Financial inclusion- problems in delivery

The financial inclusion can be seen to have two categories of barriers, viz., demand and supply side barriers. The factors that drive these barriers are listed as under:

Demand Side Barriers: 

The barriers arising out of the demand side factors may be characterized by the following features:

• Complexity: The excluded sections of the society find financial services complex in nature. They see no reason to go to the banks for conducting small transactions, which in their opinion, are time consuming and perplexing
• Place of living: Generally commercial banks operate only in commercially profitable areas and it would not be viable for banks to open branches in the remote villages. People who live in under developed areas find it very difficult to reach the nearest bank due to transportation cost and wages lost in travelling to the bank
• Limited literacy: Financial illiteracy and lack of basic education are prohibiting factors leading to non-access of financial services.
• Convenience and affinity towards informal sector: The excluded section of the society finds informal sector (such as the money lender or the pawn-broker) more user-friendly and accessible and as such, they develop an affinity which always drives them to approach this sector for their credit needs.

Supply Side Barriers: 

The supply side of barriers though not many, may be characterised by the following features:

• Legal identity: Inability to provide a legal identity such as voter id, residence proof, birth certificates, etc. often exclude women and migrants from accessing financial services.
• Outreach Issue: Very often, even if a person is bankable, the distances are too long for services & supporting the accounts at reasonable costs.

By: Deepak Garg