The financial sector has been core to many deliberations about global growth and the trend continues. The air of scepticism has been haunting the sector since the global meltdown and even post the resurgence. With all the continuing challenges faced by world economies it is imperative that financial sector and its enablers regain their role as financial catalysts to a better world order.
While we should do here is to bringing into the consideration set, at the organizational and country level, the important aspect of inclusiveness. I quote here the CRISIL Inclusix index for India on financial inclusion, which says that the bottom 50 districts have just three banks per 100,000 of population. This indeed is an unacceptable position.
It has become apparent and important that all efforts be taken to make financial sector inclusive and representative of a wider "Bharat", not mere segments within it. We gave global examples in developed and developing countries, how they have achieved inclusiveness with policy measures synergized with innovations in the business model. "The Guardian" of UK had recently launched a portal to connect the financial inclusion stakeholders on a common platform.
India needs to consider some of these measures and implement solutions, based on key inclusion parameters. In this context the recent RBI mandate to adopt technology for augmenting the reach of financial services is a welcome sign. The announcement enables remittance to those without a bank account through ATMs. RBI has also come out with no frills account and revised and simpler KYC norms and account portability for the BoP consumers. These initiatives in themselves are laudable, but a greater and urgent drive for a comprehensive solution is due. Traditionally banks avoid operations from remote locations for economic reasons since the cost to operations is higher versus the business benefit.
Milton Friedman had once said, “Poor remain poor not because they are lazy but because they do not have the capital.” Several reports have marked the concurrence of financial inclusion to reduced robbery rates, higher literacy rates which are key parameters to assess the wellness of a nation. It is in this context that the micro financing institutions are crucial to the social fabric for a sustained financial inclusion does not only help individuals but society at large.
Micro-financing sector has an unparalleled opportunity to venture into almost a virgin market. The Micro Financing Institutions will have to rely significantly on innovative business models and product outreach for market penetration. To bring parity into the system it will have to be ensured that those with ideas find the means to realize it.
Many would debate that the role of such actions must be in the Govt's domain and therefore of low relevance to other organizations and private sector. But that is not the approach to advocate; for organizations have a huge role to play, not only to create platforms but also elevate above regional level and make them available across markets. While governments contribute with policy framework and several programmes such as Grameen Bank and Mahila Bank, the corporate sector will have to also facilitate these platforms and create a ripple effect for rapid and wide reaching transformations.
Many leading banks are now getting into a partnership model with NGOs and Micro Finance Institutions to factor the network of the MFI’s and the domain expertise of the banks. While the immediate purpose is to micro-credit, it opens up the field for wide variety of financial services like insurance and savings product offerings.
In all above, technology has a paramount role to play in creating the backbone for financial inclusion models.. It is the technology that is becoming the enabler for institutions be it the scanning and uploading of documents from remote locations, banking tips on a mobile SMS, grievance and counselling centre, technology binds the processes together. With the challenge of finding skilled professional at remote locations, technologies while being effective have also to be simple enough to be adopted and flexible enough to be adapted to regional requirements. With the branchless banking solutions, banks and financial institutions can seamlessly offer last-mile banking services in a cost-effective manner to the unbanked and underbanked segments by enabling consumers to easily access banking services through agents rather than bank branches. This brings in operational efficiencies and a larger served market base.
Therefore for all economies combating with challenges on financial inclusion, a pervasive financial sector is a must. While ways and means to achieve may vary from country to country basis the federal structure, the role of corporates to engage in activities of inclusion is a must. Additionally they need to converse with their technology partners to come up with solutions that integrate inclusiveness to bring operational efficiencies.
Everyone has the right to dream and no dream should fade because it did not find an expression. Let’s create an environment, where ideas flourish and create a virtuous cycle.
Let a thousand flowers bloom!
Submitted by:
V.S.Parthasarathy
Chief Financial Officer,
Group CIO & EVP-Group M&A
Member of the Group Executive Board, Mahindra Group
