Inclusive Finance India Summit – A global platform to deliberate on issues related to Financial Inclusion, Financial Education and Financial Stability, and build a Financial Inclusion Vision 2020
Access to financial services plays a critical part in facilitating economic growth and reducing income inequality. Inclusive financial systems allow poor people to smoothen their consumption and insure themselves against economic vulnerabilities they face - from illness and accidents to theft and unemployment. Financial inclusion enables poor people to save and to borrow - allowing them to build their assets, to invest in education and livelihoods opportunities, and thus to improve their quality of life. Inclusive finance especially benefits disadvantaged groups such as women, youth, and rural communities. For all these reasons financial inclusion has gained prominence in recent years, across the world, in many countries as a policy objective to improve the lives of the poor. Recognizing that 2.5 billion adults worldwide are ‘unbanked’ the World Bank has put forward a vision for achieving universal financial access by 2020. More than 50 countries, including India, have made ambitious commitments to financial inclusion targets.
Financial inclusion can be a powerful accelerator of economic progress, and can help achieve the goals of eliminating extreme poverty and building shared prosperity.
In addition to the intent of governments and policy support, if the private sector too responds by unleashing its resources and know-how, then universal financial access by 2020 is quite within the realms of possibility. Going forward, new technology, transformative business models and bold reforms will enable the accomplishment of this 2020 vision. Therefore, convergence of all the efforts and investments by the stakeholders, in strengthening the financial inclusion value chain, towards accomplishing this daunting challenge, will be a key to success.
As per the Global Findex, in India, only 35% of adults have a formal account, and 8 % a formal loan. Given the significant proportion of exclusion, the Government of India, in the last one decade, has taken several policy initiatives. While in 2006, it set up the Rangarajan Committee on Financial Inclusion; subsequently in 2008, RaghuramRajan Committee on Financial Sector Reforms also emphasized financial inclusion as a third policy objective along with growth and price stability. In 2011, the Government of India launched the Swabhiman
campaign under which banks were advised to open branches in all habitations of 5000 or more population in under-banked districts. Banking facilities were provided to more than 74,194 such villages, more than 62,468 Banking Correspondent Agents (BCAs) were appointed and about 3.16 Mn FI accounts opened by end of March 2012. While there is apparent progress, almost half the No Frills Accounts remain dormant, BCs are not viable and banks are skeptical of this drive impacting their bottom line. The Government of India further has also begun passing subsidies and entitlements under the Direct Benefit Transfer programme, leveraging the AADHAR platform. Several efforts outside Swabhiman
are also being tried out by private sector players’, bilateral / multilateral agencies, payment gateways, and telecom companies to advance the financial inclusion agenda. More recently, while one MFI was awarded a bank license, the Government of India established the niche BhartiyaMahila Bank to serve financial needs of women, the NachiketMor Committee has recommended for differentiated banking architecture to support financial inclusion. Given the overwhelming challenge of financial inclusion; more holistic, systemic and convergent strategies need to be designed to establish an eco-system that will understand the needs and aspirations of the unbanked, specially the poor, leverage technology, engage with private sector and deliver responsive products and processes tocreate beneficial outcomes.