Amish Dhungel

Financial inclusion can be defined as a state whereby Individuals and businesses have access to meaningful and affordable financial products and services. It means that customers regardless of their geographical location, ethnic, social-cultural, educational, or economic background have an access to a suitable financial products, while ensuring the fairness in service delivery at a reasonable cost.
The popularity of financial inclusion is because of the role it plays in reducing poverty and bringing prosperity. Financial inclusion is generally measured in terms of access of people and business to a bank account. Having a bank account means that people can save, send and receive payments as such people are connected with one of the important part of life-- banking. Such an account serves as a starting point for the users to facilitate day to day living, make immediate and long-term financial plans and make use of wide varieties of financial services.
Access to finance at present is not only limited to having a bank account in physical banks. With the use of modern technology in the field of banking and finance, financial services are offered through mobile phones, personal computers, internet, or via linkage of card to a digital payment platform known as digital financial services (DFS). For any product offerings to be called DFS, it should enable the users to perform basic banking functions like payments, savings, borrowings, etc making use of the internet, and without having to go to the physical branch location. DFS is a broad terminology and also includes Mobile Financial Services (MFS) which means the use of a mobile phone to access financial service and execute financial transactions.
Financial inclusiveness throughout the globe has been low. The World Bank estimates that around 1.7 billion adults worldwidedo not have a basic transaction account. In Nepal, around 60 per cent of population is still said to be outside the coverage of formal banking channel. Low financial literacy, complex KYC requirement, unequal access to infrastructure, convenience in using informal market tools, lack of trust and inadequate financial awareness are the reasons of staying outside banking services.
Government of Nepal (GoN) has introduced measures to increase the access of people to financial services. It has planned to open a physical branch of commercial banks in all local level of the government. With about 81 per cent of Nepal's population living in rural areas, the increase in number of banks in local level will increase bankable population. Banking at doorsteps will create a convenience to the users which was a matter of privilege some years back.  Similarly the government has launched opening bank accounts campaign targeting every citizen. To ensure its effectiveness the process of opening bank accounts has been simplified. Opening bank account earlier required copy of citizenship but now can be done just by presenting copy of driving license, national identity card. Similarly such accounts will receive deposit of Rs. 100 from the bank’s side.
The government has also introduced the 'Digital Nepal' campaign which highlights the role of digital financial services to promote digitisation of financial transactions. It recommends to increase the limit of digital transactions, reduce cost of digital financial transactions, issue of national biometric card and introduce telecommunication company into payment industry. The government, together with other stakeholders can create an enabling environment to promote digital financial services. For instance recently Bangladesh introduced 'Digital Bangladesh' campaign which largely increased the financial inclusion. Bangladesh, in 2018 had 47 per cent of adults in financial channel, a 10 per cent increase from 2017. Such a progress was due to larger portion of population having access to MFS. Such stories can also be found in countries like Kenya (mPesa), China( Alipay,Wechat),etc. Our own homegrown MFS providers include e-sewa, IME pay, sparrow pay etc. that have been gaining momentum.  
Large unbanked population together with predominant cash based economy has been a constant problem to Nepali financial system since long. A solution can be the extension of digital financial services throughout the country. With mobile penetration rate greater than 100 per cent, declining cost per unit of data, high-speed internet solutions, expansion of physical infrastructure, 50 per cent internet penetration rate, the environment is conducive for expansion of digital financial services. This context is more suitable to popularise mobile financial services. The population base with wide access to mobile and internet can be tapped to open digital wallet which would be game-changing to enhance financial inclusion in Nepal. Licensed mobile financial services providers from Nepal Rastra Bank in the form of PSP’s and PSO’s can tap the unbanked population across the country.
Digital finance is instrumental to ensure broader financial inclusion. Similarly in contrast to the traditional brick and mortar banking, digital finance is more affordable and convenient.  The major advantage of digital finance comes from its ability to offer product offerings at a affordable price, ensuring interoperability across various service providers. It also enables the regulators to easily check the flow of black money, or undue financial transactions. Another advantage would be the efficiency factor. Use of innovative digital finance services can have long-lasting positive impact on the banking performance.  
Access to digital finance is likely to boost the gross domestic product of the economy by providing the service users with wide range of digital finance products and services. Under banked groups like SME’s, women, and population on the bottom of the pyramid will have access to financial services. This will boost aggregate expenditure leading to a positive contribution to GDP and will also contribute to reduction of poverty level.
The government should build coordination with concerned stakeholders and create an enabling legal and physical infrastructure to promote digital finance in the country. Making use of the technology to offer existing banking solutions and leveraging the benefit of technology to offer mobile financial services across the country will significantly enhance financial inclusion in the country. Such measures will significantly add to government’s mission of ‘Digital Nepal’.

(The author is an Assistant Director at Nepal Rastra Bank.)