Employment, accounts and financial inclusion

Posted on February 02, 2013 by Sumita Kale

As noted by Tilman Ehrbeck of CGAP here, the link between jobs and financial inclusion is clear, especially for the poor:

To the degree that economic growth might lead to formalization of these jobs, the traditional finance linkages hold.  Today’s reality for informal wage earners, however, is more likely to be characterized with great uncertainty,  long spells without earnings, the need to send money home to the family in the village.  Families that have irregular wage income need to be active managers of their financial lives.  The less security is stemming from employment, and the less society as a whole provides social protection for health issues or in old-age, the more families have to fend for themselves and need financial instruments such as savings, credit, and insurance  to do so.

....In economic terms, all these families are producers and consumers at the same timeThey need access to the full range of financial services to create income generating opportunities, build assets, smooth consumption in the face of highly irregular or seasonal incomes, and manage risks

This is why MNREGA, has been, to some extent, a powerful enabler of financial inclusionOur PM pointed out recently, over four crore bank accounts have been opened under MNREGA and even more accounts have been opened in post offices However, getting the unbanked to start transactions in these new accounts is another ball game altogether, opening of accounts for government payments are a necessary but not sufficient condition for real inclusion.

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