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This paper attempts to measure and understand financial inclusion by looking at supply of and demand for financial services. Separate composite Financial Inclusion Indices has been constructed for both financial services. For demand side, household level data is collected for three districts of Assam namely Baksa, Barpeta and Nalbari. Within supply side, one observes a lot of variation across states, for rural and urban regions. Even within a state, differences are clearly evident between rural and urban areas for the different indicators considered. From demand side indicators, it is found a dominant role of semi-formal organizations in rural areas of Assam, whereas the role of informal lenders is declining in rural Assam. The paper concludes to provide importance on vulnerable states in providing access to financial services on which they are lagging. In addition, the paper emphasized to expand semiformal sources in rural areas of Assam.
Keywords : Financial Inclusion, Demand Side, Supply Side, Semi-Formal Finance, Informal Finance, Assam.
Introduction
An essential component of an economy is finance. Interestingly, there occurred a two way association between development of financial system and growth of real sector. The real growth of an economy happens by developed financial system, whereas financial sector advancement occurred by the growing economy's demand (Kumar & Mishra, 2011). The momentous and central involvement of high concentration of banks in Scotland for the reviving expansion of the Scottish economy was articulated by Adam Smith (1776) in the early eighteenth century. Joseph Schumpeter ( 1912) in the early twentieth century expresses that technological innovation and its successful accomplishment is stirred by well functioning banks. Likewise, it was argued by Sir John Hicks (1969) that the insufficient growth of financial system caused the time lag between an innovation and its successful accomplishment. By empirical testing of the neoclassical outlook found that the countries with large numbers of bank and more dynamic stock markets grew
more rapidly over successive decades even after controlling for various factors originating economic expansion (Levine 1997).
Furthermore, finance plays a constructive task in poverty lessening. It was argued that Indian rural branch expansion program extensively impact rural poverty, and expands non-farm employment (Pande & Burgess 2003). Nevertheless, a developed financial system reachable to everyone declines information and transaction costs, positively...