Financial inclusion

FINANCIAL INCLUSIONFINANCIAL INCLUSION

Group :Bhagwan Sahay Bairwa S-13Devender Singh Pal S-19Dipanwita Datta S-21Hari Kumar S-24Pushpendra Kumar S-42Sravan Bagaria S-59

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“The future lies with those companies who see the poor as their customers”

~C.K.Prahalad

The Potential of the The Potential of the UnreachedUnreached

FINANCIAL EXCLUSIONFINANCIAL EXCLUSION


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Financial Exclusion

NoSavings

No Insurance

Noassets

No bank account

No access tomoney adviceNo affordable

credit

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Financial Inclusion - ScopeFinancial Inclusion - Scope

Financial Inclusion should include access to financial products and services like,

Bank accounts – check in accountImmediate Credit Savings productsRemittances & Payment servicesInsurance - HealthcareMortgageFinancial advisory servicesEntrepreneurial credit

Extent of Financial Exclusion Only 5% of villages have a

Bank branch.

81% villages do not have a bank branch in 2 km radius

Number of deposit accounts per adult population is only 59%.

Who are Financially Excluded:

1. Poor2. Socially under-privileged.3. Disabled.4. Old as well as children.5. Women.6. Ethnic Minorities.7. Uneducated.8. Mobile population. 9. underprivileged section in

rural and urban areas like, Farmers, small vendors, etc.

10.Agricultural and Industrial Labourers

11.People engaged in un-organised sectors

12.Unemployed


Financial Exclusion is multi-Financial Exclusion is multi-dimensionaldimensional

Financial Exclusion is Financial Exclusion is universaluniversal

Financial exclusion is an issue even in developed economies

As per Census 2001, in India only 36% of the people use any kind of banking services

Country/locationCountry/location % of population% of populationwith an accountwith an account

DenmarkDenmark 99.099.0

United StatesUnited States 91.091.0

EuropeEurope 89.689.6

BotswanaBotswana 47.047.0

Brazil (urban)Brazil (urban) 43.043.0

SwazilandSwaziland 35.335.3

South AfricaSouth Africa 31.731.7

NamibiaNamibia 28.428.4

DjiboutiDjibouti 24.824.8

Mexico CityMexico City 21.321.3

LesothoLesotho 17.017.0

TanzaniaTanzania 6.46.4

Drivers of Financial Drivers of Financial ExclusionExclusion

Drivers of financial exclusionDrivers of financial exclusion: ◦ Most frequent: Low income, Nil or low

savings, Lack of assets, Unemployment, Use of inappropriate products

◦ Less Frequent: Psychological/disability issues, Feeling of being excluded, Indigenous/ethnic issues, Geographical remoteness, Lack of PC/Internet Access

Personal and social factorsPersonal and social factors: Cultural norms, Gender, Age,

Legal identity

FINANCIAL INCLUSION FINANCIAL INCLUSION

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Financial Inclusion - Financial Inclusion - DefinitionDefinition

“The process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost”

- The Committee on Financial Inclusion (Chairman: Dr. C. Rangarajan, 2008)

“The process of ensuring access to appropriate financial products and services needed by vulnerable groups such as weaker sections and low income groups at an affordable cost in a fair and transparent manner by mainstream Institutional players.”

Steps of Rural DevelopmentSteps of Rural Development

Enthusiasm

Skills

Implemen-tations

Networking

*Threats*Opportunities

*Basics*Programmes*Technology

*New work cultures

*Cooperation*Purchasing *Production*Marketing*Selling Will

*Commit-ment

Modernisation

*Cooperation*Contents*Benefits

Financial Inclusion – Financial Inclusion – What exist s n lackingWhat exist s n lacking

Steps TakenSteps Taken Co-operative

Movement Nationalization

of banks Lead Bank

Scheme RRBs Service Area

Approach Self Help Grou

ps13

What was lackingWhat was lackingAbsence of mod

TechnologyInadequate reach and

coverageDelivery MechanismWell defined Business

ModelRich have no

compassion for poor

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Why Are we Talking of Why Are we Talking of Financial Inclusion Now?Financial Inclusion Now?

Focus on Inclusive Growth

Banking Technology has arrived

Realisation that Poor is bankable

FINANCIAL INCLUSION AND FINANCIAL INCLUSION AND TECHNOLOGYTECHNOLOGY

Technology- An Technology- An EnablerEnabler

For Simplification of process Cost reduction to make it

affordable to masses Product design to suit the

requirements of the Rural masses

Innovation does not become technology till it reaches the

masses.

Technological Banking to the Common Technological Banking to the Common ManMan

Opportunities

Coverage

Access to Diversified Financial Products and Services

Delivery Model- Day to day transactions

Availability of infrastructure

Dedicated software

Door Step Banking & no. of touch points to be increased

Technology is costly ….Technology is costly ….

