Title of seminar paper

A seminar paper
BY
Dipika shah

Bachelor of business
Adminstration (BBA) Semester-II
Macroeconomics

Submitted To
Faculty of management
department Degree campus
Tribhuvan University
 Letter of Approval

We are pleased to approve your seminar paper “private and public

participation”. Your seminar paper is satisfactory in the scope and quality

prescribed for BBA second semester contemporary issues in the

Macroeconmics and we believe your work will make a valuable

contribution to your field of study.

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External Examinar

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 Abstract
This article presents several theories of financial inclusion. Financial inclusion is defined as the

availability of, and the ease of excess to basic formal financial services to all the members of the

population. It means that individual and businesses have access to useful and affordable formal

financial services that meet their need in a responsible and sustainable way.

Financial inclusion theories are explantion for observers financial inclusion practices. This study

shows that the ideas and perspective on financial inclusion can be grabed into theories to

facilitate meaningful discussion in the literature. The financial theories identified and practices

vary from country to country and there is a need to identify the underlying principles that

explain observed variation in financial inclusion.

Financial inclusion is essential for building inclusive financial system which is supposed to be

helpful for reducing poverty and inequality in the economy. This paper aims to analyze the

progress of financial inclusion in Nepal over time. With various efforts taken in the past, financial

inclusion in Nepal has been progressing. Yet, Nepal has inadequate and unequal access as well as

very low usage, particularly use of credit and digital medium indicating a long way ahead to make

financial system more inclusive, there are several bottlenecks for expanding financial inclusion

such as difficult geography, scatter settlement in villages, adapting as well as implementing

policies access to finance has to be increased inclusively. Further by creating financial awareness

and increasing the benefits , the usage of formal financial services should be increased for

meaningful financial inclusion. Foreign direct investment and transfer of technology in the areas

of fintech can also expand financial inclusion in Nepal in a profitable way.

With financial inclusion playing a vital role in reducing poverty and income disparity it is

emerging as a top priority for policymakers and regulators. A large number of countries have

introduce comprehensive measures to improve access to and usage of tailored financial services.
 Financial inclusion in Nepal
Introduction
Background

Financial inclusion refers to the process that measures the ease of area availability and uses of
the form. Financial system for all members of an economy with financial inclusion playing a vital
role in reduce poverty and income disparity. It is emerging as a top priority for pydicymaker and
regulators. In Nepal the financial litracy rate is 57.9 percent according to recent studies. Financial
literacy is an important aspect of a country financial system and it helps people make informed
decisions about their money and how to manage it effectively. It has been made compulsory by
the NRB under its desired sector lending directors for class A,B,C financial institution to make
available at low cost to microfinance institution (MFIS) there by facilitating access of financial
services to the undesired areas. As inclusive financial system has several marks. It facilitates the
efficient application of productive resources and thus can potentially reduce the cost of the
capital. In addition access to appropriate financial and services can significally improve the day to
day manage ment of finance. As inclusive financial system can help in reducing the growth of
financial services of credit which are often found to be exploitatire .

The principles of financial inclusion are :-

1 Access : this involves offering cost effective financial delivery channel , financial services and
financial products
2 Suitability
3 Affordability

4 use
5 Financial education of consumers
6 Diversification & innovation
7 Simplicity

The main point of financial litracy is the skills help individuals make marter decision and make
more responsible with their personal finance. The determnants of financial inclusion can be
desired and supply driven. The demand side factor include socioeconomics such as income,
education, age and gender. On the other hand , supply side factor include individual attitudes
percent which influences the decisions to use financial products and services.
1. Availability of financial products and services.
2. Price of financial products and services.
3. Us age of financial products and services.
4. Quality of the financial products and services.
 Components of financial system
1. Money : To pay for purchase and store wealth
2. Financial instruments : to transfer services from areas to investor and to transfer risk
3. Financial market : by buying and sell financial instrument
4. Financial institutions provide access to financial market.
5. Central banks : Monitor financial institution and statistics the economy.

