Impact of financial inclusion on economic development of marginalized communities through the mediation of social and economic empowerment

Abstract

PurposeThe purpose of this paper is to check the impact of financial inclusion on economic development of marginalized communities through the mediation of socio-economic empowerment.Design/methodology/approachIn order to fulfil the objectives of the study, primary data were collected from 382 bank customers belonging to marginalized communities breathing in Jammu district of J and K by using purposive sampling technique. The data were collected during the month of April–August 2020. Multivariate statistical techniques such as EFA, CFA and SEM were used for data analysis and scale purification.FindingsThe study’s results reveal that financial inclusion has a direct and significant impact on economic development of marginalized communities through the mediation of social and economic empowerment. The study highlights that despite various initiatives taken by the government towards financial inclusion, there is a denial from the financial institutions to extend the credit to the marginalized communities due to lack of education, illiteracy, lack of awareness, attitude of bankers and policy directions to the banking sector, which confine these communities to feel proud, dignified, confident and self-reliant to face any financial crisis.Research limitations/implicationsFirst the in-depth analysis of the study is restricted to Jammu district only that restricts the generalization of the results to the whole population of J and K. Second, the data were collected from respondents belonging to marginalized communities only. Third, comparative study of marginalized households who are covered under the financial inclusion drive and those who are still financially excluded has not been done yet. Fourth, the questionnaire approach was the only way to gather primary data and thus, the results might have a common-method bias.Originality/valueThe study makes contribution in the direction of financial inclusion narrative relating to socio-economic empowerment and economic development of marginalized communities. It looks into how for the socio-economic aspects of marginalized communities influence their exclusion from the financial system of the country. The study also provides valuable insights for the policymakers, researchers and academicians both at the countrywide and intercontinental level to devise and put into practice programmes that will widen right to use financial products and services leading to cutback of poverty incidence, income parity, social and economic empowerment, economic development and reduction in caste and gender based discrimination.

Nexus between financial inclusion and women empowerment: evidence from developing countries

“…Using structural equation modeling, Lal (2021) conducted a study in India to determine the effect of financial inclusion on women empowerment. They discovered that this impact is both direct and significant.…”

Socio-economic development through self-help groups in rural India – a qualitative study

“…MFIs, SHGs and NGOs must reconsider their roles in financial inclusion. They should create interdisciplinary forums in collaboration with government, academic and financial institutions to gain access to the most significant ideas and develop viable solutions to the complicated and broad problem of financial exclusion (Lal, 2021).…”

“…Through the mediation of social and economic empowerment, financial inclusion has a significant impact on the economic growth of excluded populations. Despite the government’s various initiatives to promote financial inclusion, financial institutions hesitate to extend credit to marginalized people (Lal, 2021).…”

Guest editorial: Financial inclusion and social development for a sustainable economic system

“…The overall development of society mainly depends on the available financial resources. In this regard, financial institutions play a significant role in improving society's welfare (Sarma and Pais, 2011; Lal, 2021). This is possible to provide easy access to financial resources for the poor and deprived groups.…”