The Solution lies in

Networking

Smart Card -A great technological challenge

Collaboration

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TECHNOLOGY INITIATIVES

“PARAM”By

Ogilvy & Mather

ELECTRONIC KNOWLEDGE

DELIVERYBy

M.S.SwaminathanResearch

foundation

e-CHOUPALBy ITC

-Account Opening-Transactions

Data Captured Through Labtop

& POS/POT

Service provider Intermediate

Server

Activity is Performed by BC - Laptop for A/c opening

POS/POT for transactions

SecurityEquipment

FIN CBS

Server

Service Provider’s (Intermediate ServerFile converted into format of CBS

Data is uploaded into FIN-CBS

Interest Calculation done centrally

and the details sent back to POS and inserted to the

smart card of customer

Villages

Data Flow Block Diagram of Financial Inclusion

FINANCIAL INCLUSION AND RBIFINANCIAL INCLUSION AND RBI

RBI ‘s ContributionRBI ‘s Contribution

No-Frill AccountsOverdraft in Saving Bank AccountsBC / BF ModelKCC / GCC GuidelinesLiberalised branch expansionLiberalised policy for ATMIntroducing technology products and services

Pre-Paid cards, Mobile Banking etc.Allowing RRBs’ / Co-operative banks to sell Insurance and

Financial ProductsFinancial Literacy ProgramCreation of Special Funds431 districts identified by the SLBC convenor banks for

100 per cent financial inclusion across various States/UTs and the target in 204 districts of 21 States and 7 UTs has reportedly been achieved

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PROBLEMS WITH FINANCIAL PROBLEMS WITH FINANCIAL INCLUSIONINCLUSION

Basic Challenges of financial Basic Challenges of financial inclusioninclusion

Coverage Access to Diversified Financial Products and Services

Delivery Model - Day to day transactions

Cost-effective technologyCustomer education/financial adviceChange in banker’s mindset

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Problems / DifficultiesProblems / Difficulties

Scaling up of activities Appropriate business model yet to

evolve BC model too restrictive Limitation of cash delivery points Lack of Interest / Involvement of Big

Technology Players

Problems of Financial Exclusion in Problems of Financial Exclusion in IndiaIndia

•Coverage •Cost of Small Value transaction •Infrastructure •Suitable products •Flexibility •Weak Delivery model •Community Enterprise & Financial Management support

Pre-conditions for successPre-conditions for successAttitude and Will power Technology Delivery Mechanism Support Services

◦Infrastructure ◦Community Development Support ◦Product Innovation

Regulatory and Policy Interventions Involvement of all

◦especially Development/Administration at District/Block/Village level

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Pre-requisites For The Pre-requisites For The Success of Financial InclusionSuccess of Financial Inclusion

Appropriate Technology Appropriate and Efficient Delivery

model Mainstream banks’ determination and

involvement Strong Collaboration among Banks,

Technical Service Provider, BC Services Involvement of all

Especially the state administration at grass-root level

Liberalisation of BC model

Initiatives for financial Initiatives for financial inclusioninclusion

1904 Cooperative Societies Act1954Rural Credit Survey Committee1955State Bank fo India created 196919 Commercial Banks Nationalised, All

India Rural Credit Review Committee1970Lead Bank Scheme introduced 1975Regional Rural Bank set up19806 more Commercial Banks nationalised1992SHG - Bank Linkage Programme2001Kisan Credit Card introduced

However, efforts to achieve financial inclusion

have failed

FINANCIAL INCLUSION AND FINANCIAL INCLUSION AND GLOBLIZATIONGLOBLIZATION

Benefits of globalization Benefits of globalization

Globalization cannot be sustained unless we move towards inclusive growth

Financial inclusion will lead to growth with equity◦This will help empowering the poor to

break out of the vicious circle of poverty and live with dignity

Then only globalization can be considered truly beneficial.

Globalization has changed the Globalization has changed the world economic order world economic order

New global markets in services New global markets in services including banking, insurance, including banking, insurance, transporttransport

Deregulated financial markets with Deregulated financial markets with 24 hour trading24 hour trading

Increased cross-border Mergers & Increased cross-border Mergers & AcquisitionsAcquisitions

Global consumer markets and global Global consumer markets and global consumer brandsconsumer brands

Globalization & its Globalization & its discontentsdiscontents

Although globalization has brought wider choice, free flow of trade and investment, better technology, in most developing economies, financial services are available only to a small minority

More than 3 billion people world-wide are financially excluded

◦Majority of the people in developing countries do not have any banking relationship

◦They seldom get credit, insurance or receive remittances through formal financial institutions

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Global Meltdown - An Opportunity Global Meltdown - An Opportunity

Focus on Inclusive Growth Focus on Domestic Consumption and Investment Focus on increased Social Sector Spending Emphasis on giving benefits to poor clients Global (bigger) players looking Inward Reduction of Cost (?)

Let us Give One Big Push to Financial Inclusion!

CONCLUSIONCONCLUSION

CONCLUSION CONCLUSION

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• Financial Inclusion is a win-win situation for the financially excluded, the Corporates, the Govt. and the Banks.

• Bankers can support by financing the Agri products including their preservation and sales.

• Corporates can sell / market their products to the large untapped rural markets.

CONCLUSION CONCLUSION

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• Public-Private partnership can utilise “Common Service Centres”for enabling access to

• Banking Services and products including consumer loans; Micro-finance Services

• Farm Equipment, Home & Construction Loans

• Credit Cards, Debit Cards,etc., Bill Payment – Electricity, Utilities, etc.,Payment Gateway, ATMs

• Multi-purpose “Smart Cards” can simplify the financial inclusion process to reach the unreached.

THANK YOUTHANK YOU

Bangladesh Gramin Bank - Bangladesh Gramin Bank - MicrofinanceMicrofinance

Founded by Mohamed Yunus in 1974 with $27 own money

Micro-lending scheme for poor in Bangladesh, mostly women

In 30 years bank has 6.6m borrowers including 97% women

Founder Mohamed Yunus got Nobel Peace Prize 2006

Extent of Financial ExclusionExtent of Financial Exclusion

1. Coverage of (Estimates based on various studies and Market Surveys):

Check in accounts - 40% Life Insurance - 10.0% Non-Life Insurance - 0.6% Credit Card - 2% ATM + Debit Card - 13%

2. Geographical coverage- 5.2% villages are having a bank branch

3. Farmers coverage-- Out of 119 million farmers, small and marginal farmers

are 97.7 million (82.1 %)

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