Statement of problem:
In Nepalese context providing the knowledge of financial system and its player to the general
person
Is very important. Financial activities should be spread throughout the country not just
confimed within the city. When the financial system is itself. In the developing phase than we
cannot axpect it to contribute as required. Moreover if we see the security marked than
there is a rapid unnatural external rapid inflation.
Due to lack of infrastructure small sized loan amount and higher instruction cost. Nepal is
not faring well in terms of economic growth and development. It has remained backwards
because of various reason and one of them is the slow pace of development of financial
system. In 2022 , 89 percent of women and 90% of men have access to formal financial
services which has only 57% and 695 respectively in loss. Lack of business management and
experience with the bank less supporting business condition , religion and family and various
document of credit requirement. Lack of income job loss. Unexpected expenses , too much
debt.

The internal factors contributing to the recession in Nepal. Economic government policies
including fixed and monetary measures as well as the challenges posed by percent changes in
government inadequate infrastructure and reliance on remittance. The percentage of
financial inclusion in Nepal has jumped from 33.8% in 2014 to 54% in 2021 giving millions of
people increased access to financial advice. The finding of regression analysis between
foreign employment and remittance indicates that foreign employment is a significant
predictor of remittance . Though increasing remittance has its own advantage hit would
eventually lead to economic failure if the flow of remittance is disrupted . There is
massive leakage in actual remittance inflow because most of labors prefers to send their
earning through the informal channels. At this scenario some of te research questions are :-
A) What is the current situations of financial inclusion in Nepal ?
B) What are the financial inclusion strategy in Nepal ?
C) What factors promote financial inclusion ?

Objectives:
 In order to meet the goals and objectives attained in the national financial inclusion
roadmap for Nepal.
 To lower transaction cost reduce risk and provide liquidity.
 To intermediaries between squares and borders.
 To improving institutional arrangements for bordening financial access.
 To building up the regulatory and supervisory.

Mentioned above all are the main and important objective related to the financial inclusion.
 Significance of the study

The study is significant on the ground that it provides general insight about the current status of
the Nepalese financial inclusion. Its significant increased from 51% in 2011. Nepal tab has seen
significant improvements over the year in the percentage of holding an acourt. It has jumped
from 33.8% in 2014 to 54% in 2021 giving millions of people increased acess to financial
inclusion.

Methods :
Sources of data:

Secondary sources of data has been used for the analysis of data paper. Economy survey is used
for the data
Nature of data:

Quantative data is used for study

Methodology :

In view of this future work financial inclusion of Nepal should revolve around conducting access
to financial survey creation of systematic profile, creating the unreached linking clients with
nonfinancial services providers maintain the financial operation of the financial cooperation
capacity development.

Discussing finance is very easy. When we study financial investment services and behaviors we
are dealing with a very private and delicate dimension of peoples lives. In order to enter the
universal universe and collect reliable we have to use research methodologies that are able to
collect, report and confidence with investors. The research design we follow in this body is
analytical as well as descriptive. Quantative and qualitative methods of social research. The
specific procedure or the techniques used to identify select and analyze information about the
financial inclusion.
 Description and Analysis

Financial inclusion in Nepal is guided by the provision of deprived sector lending requirements

for banks and financial institution in the annual monatory policy, microfinance policy 2008. Bank

and finance inastitution act as 2006. Act for NGOs involved in financial implementation 1999 and

cooperative act 1992. Greater financial inclusion is achieved when all economical activities and

segments of the society have access to financial services.

It has jumped from 33.8% in 2014 to 54% in 2021 giving millions of people increased acess to

financial inclusion. The finding of regression analysis between foreign employment and

remittance indicates that foreign employment is a significant predictor of remittance . Though

increasing remittance has its own advantage hit would eventually lead to economic failure if the

flow of remittance is disrupted. It is important for inclusive growth that is increasing for reducing

povertyand inequality in the economy.

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial

liability or equity instrument of another entity. An asset or liability that is not contractual (e.g, an

obligation to pay income taxes) is not a financial instrument even though it may result in the receipt

or delivery of cash.
 Theoretical review :-
1) Theories to find financial inclusion beneficiary

Conflicting ideas or perspective exist on who benefits from financial inclusion outcome. Some
study above that poor people are the ultimate beneficiaries of financial inclusion (Bhandari
2018) other think that women are the beneficiaries for financial inclusion. Outcome (Ghosh and
vinod 2017) Demigrackuntet at 2013 swamy 2014) while some think that the economy and
financial system are bebeficiary of financial inclusion (Mehrota and letman 2015) , kim at 2018,
Swamy 2014, Ozil 2018) against from women and poor people there are other potential
beneficiaries of financial inclusion and that have been ignored in the literature such as young
people, elderly people, people with disability and individual who have been expelled from the
financial sector for commiting criminal offences. Before are four theories that explain who
benefits from financial inclusion.

