%Hilly Area- 25.3%Terai- 39%

Region wise Gap on Financial Inclusion in Nepal

Nepalese Scenario• Around 30% of the Nepalese people live below poverty

line. • Only 29 % of the Nepalese population has access to

Banking services. • he rest 71 % are still deprived of bare minimum banking

services for which they are totally dependent on informal banking sources like private money lenders.

• Trailing behind all South Asian countries except Afghanistan on the financial inclusion front, Nepal provides 4.19 bank branches for every 100,000 adults. 

Some Efforts and Achievements• CBs, DBs and FCs are involved on indirectly on

promoting financial inclusion to meet their deprived sector lending requirements.

• Monetary policy 2010/11 requires CBs, DBs and FCs to invest at least 3%, 2.5% and 2% of their total loan portfolio on deprived sector either directly or through Microfinance Institutions (MFIs).

• Current supply of finance for the poor and dis-advantaged groups is estimated to be around Rs. 20,000 – Rs. 22,000 millions.