Financial inclusion in the Banking Sector: A Growth Opportunity for Banks

The Financial Inclusion in Banking Sector offers the banks a global opportunity to expand at a rapid pace. Financial inclusion plays an important role in reducing the distance between the banks and the customers and helps in building a strong relationship. With inclusion, banks can also reduce their risks and become more stable. The banks will be able to expand their customer base as well as their revenues. 

The opportunities that can be availed by the banks through financial inclusion include:

• Wider Customer Base

With the financial inclusion process, the banks get a wider scope to broaden their customer base. With more customers come better revenues for the financial institutions. The financial inclusion is also an opportunity for the banks to enhance their overall performance. Access to the wide customer base helps in minimizing the transaction costs and brings about enhancement in the overall efficiency. A better understanding of the inclusion system can even assist the banks in reducing the risks involved.

• Better Stability

The financial inclusion provides the financial institutions to avail better stability. Researchers have found a strong connection between the financial inclusion process and the stability of the banks. With the inclusion system, banks enjoy the benefits of higher customer deposits and low marginal costs. This helps in making the banks stronger. Higher is the degree of financial inclusion; greater is the stability of the financial institutions. 

• Lower Risks

Financial institutions have many different risk factors attached. But with the Financial Inclusion in the Banking Sector, the risks of the banks can be significantly reduced. With the low-cost deposits, the banks get an opportunity to lower their dependence on bulk deposits. This helps in better management of the liquidity risks and lowers the risks of assets. The financial inclusion also offers an opportunity to the banks cross-sell the micro insurance, micro pension products, and other asset product to mitigate the risks.

The financial inclusion system will benefit the banks through better growth opportunities with a scope to earn higher revenues. With lower serving costs, financial institutions can reap the vast economic benefits. Prioritizing the investment options in financial inclusion helps the banks to become more stable.