2) System theory of financial inclusion

The system theory of financial inclusion states that financial inclusion outcomes are archieved
from the existing. System theory is a multidisciplinary framework that provides a holistic
perspective on complex systems, helping us understand how various components within a
system interact, influence each other, and collectively work toward specific goals. It is a valuable
tool for analyzing and managing systems of all kinds, from natural ecosystems to social
organizations, and even financial systems. This theory focuses on the relationships,
interdependencies, and feedback loops that define these systems, enabling us to gain deeper
insights into their functioning and behavior. In the context of financial inclusion, system theory
can be used to unravel the intricate web of relationships among individuals, financial institutions,
governments, and other stakeholders in the effort to expand access to financial services for
underserved populations. This approach provides a comprehensive understanding of the
challenges and opportunities within the financial inclusion ecosystem, ultimately aiding in the
development of more effective policies and strategies to promote economic well-being and
inclusion for all.
 Empirical review
1. Financial inclusion theory context that microfinance can promote financial inclusion by

giving low income people access to formal financial services ( Madar , 2018, ozilizi 2018)

Dhungana and kuma 2015 , Gosh 2017 miking 8 Ashta 2020). The ability to save, borrow

and invest allows people to manage risk better, accumulate assets.

2. (2015) and Tissot and Gadanecz (2017) however few studies such as Dhungana and

kumar 2015, pant 2016 of financial inclusion of Nepal to some extent, know the progress

to design and expedite the implementation of measures for financial inclusion.

3. John conroy, 2005. “APEC and financial exclusion : missed opportunities for collective

activities. Asia: Pacific Development Journal , Unoted Nation Economic and social

commission for Asia and the pacific (ESCAP), vol. 12 (1) pages 53-79, June.

4. Mandira soulma, “ undated” jandey of financial inclusion “Indian council for research on

International Economic relation. Now Delhi working papers 215, Indian council for

research on International economic relation, New Delhi, India.

5. Aurora ferari 2007, “Access to financial services in Nepal” world Bank published Books,

The world bank groups numba 6687, July.

Aurora melhotra and James yetman, 2015 “ financial inclusion issues for central bank”,BIS

Quaterly Review Bank for International settlements , March

6. Similarly stulz (1999) and Mishtain(2001) claim that financial liborization promotes

transparency and accountability and reducting adverse selection and moral hazard while

alleviating liquidity problem in financial markets. They arrive that international capital

markets who might be the tempted explicating capative domestic capital markets.

7. MS Ratna Sahay and Mr. Matin Eihak and Mr.papr MN’ Dioye and Mr. Srobona Mitra and

MS. Annette J kyobe and yen N Mooi and Mr. Seyed Reza yousefi, 2015. “financial

inclusion can it meet multiple Macroeconomic goods , “ its staff discussion notes 2015

/2017 International monetary fund.

 Current Status of Financial Inclusion in Nepal
In Nepal several financial outreach related to policy initiatives are underway together with a long
term development strategy with the priority given to graduate the country from least development
status by 2022 as well as to attain the US is sustainable development good and become a middle
income country by 2030.

The strategic plan (2017-2025) of Nepal Rastra Bank (NRB) has been formulated based on four
strategic pillar financial stability and financial sector development being one of them under
which emerging financial access and financial inclusion has been identified as strategic objective.
NRB is committed to promote financial inclusion across region and people particularity focusing
on providing financial services to the disadvantages segments of population at affordable cost.
NRB will also ensure prompt availability of financial services to the general public without any
discrimination I terms of cost and access of services.

