Introduction

The Global Microscope report released periodically by the Economist Intelligence Unit gauges the enabling environment for financial inclusion (furthering the objectives of the Sustainable Development Goals) considering 5 diverse categories (government and policy, stability and integrity, products and outlets, consumer protection, and infrastructure) and 55 countries. The 2018 research report witnessed the model development of the key enablers of financial inclusion. It also saw the inculcation of the indicators on digital financial services to the research methodology. The Global Microscope report essentially discusses the key growth topics of the developing economies: consumer protection, enabling environment, financial inclusion strategy, policy, regulation, and government initiatives, and trends. The Microscope assesses the regulatory and policy environment to which the key players in the financial inclusion domain are exposed to: banks, NBFCs, digital money issuers, and cross-border payment companies. The vital contributions of inclusive insurance, financial agents, FinTech firms, and credit information companies (CICs) are also examined.

Global Microscope & The Status of Financial Inclusion in India

The Global Microscope 2018, interestingly, stated that Colombia, Peru, Uruguay, the Philippines, and India account for having the most enabling (friendly) environments for financial inclusion, primarily owing to the availability of the necessary government coordination also at the policy level. According to the Global Microscope 2018 report, the Ministry of Finance (Government of India) has approved the National Financial Inclusion Strategy (NFIS) in 2014. Developed with a coordinated approach and a three-pronged approach (for promoting universal access to the formal banking system, make available unique identification for its citizens, and leverage digital platforms for financial inclusion), the NFIS India is anticipated to be published in 2018-19. India is ranked 4th, having a score of 72 out of 100 (where 100 is best). The report considers this to be an outcome of the enabling ecosystem in regards to accessing different financial products in the researched countries. This access to inclusive insurance products in top scoring and ranking countries such as India and Philippines is owing to the presence of definite regulatory frameworks where low-income populations easily subscribe to life, health and other insurance products.

The Challenges & Initiatives in India

The Challenges

The advent of technology in financial services has also summoned new risks for the regulators and the governments in India. The Microscope report opines that countries require solid cyber-security frameworks in place, with an enhanced mechanism for data privacy laws’ protection and enforcement. The report mentions that some limiting restrictions exist in crossborder payments framework that limits outward remittances. There is also the absence of wider interoperability of mobile money platforms (to transfer and accept money on any mobile network) in India. This is the case because the regulators do not mandate connecting their systems, ultimately restricting the use of mobile payments for merchant transactions. Also, the Supreme Court judgment preventing the provision that facilitated the private companies to access the Adhaar ID for e-KYC reason is also poised to affect the affordable on-boarding processes by private companies.

 

The Initiatives

On the initiatives side, the report states that in India, identification numbers are linked with biometric data for identity verification. This can assist in the remote account opening in India. However, there exists a strong system in place with regards to digital identification systems linked with automated KYC processes in India. Also, it’s a welcoming mention in the report that India has deployed online systems for financial institutions to verify national identification numbers. The reforms initiated of late by the government and the Reserve Bank of India has led to the establishment of four payment banks. The next four are also in the process of establishment. Apart from this, 10 small-finance banks (with 8 of them having already operated as microfinance institutions previously) are being setup. The logic is to make available specialised services to low- and middle-income customers. These initiatives are meant to strengthen the extent of financial inclusion with the availability of multiple service offerings.