The Role of Technology in Advancing Financial Inclusion

The Role of Technology in Advancing Financial Inclusion Image

Small businesses are critical pillars of developing economies like India. However, for a number of reasons, a considerable fraction of them are far from leveraging their use of financial solutions . Gradually, the country is taking the required steps to increase financial inclusion, giving long-term unbanked and underbanked small businesses in rural areas access to a wide range of financial products & solutions.

While there have been significant strides towards bridging the financial inclusion gap, technology  plays a crucial role in advancing it in the country. Financial institutions, and fintech companies in particular, are driving financial services to a consistent and greater level of accessibility and democratisation for these small businesses. Ultimately, it is enabling them to access more financial products and solutions that were inaccessible before.

Payments made easy

India has been at the forefront of the transformation of the global digital payment landscape. The last five years have seen a significant shift. UPI payments have reached new highs, enabling merchants to accept digital B2B payments as well as credit in a seamless manner. In addition, increased smartphone penetration, increased internet access, the introduction of feature phone-based payments, and other improvements are generating a synergistic value proposition to secure the inclusion of the greater population in the digital revolution. Simultaneously, fintech firms are developing novel ways to disrupt the market.

Increased accessibility to credit

Due to high information costs, promoting credit services to nano and small business owners has been a recurrent concern for policymakers worldwide. Recent advances in fintech may be able to alleviate financial inclusion. Financial institutions are able to provide short-term loans to millions of small businesses by leveraging big data or digital footprints on existing platforms. Moreover, artificial intelligence (AI) is leveraged for alternative credit scoring that uses non-traditional data to assess credit risk. This has enabled businesses with limited or no credit history to easily access credit, thereby expanding financial inclusion.

Enhanced financial literacy

Financial literacy has frequently been cited as a barrier to reaching full financial freedom. Fintech firms have identified this concern and are taking proactive measures to address it. They provide customers with the knowledge and resources they need to make informed financial decisions through educational apps, online tutorials, and interactive platforms. These organizations provide tailored financial management services, assisting nano and small enterprises in setting budgets, maintaining credit scores, and effectively achieving growth. Fintech companies not only improve individuals’ economic well-being but also build a culture of financial responsibility by providing them with financial literacy and management skills.

Arth: Democratising finance with technology

Arth is a digital platform that  provides micro, small, and medium-sized businesses (MSMEs) with easy credit, other financial solutions as well as access to welfare & livelihood enhancing solutions It also offers MSMEs consulting services and training programmes to help them improve their skills and capacities. Arth has emerged as a powerful growth partner for many small enterprises, particularly those managed by women, by identifying and supporting their financial needs.

Arth’s product technology, process integration, and credit engine were all created with innovation in mind. To analyze creditworthiness, the company collects data on potential consumers across social, economic, health, and business criteria. Furthermore, it generates and digitally offers the most flexible line of credit to its consumers using its own credit engine and digital lending platform. By addressing issues such as market access, technology, and funding, Arth has the potential to close the financial inclusion gap in India by a large extent.