Financial Inclusion from the Trenches

Much has been written about Financial Inclusion in recent times and yet everyone seem to be fighting the battle form the 'Supply Side'. Who would do what FI and Why? What would be the norms and who would regulate it? What would be the role of each of the (supply side) player viz Banks, Post Office, Mobile Money, Cards etc. and What all products etc. etc. Whether Inclusion should be a political agenda or a Regulatory mechanism and how regulators who have a 'D' in their names (Development such as IRDA and PFRDA) are different from the Banking regulator which lack 'D' conspicuously. 

The difference between the IRDA, PFRDA and the RBI is the 'D' element. While the insurance and pension regulators have a mandate to 'Develop' the markets (without contesting the need for separation of 'D' with 'R'), Banking regulator does Not have it. The debate is on...

Having said that, the political agenda of inclusion will have to be accomplished using different channels being regulated by different regulators. Unfortunately, in India, 'Banking Inclusion' is considered 'Financial Inclusion' and vice versa, and there is no discussion on financial deepening - generating 'demand' for a portfolio of products like savings, RDs, FDs, Credit, Insurance and even Co Contributory Pensions. The G2P payments of the DBT shall facilitate availability to cash but Financial deepening could be attained Only by means of Financial Literacy for the bottom billions. 

However, who has gone to the trenches and identified as to What do THEY Want?? And if they don't want but just Need it, then how do we get the 'Need' Converted into 'Demand'? For example, everyone on this planet need a 'Pension' to fight old age poverty, but what is the 'Demand' for such products.   

What product mix is best suited for them and that who would build their capacities to better appreciate the inclusion agenda. Yes, I am talking about the 70% Indian population who has no access to formal banking and financial products and there has seldom been an attempt to make them realize the need for it.

Financial Inclusion (FI) is Meaningless without Substantial Financial Literacy (FL) and Capacity Building at the Grass-root. However, FL should not be considered with a typical classroom approach, instead,most effectively and efficient use of 'Teachable Moments' - 'that moment when a unique, high interest situation arises that lends itself to discussion of a particular topic'. The time at which learning a particular topic or idea, say, opening and using banking account becomes possible or easiest. 

The Madhya Pradesh FI Model- Samrudhhi (Prosperity), typically provides for G2P payments landing directly in the beneficiary accounts (DBT) opened at the USB / CSPs. Its Three Pillar approach has created an institutional architecture that is sustainable for the bankers and provides a win win situation to the GoMP on delivery of benefits; financial viability for the BC / USB / CSPs as frequent G2P transaction occur and customers alike, who receive their benefits such as MNREGS payments, pension etc. in their individual bank a/c located within 5 kms from their house. The three pillars constitute a SSSM (Samagra Samajik Suraksha Mission) that has built a common data base of the entire population of MP that would enable to identify individuals and also the family data. to throw up the entitlements. The second has developed a conduit for devolution and transfer of funds. This conduit is developed to ensure devolution to even non-core banking institution like Coop bank and POs. The e-FMS has been developed to transfer funds from Single bank account directly from treasury to beneficiaries’ account that may be in core or non-core banking. The Third Pillar facilitates the financial dispensation facility accessible in order to realize the concept of FI in a holistic manner. Thus, a well-considered norm has been developed to have facility in a radius of 5 km. Areas have been mapped and those devoid of the facility have been marked as 'Shadow Areas'. Till date 1761 such facilities USB (Ultra Small Bank) have been provided as a business model.

The channels are now available and the infrastructure fully functional from the 'supply side'. Now there is a need to activate the 'demand side' for financial deepening which is possible by creating awareness through 'teachable moments' and offer diversified products like Savings, Credit, Remittances, FD, RDs, NPS Lite (Swawalamban) etc. so that full advantage of the FI model could be utilized by the rural and urban workers