Financial inclusion cbt presentation feb 2011

Financial InclusionFinancial InclusionChallenges & OpportunitiesChallenges & Opportunities

Role of Government-Industry-Role of Government-Industry-AcademiaAcademiaPROF. K. SubramanianPROF. K. Subramanian

Director & Professor, Advanced Center for Informatics & Innovative Learning (ACIL), Director & Professor, Advanced Center for Informatics & Innovative Learning (ACIL), Indira Gandhi National Open University, New Delhi (IGNOU)Indira Gandhi National Open University, New Delhi (IGNOU)

SM(IEEE, USA), SMACM(USA), FIETE, SMCSI,MAIMA,MAIS(USA),MCFE(USA)SM(IEEE, USA), SMACM(USA), FIETE, SMCSI,MAIMA,MAIS(USA),MCFE(USA)Hon. IT Adviser to CAG of IndiaHon. IT Adviser to CAG of India

EX-DDG, NIC, Ministry of Communications & Information TechnologyEX-DDG, NIC, Ministry of Communications & Information TechnologyPresident, Cyber Society of IndiaPresident, Cyber Society of India

Prof. KS@2011 Krishna college, CoimbatorProf. KS@2011 Krishna college, Coimbatore Lecturee Lecture

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The drivers and emerging trends in the The drivers and emerging trends in the Digital/Information ageDigital/Information age

Tech

nolo

gica

l

Adv

ance

s

Polit

ical

Driv

ers

Economic

Drivers

Social Drivers

Citizens

Community Organizations

Other Governments

Media

Businesses

Employees

Common Needs


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These changes impact the fundamental way that organizations These changes impact the fundamental way that organizations compete in the digital/information agecompete in the digital/information age..

Industrial AgeFoundation for

Economic Development

Digital/Information Age

Control of Natural Resources Control of KnowledgeCompetitive Advantage

Protection of Assets/Resources

Open/Competitive

Rapid (re)inventionIncrease Scale Expansion

Business Environment

Labor Intensive Jobs Process-Related WorkWork Outsourced

Decision MakingHierarchical Collaborative

Key AssetsHuman Resources, Information & Technical Infrastructure

Physical Resources

Geographic Scope GlobalRegional


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India & Sustainable India & Sustainable DevelopmentDevelopment

Role of ICTRole of ICTWith a huge rural population, that is With a huge rural population, that is

economically challenged Financial economically challenged Financial Inclusion is indispensible for the Inclusion is indispensible for the sustainable growth of India. sustainable growth of India.

A holistic financial inclusion could be A holistic financial inclusion could be expedited with the maximum use of expedited with the maximum use of Information, Communication and Information, Communication and Technology-enabled services Technology-enabled services supported by an extensive Financial supported by an extensive Financial Literacy mission. Literacy mission.


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Former UN Secretary-General Kofi Former UN Secretary-General Kofi Annan said:Annan said:””The stark reality is that most poor people The stark reality is that most poor people

in the world still lack access to sustainable in the world still lack access to sustainable financial services, whether it is savings, financial services, whether it is savings, credit or insurance. The great challenge credit or insurance. The great challenge before us is to address the constraints before us is to address the constraints that exclude people from full participation that exclude people from full participation in the financial sector. Together, we can in the financial sector. Together, we can and must build inclusive financial sectors and must build inclusive financial sectors that help people improve their lives.” that help people improve their lives.”


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Financial Inclusion –A Financial Inclusion –A DefinitionDefinition

Three main concerns in financial inclusion: Three main concerns in financial inclusion: access to banking access to banking access to affordable credit access to affordable credit access to free face-to-face financial advice. access to free face-to-face financial advice.

'Financial Inclusion' is defined 'Financial Inclusion' is defined as an extension of banking and financial services as an extension of banking and financial services

at an affordable cost to unbanked people of the at an affordable cost to unbanked people of the community. community.

'Financial Exclusion' signifies 'Financial Exclusion' signifies the lack of access (by the economically poor and the lack of access (by the economically poor and

unbanked people of society) to appropriate, low-unbanked people of society) to appropriate, low-cost, fair and safe financial products and cost, fair and safe financial products and services. services.


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Dr. C. Rangarajan committee on Dr. C. Rangarajan committee on financial inclusionfinancial inclusion

"Financial inclusion may be defined as the process of "Financial inclusion may be defined as the process of ensuring access to financial services and timely and ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable as weaker sections and low income groups at an affordable cost." cost."

The financial services include the entire range - savings, loans, The financial services include the entire range - savings, loans, insurance, credit, payments etc. The financial system has insurance, credit, payments etc. The financial system has to provide its function of transferring resources from to provide its function of transferring resources from surplus to deficit units but both deficit and surplus units are surplus to deficit units but both deficit and surplus units are those with low incomes, poor background etc. By providing those with low incomes, poor background etc. By providing these services, the aim is to help them come out of these services, the aim is to help them come out of poverty. So far, the focus has only been on delivering poverty. So far, the focus has only been on delivering credit (it is called as microfinance but is microcredit) and credit (it is called as microfinance but is microcredit) and has been quite successful. Similar success has to be seen in has been quite successful. Similar success has to be seen in other aspect of finance as well.other aspect of finance as well.


