Inclusive finance in Sri Lanka begins with everyone

In any economic system, financial inclusion is essential for decreasing poverty and fostering economic development. It refers to the availability and affordability of financial goods and services, such as payments, transactions, savings, credit, and insurance that satisfy the requirements of both consumers and enterprises. While this is true for developing economies as well as the more developed countries, the need is apparent in Sri Lanka.

Making sure that people have access to financial services is especially crucial where a sizable section of the population lives in rural regions. In addition to examining the measures put in place to increase access to banking services, such as mobile banking and microfinance, with an emphasis on rural regions, the importance of financial inclusion in reducing poverty and promoting economic growth should not be forgotten. By giving economic actors the resources and means to better their financial situation, financial inclusion plays a crucial part in alleviating poverty. People may save money, get credit for investments, and safeguard themselves against unanticipated financial shocks when they have access to banking services. Financial inclusion encourages a culture of saving by enabling people to save, which can aid in ending the cycle of poverty.

According to a study by a major life insurer in Sri Lanka, low levels of saving among Sri Lankans, highlight the need to promote healthy saving. The household saving rate has increased as it grew from 29.40% in 2021 to 30.80% in 2022. Average personal savings rates in Sri Lanka have been approximately 23.44%.

Financial inclusion and economic expansion are very strongly related. The capacity of a sizable percentage of the population to engage fully in the economy is hampered when those services are not readily available to them. Financial inclusion promotes entrepreneurship, increases investment, and spurs economic growth by facilitating access to credit.

Small and medium-sized businesses (SMEs) are essential for economic expansion and employment development. A significant portion of the formal employment in Sri Lanka is produced by SMEs, and access to capital is a major barrier to their expansion. Through programs like microfinance, financial inclusion may help SMEs realise their full potential by giving them the funding they need to grow their businesses and advance the broader economic development of the nation.

Numerous measures have been put in place in Sri Lanka to provide access to financial services, particularly in rural regions. One effective method for connecting the unbanked population with financial services is mobile banking. People may now use their mobile devices to conduct fundamental banking operations including deposits, withdrawals, and money transfers thanks to the growing usage of mobile phones.

Rural areas with few physical bank branches have benefited the most from mobile banking services. It encourages financial inclusion by allowing people to get around geographic restrictions and take advantage of the ease of banking services close at hand.

In Sri Lanka, especially in rural areas, microfinance has significantly improved access to financial services. People who are normally not eligible for standard banking services can get modest loans and other financial services from microfinance firms.

These loans enable people to launch or grow small enterprises, bring in money, and enhance their standard of living. To meet the unique demands of the economically vulnerable population, microfinance organisations frequently use cutting-edge tactics, such as group lending and flexible repayment terms.

Access to financial services has increased significantly in recent years, especially in rural regions because of programs like microfinance and mobile banking. The efforts of the Sri Lankan Government, together with collaborations with several stakeholders, have further expedited the development of financial inclusion. To guarantee that the advantages of financial inclusion reach every sector of society, however, and to promote inclusive and sustainable economic growth in Sri Lanka, continued efforts are required.