All praise is due to
Allah, may peace, salutation and the blessing be upon the prophet Muhammad (ﷺ), his entire family, his
companions and those that follow their footsteps with righteous until the last
day. Indeed financial inclusion has drastically affecting the life of people in
the rural areas, for the reason that people in the rural geographical areas who
those not have enough money rather need the money, when they approach the bank
to secure a loads. The bank asked for the collateral which make the poor people
continue suffering because they cannot afford it. Moreover, this makes the life
of poor become poorer which also leads to large amount of the money been channel
from rural area to urban area, which cause shortage of money in circulation.
Furthermore, it’s also lead to systematic withdrawal of money from the bank
which make it worse as people will not have the ability to do transaction
because of shortage of medium of exchange even with the ability and the
knowledge to do the transaction leading the charges of the interest which makes
the situation worse for the rural people because of the Riba.
In
addition financial inclusion has tremendously contributed to regional poverty
in flowing ways:
Firstly money flows from rural people to
urban people, the funds is
channel from the village to the town were in the business men, rich individual
and large corporations are functioning enjoy better credit worthiness than the rural
community; cause artificial shortage of money in our existing system in other
to give worth to the otherwise fiat money. Moreover, which Lead to reduction of
velocity of money and circulation of money in our community also have an impact
on aggregate demand, total economic activities and unemployment. Rural people
will need money but cannot be available to them because of shortage of it.
Secondly banks
seeking collateral, which be in favor of urban people as they afford it and
they have collateral. When the rural people have no financial inclusions, they
their money with themselves and take load from different informal sources and
lend it out to the needy without asking any interest for it. As result once
financial inclusion was introduce to rural peoples, First and foremost you need
have an account with them (open an account) in bank, then start depositing in
your account. Later if a particular individual need a load them, you will be
asked to provide the collateral before securing a load from them. This is where
the problem is really because the rural people do not collateral, which
mean they cannot secure a load from the bank; this is where urban area took an
advantage of because they have the collateral and can afford it.
Moreover, leading to urban area to be more develop and continue advancing and
nevertheless rural area continue un develop and low standard of living,
encountering a lot of difficulties and hardship in their communities.
Thirdly rural people area left with less,
as the rural people were left with small or little money
circulation within the rural community. Moreover as we all know that money
flows to the areas within the community were surplus are highly expected or
were are highly received. Meanwhile the different of money from its role in
making it easing trade to an instrument of speculation on the money market
generate a situation in which an extra liquidity co-exists with a physical scarcity
of capital.
Therefore As we
perceived contrary to financial inclusion in our current monetary system can
create, regional poverty which in an ideal world perception, was supposed to
provide rural people with easy access to the credit. Moreover establishment of
financial inclusion in the rural, has contributed to the regional poverty but
can be solves by the used of the traditional base approach in eradicating or
solving regional poverty. These are as follows:
The
Micro Credit
The
Islamic Credit
The
Commercial Credit Circuit [C3]
Firstly Micro Credit, as define by micro credit of 1997 summit as a programs which
prolong the small loans to very poor people within a particular community to
help themselves for their self-employment project and continue innovation to
create income to cater oneself, the family and other relative” (Levin 2012) . As we know micro
finance is part of it which provides a broader range of finance services, must
specially they make saving account available to the poor. As people come
together to group known as “self-formed groups who are jointly accountable
for the paying back of the debt [Loans]”. They all
contribute to help each other in the process of paying back loans; moreover this
can solved the “adverse selection” and
overcome poverty in our societies with the used of our local information.
Maintain the loans payment the group used an incentive structure called peer
monitoring. Furthermore, this helps to monitor each in the process to make
so that the participant make good use of the fund provided because as such
the defaulters will likely to join, this is process is more
efficient than bank even (Stiglitz 1990) .
Secondly Islamic
Credit, as it is totally prohibited to deal with interest know as Riba,
Islamic Credit have no problem with interest because part of their dealing. Their
credit system is a lease based as an alternative to cash base system of given
credit, they make sure it is expend on real economic activities. Moreover there
is a chance of fund diversification for uses other than that requested for is
eradicated. In Islamic incurring excessive is not encourage, the beneficiaries
ponder this as religion requirement to pay back the debt. Indeed is improbable
that the credit linked strives will happen between the members of an Islamic
Micro Finance banks or other financial institution. Furthermore family is
targeted instead of woman participants in the household; the poorest among the
beneficiaries will be benefitted by incorporation zakat and waqf into the
system (Khan 2008) .
Thirdly the Commercial Credit Circuit [C3], is define as the mutual credit system where the related companies
can make transaction using an internal exchange unit, example the value claims
or invoices. C3 inject new form of liquidity in our community and accelerate
real economic activities, by providing the chance to finance purchases with the
seller within C3 community network by means of value claims which were the
assets of the vender, but then again it’s in the form of illiquid account
receivables. As a result this injection new liquidity significantly increase
the total amount of purchasing power accessible in the market, extra sales,
retailers from wholesaler, cerate extra production, employment and income and
profit resulting from circulation of more means of payment.
In
conclusion financial inclusion, causes regional poverty through flow of
money from rural areas to urban areas, people in rural area getting poorer and
urban people getting richer. Moreover seeking collateral from the people rural
area knowing that they cannot afford it while people in the urban area can
afford it and left the rural people with less money in circulation. The
traditional base approach was establish to solve this regional poverty.
Jazakallahu kahair
Bibliography
Dunne, Bernard Lietaer & Jacqui. 2010. "How
New Currence Turn Into Scarcity and Prosperity ." Rethinking Money
p: 121-128.
Khan. 2008. Solution to the regional poverty
(Islamic Micro Credit0 .
Levin. 2012. Regional Poverty .
Science, Direct. 2015. Microfinance and Poverty
Reduction. Jully 03. Accessed November 17, 2018. http://www.Microfinance
and Poverty Reduction%20 A Review and Synthesis of Empirical Evidence -
ScienceDirect.htm.
Stiglitz. 1990. Tradtional Approach of Solving:
Micro Credit.
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