The term “Financial Inclusion” refers to efforts for providing financial services and access to adequate credit at affordable costs to the excluded sections of the society and low-income households where traditional finance lacks its reach. It is a result of findings of financial exclusion and its direct correlation to a country’s economic growth. Full financial inclusion is a state in which all people in the world can have access to quality financial services, at affordable prices, in a convenient manner, and with dignity.

As per a report by the World Bank, it is estimated that almost “70 percent of the adult population in developing countries, or 2.7 billion people, do not have access to basic financial services, like savings or checking accounts.” In Sub-Saharan Africa, only 12 percent of the population has bank accounts and in South Asia, it is 24 percent. In India, only 55 percent of the population has deposit accounts.

An all-inclusive financial system will boost efficiency and welfare by providing scope for safe and secure saving practices and by helping a wide range of financial services to the underserved segment of the society.

Financial inclusion is considered to be the core objective of many developing nations since the last decade but achieving an all-inclusive financial system still seems to be a daunting task.

Below is some handful of challenges on the path to financial inclusion:

  • Lack of financial literacy- It is one of the major challenges in establishing an all-inclusive financial system. The absence of basic education prevents people from following even simpler information on financial services. They lack knowledge even about basic products like insurance, bank accounts, cheque facilities, etc. This ignorance poses a challenge in facilitating financial services in rural and semi-urban areas.


  • Lack of formal identification documents- Another factor that prevents the urban poor from utilizing the financial services from formal financial institutions is the requirement of various document proof. The people in rural areas generally lack documents such as income certificate, birth certificate, address proof etc. The process of getting said documents is an expensive and time-consuming process that needs to be simplified.


  • Consumer Protection– While payment services like mobile money and e-money can further expand financial access, it’s important to establish secure and reliable platforms to protect data privacy and funds. To promote the usage of digital payments, it’s important to treat new customers fairly, disclose key product information adequately and build safety and reliability standards to allow customers to make informed decisions.


  • Usefulness- The opening of a bank account is the first step, not the end objective. Accounts must be useful and function as a gateway to other financial products such as savings, insurance, and credit. Most of the adults in developing countries having a bank account still remit money in cash or over-the-counter. Fintech companies can play a key role here in accelerating usage digitally.


  • Lower mobile & mobile financial services penetration- Mobile phones have the potential to significantly simplify transactions and play a vital role in extending financial inclusion. Mobile phone diffusion has increased swiftly in African countries and other regions of the developing world but still, there are nearly 1.7 billion unbanked customers with mobile phones. The reason behind this is the low penetration of smartphones and internet connectivity in rural areas. The people living in rural areas are still using 2G feature phones which is a roadblock in accessing financial services digitally.


  • Lack of strategic approach involving all stakeholders- Financial inclusion cannot happen without strategic partnerships. It includes actions for banks, payment networks, microfinance institutions, telecommunication companies, technology companies and consumer goods companies all of them should contribute. Currently, the stakeholders involved in the process are working in silos and there is a need to have an integrated approach.


  • Restrictive nature of the banking correspondent (BC) model- Traditional banks are not equipped to cater to the special needs of the segment.


Financial inclusion of underbanked masses is a major challenge in traditional banking methods but the rising technology can play an important role in improving the financial inclusion efforts. Increased penetration of smartphones and mobile financial services can help achieve an all-inclusive financial system. In fact, the recent achievements have shown the same, M-Pesa of Kenya has spread rapidly and has become one of the most successful mobile-based financial services. Along with technology basic financial education to the people living in rural areas is also important. The customer should know the answers to what, why and how.

An integrated approach and an effective partnership structure between stakeholders can bring together different elements of a complex system in an organized manner to facilitate the effective functioning of individual entities and the system as a whole. As far as traditional banking is concerned, more incentives should be paid to banking correspondents for creating awareness for the use of banking technologies as well as mobile phones, etc. that will also help in creating a big difference in the economy.

With the evolution of modern Fintech solutions, it can become an achievable target for institutions. The availability of low-cost devices and cheap internet packages has opened up huge opportunities for the rural population who have remained unbanked for ages.

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