Bringing financial services to the masses An NCR White Paper on financial inclusion

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.