Speeding Financial Inclusion
Scaling-up access to finance for India’s rural poor presents a formidable developmental challenge in a country as vast and varied as India. It was in this context that Skoch Development Foundation undertook the first-ever nationwide multi-stakeholder study entitled “National Study on Speeding Financial Inclusion”. This study sought to collate primary research based on our grassroots experiences from several project sites and field visits; and, views from all stakeholders so as to arrive at key interventions and intermediations to speed up the process of financial inclusion, and thereby poverty alleviation. Apart from providing key recommendations in the form of a roadmap to speed up the process of financial inclusion, the study also sought to determine the viability and cost-effectiveness of the Business Correspondent (BC) model and has identified several options to make the model viable.
Reviews / opinions:
“The critical question the study has raised is the cost of intermediation through business correspondents and who is to bear the cost. The study reveals, there is a cost involved in such intermediation and if this cost is not covered, then the viability of the system of business correspondents itself is in question.”
— C. Rangarajan, Chairman, Economic Advisory Council to the Prime Minister.
“It is an out-of-the-box approach that has delivered some critical insights in the form of this study. Reflective of the commitment towards the cause of financial inclusion, the recommendations are focused on speeding the process and are worthy of consideration.”
— K.C. Chakrabarty, Deputy Governor, Reserve Bank of India.
“The costs involved in serving the financial excluded are actually quite small compared to the size of the balance sheets of large PSU banks – but since the banks are not bearing the cost but expect the business correspondent to do this, the system is designed to fail.”
— Sunil Jain, Senior Associate Editor, Business Standard.
“The situation has definitely changed for the better with banks aggressively opening “no-frill accounts”, but recent study by Skoch Development Foundation says only 11% of 25.2 million such basic accounts opened between April 2007 and May 2009 are operational. ”
— Tamal Bandyopadhyay, Deputy Managing Editor, Livemint.
“…It is indeed an insightful study as it goes far beyond the usual comments made regarding lack of access to credit for the poor and people in rural areas. Details about the difficulties coming in the way of even using the zero balance accounts are quite an eye opener….”
— Rajwant Sandhu, Additional Secretary, Ministry of Panchayati Raj.
ABOUT THE AUTHOR:
Sameer Kochhar is President of Skoch Development Foundation—a not-for-profit Section 25 company—and has been passionately working towards promoting participatory democracy, empowerment and bringing improvements in delivery systems. He is CEO, Skoch Consultancy Services and is an industry veteran with a multifaceted career spanning over two and a half decades. He has been India strategy and management consultant to several Fortune 500 as well as large Indian companies for over a decade. He is also Chief Editor of Inclusion—a quarterly publication focused on development economics issues. He is considered to be one of the most respected independent voices on inclusive development and citizenship issues in India. He is a member of several expert groups and committees and his research opinions and writings have shaped many a public policy dialogue. He is also a Member of the Expert Group constituted by the Ministry of Panchayati Raj, Government of India advocating a case for strengthening of Panchayati Raj Institutions (village councils), and urban local bodies. He has written extensively on areas of emerging management practices, mergers and acquisitions, Indian IT industry, e-Governance, Panchayati Raj, and, ICT for development. He has recently published with Academic Foundation, New Delhi, three widely acclaimed books titled: Infrastructure and Governance (2008); Financial Inclusion (2009); and, Urban Renewal: Policy and Response (2009).
CONTENTS IN DETAIL:
Preface by C. Rangarajan
Introduction by K.C. Chakrabarty
1. Why This Study
2. Financial Inclusion and Poverty Alleviation
The Reality of Financial Exclusion
Experience with Credit Programmes
Needs of the Poor
Towards an Enabling Environment
3. Setting the Stage for Financial Inclusion
Role of Microfinance
Steps Towards Financial Inclusion—Demand Side
Committee on Financial Inclusion
RBI Takes the Lead
The Next Steps?
4. What is the Cost of Financial Access?
5. Converting Financial Access to Financial Inclusion
Inclusive Economics, Inclusive Governance
Meeting Credit Needs
Insurance for All
Catering to MSMEs
FI in Urban Areas
6. Summary of Stakeholder Discussions
7. Conclusion and Recommendations
8. Case Studies
Bank of Baroda
Punjab National Bank
The Zero Platform