Financial Inclusion White Paper - NCR

Executive Summary
Over the past decade, India has enjoyed strong economic growth and prosperity. Its
gross domestic product (GDP) has averaged nine percent growth year on year for the
past five years, earning a reputation as an emerging economic power. India is now
the world’s 12 th -largest economy and fourth in terms of purchasing power parity
(PPP), which is largely due to the increase in the size of its middle class consumer
population. There are twice as many billionaires in India than in Japan and as many
as in Germany, second only to the United States.
India’s growth; however, is challenged by the disproportionate distribution of income
and the disparity between the rich and poor. More than half the country’s wealth is
shared by only 10 percent of the population. In 2005, 42 percent of the population
still struggled to live on less than US$1.25 a day, the same proportion who survived
on less than a dollar a day a quarter century earlier. This uneven growth has
resulted in the exclusion of 51 percent of the country’s population (560 million
people) from formal sources of finance services, which is identified as a key cause of
poverty, together with illiteracy, and a lack of access to social benefits, productive
assets, and inadequate healthcare. India’s continued growth can only be assured if
steps are taken to ensure that the social and economic development is inclusive.
Financial Inclusion is the delivery of formal banking services at affordable costs to
the underserved sections of society.
The governments of India and other developing countries have made Financial
Inclusion a priority – evidenced by policy development, regulatory reform and new
funding vehicles. The government of India has a set a target of reaching full inclusion
by 2015. These objectives are being reached through financial instruments, such as
microcredit, which have achieved positive results, helping thousands of the world’s
poor to lift themselves out of poverty. Globally, public recognition of the value of
financial inclusion came when Dr. Muhammad Yunus, founder of Bangladesh’s
Grameen Bank, was awarded the 2006 Nobel peace prize for his work in bringing
microfinance to the poor.
The intent of this White Paper is to examine the critical success factors and
challenges that exist in the delivery financial inclusion in India. In doing so, learnings
were examined from case studies in India and other parts of the world. In depth
interviews were conducted with stakeholders responsible for policy development and
delivery in India, including representatives from the Reserve India Bank (RBR) and
leading financial institutions.
Conclusion: The size of the unbanked and underserved population is too large and
spread across too vast of geographies to be properly served by conventional
channels alone. Self-Service technology solutions are essential to address the
scalability and sustainability challenges facing financial inclusion.
• Providing greater confidence, security, and ease of use for those people using
financial services, including overcoming issues such as literacy.
• Providing an affordable platform for the delivery of multiple financial products.
In exploring these issues, the White Paper provides key learnings that policy makers,
financial institutions and technology providers can use to establish a collaborative
business model to deliver Financial Inclusion objectives.
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