What is Financial Inclusion: Goals, Progress & Impact on the Economy

Key Insight
 

1. Banks help protect your savings and provide loans with fair interest rates, which is much safer than borrowing from loan sharks.
    
2. With insurance and bank protections, a single accident or theft will not take away everything you have worked for.
    
3. Mobile banking and UPI make it easy for people, even in villages, to save money, send funds, and pay bills without needing to travel long distances.

Financial Inclusion is a service provided by Financial Institutions ( Banks) to all individuals, offering useful and cheap financial services. It makes people save, borrow, and take care of their money.

Example: 

• Before Financial Inclusion:
   
  • Arun needed ₹1,00,000 for an emergency.
     
  • He took money from a moneylender at 5% interest per month (60% per year), which was too costly.
     
  • He kept cash at home, but a thief stole it ( there is no safety).

• After Financial Inclusion:
   
  • He took a bank loan at 11% per year, much cheaper.
     
  • Opened a savings account, and the money is safe and earns interest.
     
  • No fear of theft, the bank secures his money (Secure his Money by financial inclusion).

Financial inclusion helped Arun to save money, and if he requires an emergency fund, financial inclusion provided it at a lower rate.

Meaning of Financial Inclusion

Financial inclusion refers to the process of offering fundamental financial services to all people (those services that are easily accessible to the general public), including bank accounts, loans and insurance. It helps people to manage money safely, save money for the future and secure themselves from expensive debts.

Example:

1. Before Financial Inclusion

Arun’s story highlights the dangers of relying on informal loans and keeping savings insecure, a costly mix of high debt and high risk.
 

• Arun needed ₹1,00,000 for his daughter’s education.
   
• He borrowed from a local moneylender at 5% interest per month (which means 60% per year).
   
• He kept all his cash at home because he had no bank account.
   
• One night, a thief entered his home and stole his money.
   
• Arun was left with no savings and a huge debt.
   

Arun’s tragedy underscores the need for formal financial tools, affordable loans and secure savings to protect against exploitation and loss.

2. After Financial Inclusion

Arun’s shift from a risky informal loan to secure banking transformed his financial stability and future prospects.
 

• Arun opened a zero-balance savings account in a nearby bank.
   
• He took a bank loan at 12% per year (much cheaper than the moneylender and he saved a good amount of money).
   
• His money was safe in the bank, so don't worry about the money's safety. Now he is doing our work without stress.
   
• He even earned a small interest on his savings.
   
• Now, Arun can plan for the future without fear.
   

By choosing affordable bank loans and safe savings, Arun escaped debt stress, protected his money, and gained peace of mind for the future.

Comparison Table: 

This table contrasts Arun’s financial journey, from vulnerability with high-cost loans and unsafe cash storage to security with banking.
 

By switching to formal banking, Arun slashed debt costs, secured his savings, and gained the confidence to plan for a stable future.

Financial inclusion also helps Arun to save money, borrow safely, and secure his future. You all should get this opportunity.

Bonus Tip: Schemes like MUDRA loans offer small business loans without collateral based on your income or business plan.

Goals of Financial Inclusion

Financial Inclusion Goals are introducing financial tools to the poor people and those who live in rural areas. The main objective is to provide safe savings and take a loan without fear (fair loans) and give security against risks.

Example:

1. Arun’s Problems Before Banking Access

Raju’s reliance on informal loans and cash savings led to devastating losses, theft and disaster, with no safety net.
 

• He needed ₹1,00,000 for his small shop but had no bank account.
   
• He took a loan from a moneylender at 8% monthly interest (96% per year), which was too expensive.
   
• Saved cash at home, but thieves stole all his money, ₹25,000
  .
• He did not have any insurance plan, and lost money during floods without help.
   

His story underscores the critical need for affordable banking and insurance to protect against theft, disasters, and debt traps.

2. How Financial Inclusion Changed Arun’s Life

Arun shifted to formal banking and insurance, transforming his financial security and replacing risk with resilience.
 

