Financial Inclusion White Paper - NCR

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3. Historical Reasons for Financial Exclusion - India Why What How Why Financial Exclusion? Under developed IT-Telecom infrastructure in the interiors of country Higher cost of funds and administrative expenses Population and poverty Illiteracy (Includes financial illiteracy) Regional barrier (language and culture) Absence of Feasible Technology What are the possible solutions for Financial Inclusion? • IT-Telecom integrated platform • Accessible network in interiors of country • Microbanking products • Technology platform that can be shared to reduce cost and improve efficiency • Influx of technology products to scale • Higher Volumes • Better usage of data • Reduction in cost of delivery of service • Social development program • Involvement of other non- government bodies • Literacy campaign • Financial literacy campaign • Use of technology where ever possible • Customization of product for excluded populace • Delivering solution in regional language • Localization of delivery channel • Co-operative or community center • Need high transaction volume • Reduction in input cost for feasible products • Interoperable solution • Setting up industry standards(Inter-operability) How solutions can be applied? • IT – Telecom Integration • Data connectivity • Shared access 7 • Well connected delivery channel for real time transaction • Low cost technology products, (standardised and inter-operable) • Shared access and self-service solution • Low cost data management system • Developing delivery channel such as BC model and self-service solution • Government initiatives in social development • Government incentives and support for NGOs and SHGs • Development of MFI, SHGs & NGOs • Corporate involvement in literacy drive, e.g. Teach India campaign • National alliance driven by MFIs, SHGs, NGOs and even technology vendors • Interactive Voice Response System (IVRS), Self-service solution • Literacy campaign • Corporate drive for financial literary • Technology Solution such as IVRS, • Delivery channels: Self-service and Business correspondent model • Higher involvement of regional SHG, MFI, NGO • Low cost products or innovative business models (Pay Per Use) • Government incentives and favorable policies • Shared Access • Standardisation and collaboration 7 Shared Access is defined as consolidation and sharing of services by different departments within an organization or by different organizations to lower cost, increase efficiency and increase service levels. Source: Frost & Sullivan 17
4. Financial Inclusion Lifecycle The first step of Financial Inclusion is to educate customers and open an account. However, merely opening a bank account for a poor individual is not financial inclusion. This approach generally results in an inactive account or, at best, a repository for government benefits. A three-step approach (see Chart 4a) is required to bring financially underserved individuals into a financially inclusive society. After improving financial literacy and opening an account of some form, it is usage of that account, linkage with other financial services and access to all the financial instruments that are required to complete the financial inclusion lifecycle. Optimum utilisation of an account should be another target for banking service providers. Chart 4.a: Financial Inclusion Lifecycle Financially Excluded Financial Literacy • Individual institutes such as SHG, MFI, Rural banks, etc • National alliance of MFI, SHG, Banks, for financial literacy drive • Voice enabled Kiosk (Self service solution) • Regulatory Support Opening bank account No frill account Smart Card, etc • Financial Service Providers oBanks o SHG + Financial institute • Technology Service providers (BC channel) • Regulatory Support Step 1: Financial Literacy Delivering Financial Services • Outreach Mechanism o Self Service Solution o BC model o Mobile banking • Regulatory Support • Technology providers Accounts under utilized Optimum utilization of account (Multiple financial services, Credit score tracker) • Multiple product delivery platform (Self Service Solution) Financially Included Source: Frost & Sullivan To begin the financial inclusion process, one needs to understand financial products, usage, operation and management of accounts. As defined by the Reserve Bank of India (RBI), financial education is "the process by which financial consumers/investors improve their understanding of financial products, concepts and risks and, through information, instruction and/or objective advice, develop the skills and confidence to become more aware of 18
Page 1 and 2: Do you want to implement a scalable
Page 3 and 4: Acknowledgement Frost & Sullivan is
Page 5 and 6: Table of Contents 1. Introduction t
Page 7 and 8: 1. Introduction to Financial Inclus
Page 9 and 10: Brazil Brazil’s government has ur
Page 11 and 12: 2. India’s Socio-Economic Landsca
Page 13 and 14: Case Study 2S1: Swadhaar Microfinan
Page 15 and 16: Chart 2.b: India’s Regional Split
Page 17: 2.3 Underbanked bankable population
Page 21 and 22: 5. A Feasible Solution for Financia
Page 23 and 24: 5.1.3 Kisan Credit Cards (KCC) The
Page 25 and 26: 5.2 Technology Solutions Technology
Page 27 and 28: Self-service technologies offer pro
Page 29 and 30: Case Study 5S1: M-PESA, Kenya Provi
Page 31 and 32: a customer through the entire trans
Page 33 and 34: 2) Audio-Video lead through Use of
Page 35 and 36: 5.3 Multi Channel Delivery Models 5
Page 37 and 38: 5.3.2 Independent and Shared Access
Page 39 and 40: Case Study 5S4: Mzansi, South Afric
Page 41 and 42: 6. Conclusions India is a country o
Page 43 and 44: Measurement System Appendix A criti
Page 45 and 46: Policy Template Nature Impact Time
Page 47 and 48: 2.2 Measuring the impact of Micro D

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