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Financial Exclusion: ReasonsFinancial Exclusion: Reasons Lack of information:Lack of information: Lack of information about the role and function of banks, banking services and Lack of information about the role and function of banks, banking services and

products, interest rates, etc. stop people from including themselves in mainstream products, interest rates, etc. stop people from including themselves in mainstream banking. banking.

Insufficient documentation: Insufficient documentation: Many people (even in metropolis and urban areas) are unable to show their self Many people (even in metropolis and urban areas) are unable to show their self

identification documents during the opening of a bank account or during taking a identification documents during the opening of a bank account or during taking a loan. loan.

Lack of awareness: Lack of awareness: Many people are unaware of the banking terms and conditions laid down from time Many people are unaware of the banking terms and conditions laid down from time

to time. to time. High transaction chargesHigh transaction charges: : Various commercial banks across the globe levy transaction charges on credit or Various commercial banks across the globe levy transaction charges on credit or

debit transactions, on over usage of banking services, on cheque book issuance etc debit transactions, on over usage of banking services, on cheque book issuance etc Lack of access:Lack of access: Accessibility is a problem from all those people who live in geopolitically isolated Accessibility is a problem from all those people who live in geopolitically isolated

regions. Moreover, as most of the commercial banks are located in the vicinity of regions. Moreover, as most of the commercial banks are located in the vicinity of cities, people in rural areas (mainly in developing countries) have a geographical cities, people in rural areas (mainly in developing countries) have a geographical barrier in accessing banks. barrier in accessing banks.

Illiteracy:Illiteracy: Because of illiteracy, a substantial number of people are unable to take recourse to Because of illiteracy, a substantial number of people are unable to take recourse to

banking services. banking services.


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Challenges In Financial InclusionChallenges In Financial Inclusion

Several challenges like large area, cost of small value Several challenges like large area, cost of small value transactions, weak delivery model, unsuitable transactions, weak delivery model, unsuitable products, infrastructure, lack of finances, products, infrastructure, lack of finances, management support have to be effectively dealt management support have to be effectively dealt with. with.

The automation of core banking processes with the The automation of core banking processes with the use of channels such as ATM, IVR based Tele-use of channels such as ATM, IVR based Tele-banking, Internet banking, the banking industry has banking, Internet banking, the banking industry has become more profitable. become more profitable.

Banks however, face an uphill task of reaching out to Banks however, face an uphill task of reaching out to the mass customers in remote areas such as villages. the mass customers in remote areas such as villages. Naxal Movement, low Return –OnInvestment (ROI), Naxal Movement, low Return –OnInvestment (ROI), customer behavior, operating expenses inhibits customer behavior, operating expenses inhibits banks from expansion in rural areas.banks from expansion in rural areas.


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The Scenario & Actions 1The Scenario & Actions 1Financial Inclusion is needed for rural and downtrodden masses that Financial Inclusion is needed for rural and downtrodden masses that

are the future growth engine of the economyare the future growth engine of the economy. .

From the recent initiatives undertaken by the different world From the recent initiatives undertaken by the different world governments to foster financial inclusion, one cannot undermine governments to foster financial inclusion, one cannot undermine the need to include the economically underprivileged in the the need to include the economically underprivileged in the mainstream banking sectormainstream banking sector..

The role of various ICT tools and The role of various ICT tools and associated technologies in providing financial solutions to the associated technologies in providing financial solutions to the

unbanked is also substantial. Rural ATMs, plastic cards (like smart unbanked is also substantial. Rural ATMs, plastic cards (like smart cards, biometric cards, etc.) and mobile payment technologies do cards, biometric cards, etc.) and mobile payment technologies do have the ability to engage the unbanked sectionshave the ability to engage the unbanked sections. .

Steps have been taken by the Government for the expansion of Steps have been taken by the Government for the expansion of banking services and linking of opportunities among various banking services and linking of opportunities among various segments of financial sector like capital markets, insurance, etc. segments of financial sector like capital markets, insurance, etc. to achieve its aim of Inclusive Growth.to achieve its aim of Inclusive Growth.


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The Scenario & Actions 2The Scenario & Actions 2High GDP growth in IndiaHigh GDP growth in India, , Triggered by an open economy has created job opportunities in Triggered by an open economy has created job opportunities in

urban and semi-urban India and it will go further into rural India, urban and semi-urban India and it will go further into rural India, increasing the potential for growth to vast sections of increasing the potential for growth to vast sections of disadvantaged and low income groups. disadvantaged and low income groups.

