“If the misery of the poor be caused not by the laws of nature, but by our institutions, great is our sin.” – Charles Darwin
The realisation of Sustainable Development Goals (in particular, SDG’s Goal 1—No Poverty) set by the United Nations (UN) requires giving considerably stringent attention and concerted efforts also to financial inclusion. In 2004, the Khan Commission was setup by the Reserve Bank of India (RBI) to explore Financial Inclusion. The recommendations of the commission were included in mid-term policy review (and so arrived the advent of simplified banking accounts).
K.C. Chakrabarty (Deputy Governor, RBI) opines: “Even today the fact remains that nearly half of the Indian population doesn’t have access to formal financial services and are largely dependent on money lenders.”
What the RBI’s deputy governor intends to convey here is that the innate objective of financial inclusion here is also to build a trusted ecosystem (goodwill) via relationships (with a cooperative and community focus).
The vision for 2020 of RBI is to get 600 million new customers’ accounts opened and serviced with the help of diverse channels with leveraged benefits of IT. The RBI and the Government of India (GoI) have directed considerable attention and efforts towards setting and realising the goals of financial inclusion. The RBI has submitted (as of January 2019) to the Financial Stability & Development Council (FSDC), a draft National Strategy for Financial Inclusion (for a 5-year period).
What else has also gained warranted attention of the regulators and of the elected representatives is the necessity of financial stability (to earn goodwill and build a trusted ecosystem to serve the massively unbanked poor population). Where financial inclusion essentially means uncomplicated access to formal financial services, and their utilisation by all the participants of the economy; financial stability is the tool that, when ensured, enables financial inclusion.
The G20 has placed in the forefront the devotion to a global pledge of advancing financial inclusion by formally launching in 2011 the Maya Declaration (at the Global Policy Forum in Riveria Maya, Mexico) and the Alliance for Financial Inclusion—a network of financial inclusion policymakers having its headquarter in Kuala Lumpur, Malaysia. Also, prior to that, so as to augment financial stability at the global and country levels, the Financial Stability Board (FSB) was launched in April 2009. The FSB has the RBI, SEBI (Securities & Exchange Board of India), & Ministry of Finance (GoI) as Members.
The FSB defines FinTech as: “technology-enabled innovation in financial services that could result in new business models, applications, processes or products with an associated material effect on the provision of financial services.”
The financial inclusion objectives will at best be achieved by using innovative financial technology solutions (such as FinTech). In the coming times, BigData, BigTech, Data Analytic companies (mostly having already earned considerable trust and recognition) will increasingly act as data providers for the financial institutions. So, the manner in which these innovative companies and institutions manage their customer networks also needs to be monitored by the authorities to ensure financial and market stability.
The Sochi Accord stresses on endorsing the adoption of FinTech for Financial Inclusion—with regulatory or policy intrusions to balance innovation in technology-based financial services (FinTech) and its oversight (for financial stability). The Sochi Accord is meant to make the recipients realise financial inclusion’s objective of access to finance “at scale” via innovative FinTech solutions (making it affordable and efficient) supported by meticulous market design and oversight. It’s also a welcome step from the Sasana Accord (introduced in 2013 at the AFI Global Policy Forum in Kuala Lumpur) to have “financial inclusion policies and actions based on evidence and data” as its dictate.
So, it is worthy to agree that in the present state of affairs, championing financial inclusion (democratising credit) and streamlining socioeconomic objectives (social inclusion and empowerment) on a priority-basis as a public policy is necessary. Given that the premise of financial inclusion is built upon the foundations of equity and inclusive growth. Involving policymakers and a diverse group of stakeholders to devise efficient policy proposals is vital.
Financial inclusion is also an instrument to facilitate availability of reasonable levels of disposable income for the rural households, translating into elevated savings and enlarged deposit base for banking institutions. The responsibilities of the Government in regards to transferring social development benefits and subsidies straight to the beneficiary bank accounts can also be realised by way of financial inclusion; given that the instances of any mismanagement and misallocation in social welfare schemes are minimised (financial stability).