Financial Inclusion

Financial inclusion refers to the accessibility and availability of financial services to individuals and businesses, particularly those who are traditionally underserved or excluded from the mainstream financial system. It is a key enabler of economic growth, poverty reduction, and social development.

Financial inclusion involves providing affordable and accessible financial products and services, such as bank accounts, loans, insurance, and payment systems, to all individuals and businesses, regardless of their income level or location. This can be achieved through a variety of means, including the use of technology, financial education, and regulatory reforms.

The benefits of financial inclusion are numerous. It can help to increase savings and investment, promote entrepreneurship and job creation, and improve access to basic services such as healthcare and education. It can also contribute to greater financial stability, as more people are able to participate in the formal financial system and are less likely to rely on informal or risky financial arrangements.

However, achieving financial inclusion is not without its challenges. Some of the barriers to financial inclusion include lack of awareness or trust in formal financial institutions, high transaction costs, and inadequate financial infrastructure in certain regions. Overcoming these barriers requires a collaborative effort between governments, financial institutions, and other stakeholders to design and implement policies and programs that promote financial inclusion.

Financial inclusion in Bhutan is a concern as many Bhutanese individuals and small businesses lack access to formal financial services. The government of Bhutan has recognized this issue and is making efforts to increase financial inclusion in the country.

One of the main challenges to financial inclusion in Bhutan is the lack of financial infrastructure in rural areas. Many people in rural areas do not have access to banking services due to the lack of banks and ATMs in their vicinity.

To address these challenges, the Royal Monetary Authority of Bhutan (RMA) has implemented various initiatives to increase financial inclusion in the country. For instance, the RMA has introduced mobile banking services, which allow people to access banking services through their mobile phones. The RMA has also encouraged banks to establish branches in rural areas and has introduced policies to make banking more affordable, such as waiving fees for low-income individuals and small businesses.

Furthermore, the Bhutanese government has launched the Financial Inclusion Policy in 2021, which aims to provide access to affordable and convenient financial services to all Bhutanese. The policy focuses on increasing financial literacy, promoting digital financial services, and ensuring access to credit and insurance for underserved communities.

Overall, while financial inclusion remains a significant challenge in Bhutan, the government and the RMA are making efforts to increase access to financial services and promote financial literacy among the Bhutanese population.

References:

Demirgüç-Kunt, A., & Klapper, L. (2013). Measuring financial inclusion: Explaining variation in use of financial services across and within countries. Brookings Institution Press.

According to Demirgüç-Kunt and Klapper (2013), the availability and accessibility of financial services vary across countries, affecting the level of financial inclusion.

Phuntsho, Tenzin, and Subramaniam (2020) identified several factors that determine financial inclusion in Bhutan, including access to financial infrastructure, education, and income levels.

The World Bank Group (2019) conducted a financial sector assessment program in Bhutan and identified challenges to financial inclusion, including limited access to financial services in rural areas and low levels of financial literacy among the Bhutanese population.

Aterido, R., Beck, T., & Iacovone, L. (2013). Access to finance in sub-Saharan Africa: Is there a gender gap? World Development, 47, 102-120.

Phuntsho, S., Tenzin, K., & Subramaniam, T. (2020). Determinants of financial inclusion in Bhutan. Asian Development Bank Economics Working Paper Series, 611.

Aterido, Beck, and Iacovone (2013) found that women in sub-Saharan Africa are less likely to have access to formal financial services, indicating a gender gap in financial inclusion.

Royal Monetary Authority of Bhutan. (2019). Financial Inclusion in Bhutan. https://www.rma.org.bt/financial-inclusion/

World Bank. (2021). Financial Inclusion. https://www.worldbank.org/en/topic/financialinclusion

The World Bank (2021) defines financial inclusion as the accessibility and availability of financial services to individuals and businesses, particularly those who are traditionally underserved or excluded from the mainstream financial system.

World Bank Group. (2019). Bhutan Financial Sector Assessment Program: Financial Inclusion and Consumer Protection Diagnostics. World Bank Group.