Commercial banksCommercial banks are making use of the services of non- are making use of the services of non-governmental organizations (NGOs/SHGs), micro-finance governmental organizations (NGOs/SHGs), micro-finance institutions, NBFCs, etc. as intermediaries for providing financial institutions, NBFCs, etc. as intermediaries for providing financial and banking services which could be used as business facilitators and banking services which could be used as business facilitators (BF) or business correspondents (BC) by them. (BF) or business correspondents (BC) by them.

Government initiativesGovernment initiatives to support FI needs to be backed by to support FI needs to be backed by progressive policies. This can be achieved only through Public- progressive policies. This can be achieved only through Public- Private Partnership Model powered by ubiquitous technologies. Private Partnership Model powered by ubiquitous technologies.


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Role of Multi-stack holders Role of Multi-stack holders Government-Industry-AcademiaGovernment-Industry-Academia

Twenty Commandments Twenty Commandments1.1. A New Financial Architecture to Suit A New Financial Architecture to Suit

the Needs of Inclusive Growththe Needs of Inclusive Growth2.2. Coordination with UIDAICoordination with UIDAI3.3. Formation of National Financial Formation of National Financial

Inclusion MissionInclusion Mission4.4. Involvement of Education Sector for Involvement of Education Sector for

furthering Financial Inclusion-furthering Financial Inclusion-Synergize Education & DevelopmentSynergize Education & Development

5.5. Establishment of Financial Counselling Establishment of Financial Counselling Centres (SEWA Centres)Centres (SEWA Centres)

6.6. Building Client Capacities-To build a Building Client Capacities-To build a vibrant financial systemvibrant financial system

7.7. Financial Inclusion as a Corporate Financial Inclusion as a Corporate Social Responsibility of all the Banks Social Responsibility of all the Banks and Financial Institutionsand Financial Institutions

8.8. Role of RBI--Role of RBI--power of moral suasion as power of moral suasion as well as regulatory powers.well as regulatory powers.

9.9. Political WillPolitical Will10.10. Partnership with Dedicated NGOs and Partnership with Dedicated NGOs and

MFIs-MFIs-financial as well as non-financial financial as well as non-financial incentives have to be designed for the incentives have to be designed for the spirited involvement of such spirited involvement of such organisationsorganisations

1.1. Financial Inclusion as a Part of Course Financial Inclusion as a Part of Course Curriculum in High Schools (systemic Curriculum in High Schools (systemic Literacy)Literacy)

2.2. Digitise the Documentation Process for Digitise the Documentation Process for Opening of Bank AccountsOpening of Bank Accounts

3.3. Strategize the Provision of Bank Strategize the Provision of Bank Credit->strengthen rural creditCredit->strengthen rural credit

4.4. Exclusive Focus on the Socialyl Exclusive Focus on the Socialyl Excluded and the PoorExcluded and the Poor

5.5. Extensive use of Co-operatives Extensive use of Co-operatives Greater role of NABARDGreater role of NABARD

6.6. Procedural / Documentation Changes Procedural / Documentation Changes SimplifySimplify

7.7. Proactive Role of GovernmentProactive Role of Government8.8. A Role for Rural Post OfficesA Role for Rural Post Offices9.9. Effective Use of Information Effective Use of Information

Technology SolutionsTechnology Solutions10.10. Adequate Publicity for the Project of Adequate Publicity for the Project of

Financial InclusionFinancial Inclusion


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A Combination of Technology, Innovation, A Combination of Technology, Innovation, Leadership and Inspired Workforce-Ingredients for Leadership and Inspired Workforce-Ingredients for

Enterprise & National DevelopmentEnterprise & National Development The economic strength is powered by The economic strength is powered by

competitivenesscompetitiveness

- The competitiveness is powered by - The competitiveness is powered by knowledge power. knowledge power.

- The knowledge power is powered by - The knowledge power is powered by Technology and Innovation. Technology and Innovation.

- The Technology and Innovation is powered - The Technology and Innovation is powered by resource investment. by resource investment.

- The Resource investment is powered by - The Resource investment is powered by revenue and return on Investment. revenue and return on Investment.

-…Contd-…Contd


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A Combination of Technology, Innovation, A Combination of Technology, Innovation, Leadership and Inspired Workforce-Ingredients for Leadership and Inspired Workforce-Ingredients for

Enterprise & National DevelopmentEnterprise & National Development

- - The Revenue is powered by Volume and repeat sales The Revenue is powered by Volume and repeat sales through customer loyalty. through customer loyalty.

- The customer loyalty is powered by Quality and Value of - The customer loyalty is powered by Quality and Value of Products. Products.

- Quality and Value of products is powered by Employee - Quality and Value of products is powered by Employee Productivity and Innovation. Productivity and Innovation.

- The Employee Productivity is powered by Employee - The Employee Productivity is powered by Employee Loyalty, employee satisfaction and working environment.Loyalty, employee satisfaction and working environment.

- The Working Environment is powered by Management - The Working Environment is powered by Management Stewardship. Stewardship.

- Management stewardship is powered by Invisible - Management stewardship is powered by Invisible leadershipleadership


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Financial inclusion cbt presentation feb 2011