Financial Inclusion and Ethics
Context:
28th August 2024 marks the 10th anniversary of the successful implementation of the Pradhan Mantri Jan Dhan Yojana (PMJDY).
Relationship between financial inclusion, inclusive economic growth and ethics. The relationship between financial inclusion, inclusive economic growth, and ethics is complex and interdependent. Here’s an overview of how these elements interact based on the provided search results:
Financial Inclusion and Inclusive Economic Growth:
- Positive Correlation: Financial inclusion is recognised as a key driver of inclusive economic growth, enabling marginalised communities to access financial services.
- This access leads to increased economic participation and productivity, fostering a more equitable distribution of wealth and opportunities.
- Reduction of Inequality: By providing financial resources to underserved populations, financial inclusion reduces income inequality and alleviates poverty.
- This aligns with the principle of Antyodaya, which advocates for uplifting the poorest and most marginalised individuals in society, ensuring that economic growth benefits all.
- The process must start at the base of the pyramid, addressing the needs of those who have been marginalised or neglected.
- Inclusive growth is characterised by the progress that includes women, tribals, dalits, and the poor, ensuring they are not left behind.
- Empowerment and Human Capital Development: Access to financial services empowers individuals to invest in education, health, and entrepreneurship, which is essential for human capital development.
- This empowerment resonates with Sarvodaya, which emphasises the welfare of all and the importance of uplifting every individual in society.
Ethical Considerations:
- Equity and Fairness: Ethical considerations in financial inclusion stress the need for equitable access to financial services.
- Initiatives like Pradhan Mantri Jan Dhan Yojana (PMJDY) aim to eliminate financial exclusion, ensuring that disadvantaged groups are not left behind.
- This ethical commitment is reminiscent of the Gandhian Talisman, which suggests that policies should be evaluated based on their impact on the poorest members of society.
- Consumer Protection: Ethical financial inclusion involves protecting consumers from exploitation and ensuring that financial products are designed to meet their needs.
- This includes safeguarding against predatory lending practices, aligning with the ethical imperative to promote fairness and justice in financial transactions.
- Accountability and Transparency: Ethical frameworks stress the need for accountability and transparency in financial institutions.
- Ensuring that these institutions operate with integrity is crucial for building public trust and facilitating broader participation in the financial system.
Asian Development Bank’s WISE Model: The Asian Development Bank (ADB) has developed the WISE model to represent its approach to inclusive growth. WISE stands for Welfare, Inclusion, Sustainability, and Empowerment, and these four pillars guide ADB’s strategies and operations aimed at fostering inclusive development in the Asia-Pacific region. ADB’s WISE model is operationalised through various initiatives (related to social protection, infrastructure development, etc.) and projects that align with its Strategy 2020, which prioritises inclusive growth as a strategic agenda. The model aims to create a balanced approach to development that not only drives economic growth but also ensures that growth is shared broadly across society.
Amartya Sen’s Capability Approach
Sen’s Capability Approach provides a valuable lens for understanding the intersection of financial inclusion, economic growth, and ethics. For this, he provides the aspect of parametric variations that define a number of metrics where people cannot be equal. This approach emphasises that true development should enhance individuals’ capabilities to lead lives they value. In this context, it implies:
- Empowerment: Financial inclusion enhances individuals’ capabilities by providing them with the resources necessary to make choices that improve their well-being.
- Freedom and Agency: By ensuring access to financial services, individuals gain the freedom to pursue opportunities, invest in their futures, and contribute to economic growth.
- Focus on Well-being: The Capability Approach aligns with the ethical imperative to focus on the well-being of individuals, ensuring that economic growth translates into improved quality of life for all, particularly the marginalised.