• He opened a free savings account with a bank.
   
• Got a small loan at 14% per year to grow his shop.
   
• Money is now safe in the bank, so no worry about the money from the thief.
   
• Bought insurance which is now protected from floods, accidents.
   
• Now, he uses mobile banking to pay bills easily and securely.

By embracing affordable loans, safe savings, and insurance, Arun now runs his shop without fear, prepared for emergencies.

Table:
 

This table highlights Raju’s journey from financial vulnerability to security by embracing formal banking and insurance.
 

Financial inclusion provides a facility for people in rural areas with security, reduced costs and a possibility of a better life.

Bonus Tip: Use mobile banking, UPI apps, or local banking correspondents (CSC/BC points) in villages for deposits, transfers, and withdrawals.

Progress in Financial Inclusion

The concept of financial inclusion is extending banking facilities to the poor and rural population that were previously excluded. It assists them to save securely, receive equitable loans and defend their money.

Example:

1. Arun's Old Money Problems (5 Years Ago)

Five years ago, Arun faced severe financial risks due to informal practices,  no banking, costly loans, and a lack of safety nets.
 

• No bank account kept all the cash hidden at home.
   
• Borrowed from a moneylender in an emergency at 60% yearly interest.
   
• Lost ₹18,000 when his house was robbed.
   
• No insurance when his crops failed in a drought.
   

His losses from theft and disaster underscore the vital importance of formal financial access and insurance for stability and recovery.

2. Arun's Better Life Today

Arun’s financial transformation—from vulnerability to security—showcases the power of banking, fair loans, and insurance.
 

• Now has 2 bank accounts (savings and business)
   
• Got 3 small bank loans at fair rates to grow his farm
   
• ₹50,000 saved safely in bank (earns 4% interest)
   
• Insurance covers his crops, health and livestock
   
• Uses phone banking to send money to his children
   

With safe savings, insured assets, and digital tools, he now builds a resilient future for his family and farm.

Table:

This table shows Arun's inspiring journey from financial insecurity to stability by embracing formal banking and modern tools.
 

By switching to fair loans, insured assets, and digital payments, Arun now enjoys safety, growth, and a sense of peace of mind.

Arun has experienced financial inclusion, which has provided him with security, growth opportunities and peace of mind. This shows the actual progress of Financial inclusion in rural areas.

Conclusion

Financial inclusion has significantly improved Arun's life. Previously burdened by risky savings and exploitative debts, he now enjoys access to safe savings, low-interest loans, and effective mobile banking. 

This empowers him to manage his finances easily and secure his family's future. Arun's experience highlights how financial inclusion provides safety, opportunities, and hope, allowing people in rural areas to plan better lives. 

While more work is needed, his story shows that financial inclusion can create a secure and fairer future, one family at a time.

FAQs

Can I get a loan if I’m poor?

Yes! Banks offer small loans at low interest rates under government schemes. You don’t need big property, just proof of income or a business idea.

What if I can’t repay my loan?

Banks will first try to help you with easier repayment options. If you still struggle, talk to them early; they may adjust your loan terms.

How do I keep my money safe in the bank?

Banks insure deposits up to ₹5,00,000. Even if the bank has problems, your money is protected by the government.

Can I use a bank without going to a branch?

Yes! Use mobile banking, UPI, or ATMs to check balance, send money, and pay bills from home.

What is insurance, and do I need it?

Insurance protects you from big losses like crop failure, accidents, or illness. Small yearly payments can save you from huge debts later.

How can I learn more about banking services?

Ask your local bank agent, visit a branch, or call the toll-free number for free guidance. The government also holds village camps to help people.

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About the Author

LoansJagat Team

We are a team of writers, editors, and proofreaders with 15+ years of experience in the finance field. We are your personal finance gurus! But, we will explain everything in simplified language. Our aim is to make personal and business finance easier for you. While we help you upgrade your financial knowledge, why don't you read some of our blogs?