For the first time in India’s history, everyone from politicians to entrepreneurs to technology gurus are converging on a common theme — to take the benefit of banking and finance to India’s neglected millions
If you are the scion of India’s most powerful political family with a fair chance of becoming the prime minister one day, what do you choose as the most important agenda to anchor your career on? Rahul Gandhi must have pondered this question several times in his fledgling Parliamentary career and as the years rolled by, the answer has become clearer. The kurta-clad handsome young man is not in the league of usual rabble rousers. He is playing for a unique positioning — that of a leader who brought millions of poor people living at the edges of society into the economic mainstream. He wants to take the benefit of banking and financial literacy to the remotest corners of the country. His agenda, then, is ‘financial inclusion’.
“The speed and continuity of our economic growth depend on inclusion. A small, resource-rich section of India cannot grow indefinitely while a vast disempowered nation looks on,” Gandhi said in a speech in Lok Sabha in 2008. “If opportunity is limited to a few, our growth will be a fraction of our capability as a nation.”
He followed up his statement with action. He roped in experts including central banking veterans to counsel him on the complexities of financial inclusion. He took his constituency, Amethi in Uttar Pradesh, as the test bed for some of his experiments. He took billionaire Bill Gates and British politician David Miliband there to showcase the work done by the Rajiv Gandhi Trust in bringing financial power to women. A close friend of Gandhi’s says he is steadfast and sincere in his commitment to this cause. “There is no doubt in my mind that his passion for social upliftment outweighs his passion for mundane political objectives.”
Rahul Gandhi may have read the people’s pulse just right. There is enough evidence to suggest that the concept of financial inclusion will be a major theme in India’s economic and political discourse in the coming years. The economy is at a point where the rural segment has to become vibrant to maintain the growth pace. The largely saturated urban markets can’t guarantee the same growth. But the village economy cannot kick off unless financial services such as credit, savings and money transfers reach there.
Today, large swathes of India are ‘financially excluded’. At least 73 percent of farmer households are in need of formal financial services. Out of 600,000 villages in the country, only 30,000 have a bank branch. Only 40 percent of the country’s 1.2 billion people have bank accounts. Nine out of 10 people don’t have insurance. Debit cards cover only 13 percent of the population and credit cards, a mere 2 percent. “We are totally under-banked as a nation,” says Nachiket Mor, former president of ICICI Foundation for Inclusive Growth.
But the buzz has begun. Today, everybody is talking about financial inclusion. The regulators, like the Reserve Bank of India, are giving it a fresh impetus and making it easy for bankers to take financial services to sections previously considered unviable. Technology is making it easy for the poor people to get bank accounts and transfer money without getting overwhelmed at the prospect of visiting a branch. Microfinance institutions (MFIs), which have played a large part in creating this buzz, are taking services deeper — to the poorest parts of Bihar and even some Naxalite-infested regions, for instance. Banks, both public and private, are appointing agents to offer financial services through kiosks and grocery stores.
“There is a new financial system coming together,” says Kaushik Basu, chief economic advisor in the finance ministry. “We want to have financial inclusion in a relatively market oriented way and there is a lot of imaginative work going on which could have a dramatic impact.”
For the first time in India’s history, entrepreneurs and investors have joined hands with the government and the banking network to power financial inclusion. It is important that they keep in mind the lessons of the past — such as the pointlessness of ‘loan melas’ — and the lessons of the present — such as the missteps of microfinance companies — to bring about lasting change.
“The speed and continuity of our economic growth depend on inclusion. A small, resource-rich section of India cannot grow indefinitely while a vast disempowered nation looks on,” Gandhi said in a speech in Lok Sabha in 2008. “If opportunity is limited to a few, our growth will be a fraction of our capability as a nation.”
He followed up his statement with action. He roped in experts including central banking veterans to counsel him on the complexities of financial inclusion. He took his constituency, Amethi in Uttar Pradesh, as the test bed for some of his experiments. He took billionaire Bill Gates and British politician David Miliband there to showcase the work done by the Rajiv Gandhi Trust in bringing financial power to women. A close friend of Gandhi’s says he is steadfast and sincere in his commitment to this cause. “There is no doubt in my mind that his passion for social upliftment outweighs his passion for mundane political objectives.”
Rahul Gandhi may have read the people’s pulse just right. There is enough evidence to suggest that the concept of financial inclusion will be a major theme in India’s economic and political discourse in the coming years. The economy is at a point where the rural segment has to become vibrant to maintain the growth pace. The largely saturated urban markets can’t guarantee the same growth. But the village economy cannot kick off unless financial services such as credit, savings and money transfers reach there.
Today, large swathes of India are ‘financially excluded’. At least 73 percent of farmer households are in need of formal financial services. Out of 600,000 villages in the country, only 30,000 have a bank branch. Only 40 percent of the country’s 1.2 billion people have bank accounts. Nine out of 10 people don’t have insurance. Debit cards cover only 13 percent of the population and credit cards, a mere 2 percent. “We are totally under-banked as a nation,” says Nachiket Mor, former president of ICICI Foundation for Inclusive Growth.
But the buzz has begun. Today, everybody is talking about financial inclusion. The regulators, like the Reserve Bank of India, are giving it a fresh impetus and making it easy for bankers to take financial services to sections previously considered unviable. Technology is making it easy for the poor people to get bank accounts and transfer money without getting overwhelmed at the prospect of visiting a branch. Microfinance institutions (MFIs), which have played a large part in creating this buzz, are taking services deeper — to the poorest parts of Bihar and even some Naxalite-infested regions, for instance. Banks, both public and private, are appointing agents to offer financial services through kiosks and grocery stores.
“There is a new financial system coming together,” says Kaushik Basu, chief economic advisor in the finance ministry. “We want to have financial inclusion in a relatively market oriented way and there is a lot of imaginative work going on which could have a dramatic impact.”
For the first time in India’s history, entrepreneurs and investors have joined hands with the government and the banking network to power financial inclusion. It is important that they keep in mind the lessons of the past — such as the pointlessness of ‘loan melas’ — and the lessons of the present — such as the missteps of microfinance companies — to bring about lasting change.
Source:- Forbes India Magazine
What we see happening in India is a radical shift of perception from perceiving finance for the poor as mere charity to a market opportunity. In this regard today providers of finance have applied the same principles as they would in business to financing the poor; namely lowering their operational costs and ensuring efficiency and consistency in service delivery. this has required them to become more competitive, employ better technology and make themselves and their products more accessible to the general public. This is truly a revolution
ReplyDeleteApart from customer-oriented products and services, financial literacy should form an integral part of any financial inclusion programs by the different agencies. Financial literacy would not only make people aware of the availability of various schemes meant for them but also help in the maximum utilization of such schemes for their betterment.
ReplyDelete