December 17, 2019
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For the longest time, India has lurked in the shadows of economic disparity. We have often heard of the “rich getting richer, and the poor getting poorer” and have had an inherent urge to belong to the former. But in a progressive society, where the welfare of others resonates with the welfare of the country as a whole, self-mindedness is a dangerous outlook.
With the inflow of technology, which is globalization’s boon to India, the amount of people getting on with the bandwagon headed towards a more stable financial condition is tremendous.
Microfinancing is a banking service meant to reach out to the rural class of society, who are majorly depended on a meager source of income. There have been endless schemes and plans made to empower the financial situations of rural class citizens.
However, the major challenge it comes across is the lack of accessibility. People from rural areas have been unable to enroll themselves in schemes specially designed for them. This is why, though there are schemes and provisions such as the Jan Dhan Yojna in place to uplift the rural class people, there was no major improvement sighted.
Another issue the rural sector of India faces is lack of awareness. Placing a smartphone and chalking out schemes won’t do much if the people are not made aware of the possibilities that stand before them. Educating the masses about the benefits they can avail through smartphones, and the internet was another challenge that microfinancing in India faced.
India is seconded only by China when it comes to mobile phone usage, with over a billion connections. A quarter of this billion comprises of smartphones alone, and that in itself is a huge number. The Global Findex Database shows that since 2011, 1.2 billion adults have opened an account. As a matter of fact, 515 million people did that over the course of just the last three years. A massive 69% of people are now using digital channels for moving money, saving, and smartly investing it. Apps like Paytm and Google Pay have made online payment of utilities and other expenses an easier affair.
A majority of adults around the world report using digital payment methods on some platform or another. About 76% of account owners across the world make or receive digital payments.
The aftermath of the wave of digitization that swept the nation is something to pay heed to. According to the Microfinance Institutions Network, which is a body of the NBFC-MFIs, the loan amount that has been disbursed over the internet (cashless mode) is 87% in just the first quarter of FY19 (the fiscal year 2019). This percentage translates to ₹11,404 crores (₹114 billion) in over 4.2 million loan accounts in India.
The increase in cashless disbursal took a giant leap very recently in India. The cashless disbursal of microfinance loans in the second quarter of FY18 was 55%. It then jumped to 73% in the fourth quarter of FY18. As a result of this, cashless microcredit disbursements played a remarkable role in aiding the recovery of the microfinance sector in India.
Business owners in India can greatly benefit from the digitization of financial services. Over 240 million people in India have access to a mobile phone. The problem is they do not use their bank accounts on these smart devices. The repeated attempts of the Government to link Aadhaar to one’s mobile number has also seemed to fall on deaf ears.
There happen to be a whole lot of accounts that stand inactive. The prime reason that surfaces for this account inactivity are the inaccessibility to banks, limited financial literacy, and an inconvenient mismatch between what the customers want and what the banks offer.
Integrating technology into financial matters bridges the gaps between people and financial services. The introduction of digitally enabled services proves to be India’s gateway into a digital economy, which is more or less prevalent worldwide now.
What is important is to establish a steady sense of awareness among people about microfinancing and the benefits they come with.
While more people from the rural sect are yet to climb aboard the FinTech bandwagon, the progress so far has been astounding. India emerges as one of the leading superpowers and seems to increase its economic prowess in the coming decade.
Microfinancing has enabled people to own businesses and make profits, which leads to a sustainable lifestyle, much to their liking. Over the years, FinTech and microfinancing hold the key that can unlock financial stability in a country that has suffered the ills of poverty for far too long. With such effective models in place, people can now regain financial control and steer their lives the right way. FinTech provides every reason to minimize excuses and indulge in financial awareness.
In the light of a promising economic future, India treads on with long strides towards a new world it rightly belongs to, with microfinancing as its aid.