There are four classes of financial institution licensed by NRB. They are commercial bank (A
class), development banks (B class), finance company(C class ) and microfinance institution (D
class). In Nepal branchless banking has been promoted taking into consideration the primary
needs of people who are excluded into access from financial system. Similarly mobile banking
used payments system have been encouraged to facilitate payments at merchandise outlets. The
other financial access indicators of Nepal are given below:-

SN Description Numbers

1 Branches Banking system 1,428

2 Branchless Banking customer 3,30,112

3 Mobile Banking customer 2,00,53,420

4 Internet Banking customer 17,68,932

5 ATM cards 4,648

6 Debit cards 1,22,22,387

7 Credit cards 2,76,089

8 Prepaid cards 1,22,111

Above table shows that there are 1,428 branches banking centers in Nepal. Likewise the total
numbers of ATM terminals are 4,648. The total numbers of debit card, credit card and prepaid
cards issued are 1,22,22,387 , 2,76,089 and 1,22,111 respectively. Thus it is clear that banking
system of Nepal is being more automated.
 Role of Government for Financial Inclusion in Nepal
Financial inclusion has become an emerging issues in developing countries like Nepal because
mass number of people is still derived from formal banking services. The existing financial system
has excluded the marginated and vulnerable people of rural community and they have still
exploited by the informal ending system. The government can build indesire financial system
through the following three major ways :-

1. The government has to deliver financial services directly and indirectly often by
disturbing good mediation for managing resources to the financial institution through
wholesale arrangement.
2. The government has to develop and implement new plans and policies in the financial
system that may help to built up inclusive financial system. These policies may include
ensuring macro-economic stability liberating inrerest rates, establishing effective banking
regulation and supervision that make viable micro finance services.
3. The government has to promote inclusion by offering fiscal iascpntives to serve poor and
low income people.

A sound financial system plays a significant role to promote financial inclusion to the nation. The
role of government is to ensure wides access of financial services to the people who are deprived
from the formal financial services.

Conclusion and suggestion

The financial inclusion has become a services issues in the context of developing countries like
Nepal. The status of financial inclusion in Nepal is act satisfying and three-fourth (75 percent) of
the people still has no bank account at the formal financial inclusion. (world bank 2012). Due to
complex geographical location and Lack of basis infrastructure there is limited number of banks
and financial institution in mid-western and far-western development region.

Inclusive economic growth has been one of the priority agenda is developing countries like
Nepal. It has widely acknowledge that inclusive economic growth cannot be accomplained
without achieving financial inclusive. To develop financial infrastructure sound if policies,
inclusive economic growth that will help to built-up inclusive financial environment in the nation.

Ensuring financial inclusion is in arduous took addressing financial exclusion requires a hdistic
approach accompassing effective approaches to awareness raising effective financial education,
technical advice on different domain of money measurement or management, debt counselling,
solving mobilization provision of affordable credit services. Strategy to explain the atreach of
their services using combinations of lending methodologies and promoting the use of
technologies.

SN Types of financial exclusion Explanation

1 Access exclusion Due to geography

2 Condition exclusion Due to condition that are inappropriate for some

people

3 Price exclusion Due to non affordability of financial services

 4 Marketing exclusion Due to targeted marketing and sales for financial
product

5 Self-exclusion Due to fear of refused or due to psycological

barriers

There are five types of financial inclusion as discussed in above table (sarma 2010). Hence
ensuring financial inclusion is a multidimensional issues, demanding multiple approaches for
increase it.

References
 The world bank(2012) measuring financial inclusion. The global findex database, policy

research working paper, the world bank development research. Group finance and

private sector Development team.

 Nepal Rastra Bank(2014), Banking and financial statistics (monthly) for mid-january 2014.

Nepal Rastra Bank, Kathmandu Nepal.

 United Nations, (2006), Building inclusive financial sectors for development New York :

United Nations

 Bank and financial institution Regulation Development (BFIRD), 2016, “Bankung and

financial statistics”. July, NRB : BFIRD.

 Sarma, M-2008, “Index of financial inclusion”, working paper no. 215 Indian for research

on International economic Relation(ICR,IBR). Available in working paper 215 pdf.

 Graph Nepal (2018, March 25), Growth of financial Institution in Nepal.

 https://www.webtet.in/img./asito/2031.pdf

 UNCDF : 2016, Nepal Detailed country Report 2016 Kathmandu, Nepal

 Sarma , S.R (2003), “microfinance against poverty. The Nepalese scenario published in

economic review occasional paper No.15, Nepal Rastra Bank, Kathmandu ,Nepal.

 Financial instrument Business dictionary .com.

Retrieved may 19, 2018, from

Business Dictionary .com website

http://www.business dictionary.com/definition/financial-instrument.html
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