According to Census 2011, out of the 24.67 crore households in the country, only 58.7% had access to banking services. Only 54% in rural India and 67% in urban India were availing banking services. World Bank data shows that in 2014 only 53% of adults (age 15+) in India held accounts at financial institutions, far behind China, Brazil and Russia. This number for India drops further to 43% for women (age 15+). As the Indian economy grows and the country moves towards becoming an economic powerhouse, ‘inclusiveness’ is a major factor to ascertain the quality of this growth. Inclusive growth would mean that all sections of society benefit from economic prosperity. A key metric for inclusion is ‘financial inclusion’ i.e. the access to banking services and affordable financial products such as bank accounts, loans, and deposits for all individuals and businesses. When the poorest of the poor have access to credit and savings facilities, this translates to their financial security. They can grow larger businesses, manage consumption and household expenses better and plan for shocks. The standard of living improves and poverty falls, allowing people to contribute more to the economy as well.
Financial inclusion has been a major area of focus for all governments of India and is increasingly seeing interest from the private sector too. Programs of the current government like the Prime Minister’s Jan Dhan Yojana and Digital India are bridging the gap between people and the formal financial sector. Private banks and Non-Banking Financial Companies are also taking steps to ensure their products reach the public. They are simplifying banking processes and setting up special programs and teams to accelerate innovation with an aim to further financial inclusion.
Additionally, like many others, the financial industry is being revolutionised by India moving into the digital age. Factors such as increased internet connectivity, proliferation of mobile phones and the acceptance of an Aadhar card as an ID for availing financial products have created conditions that are more conducive to greater financial inclusion. Companies are harnessing these trends to solve this old problem in new ways.
Here are some start-ups doing stellar work in this field:
IFMR Holdings. A Chennai-based firm, IFMR aims at increasing financial inclusion among marginalised and poorer sections of society with a unique model where it is trying to create a network of high quality front and back-end financial services in rural areas. The company aims to organise the fragmented rural financial services industry and also create its own network of high quality financial originators to provide services to rural households such as micro-loans, small business funding and affordable housing loans. IFMR’s investment in technology is helping them collect data to better customize their products. In the past eight years, they have served over 25 million borrowers and facilitated capital of up to Rs. 30,000 crore.
Eko India Financial Services. Launched in 2007, Eko is successfully tackling the last mile problem. It started by providing financial services to individuals through small neighbourhood shops that became their banking agents. The company grew and partnered with banks like SBI, ICICI Bank and Yes Bank. It provides a mobile banking platform to previously unbanked customers. It also offers no-frills bank accounts with deposit and withdrawal services and allows migrant labourers to withdraw and remit money to their families using even low-end mobile phones. It has also partnered with Bharti AXA Life Insurance to provide a micro insurance policy. In 2013, it was identified as the largest low cost banking infrastructure via phones and catered to 5 million customers in 2013. By 2016, it tripled its size to reach 15 million customers.
Artoo. Artoo’s model is to bring financial services to the unbanked population by providing finance to small businesses – one of the fastest growing segments of the economy. Artoo has developed a Digital Loan Origination System which reduces the time taken to disburse a loan. Loan officers are recruited from poorer communities themselves and trained to use the loan origination system. This system works as a data bank, a sales management portal and customer acquisition and verification device. The system allows loan agents to easily access a customer’s credit history, suggest a customised loan product and help them apply for the loan with instant application and verification. The system can be used in the field, thus increasing its potential for penetration. Artoo’s focus on this ‘doorstep digitalization’ has helped it disburse Rs. 1,200 crore worth of loans and helped them assess three lakh small businesses.
Janalakshmi Financial Services.
Janalakshmi, India’s largest urban microfinance organization, is widely known. One of their major programs for financial inclusion is ‘Badhti Bachat’ – a simple goal based savings plan. This plan allows poorer customers to save systematically towards a short term goal like a child’s wedding or education. Badhti Bachat brings ease into savings with money being collected from customer’s doorstep on a daily or weekly basis in convenient installments of Rs. 100 or Rs. 500. Customers have the flexibility to opt for the variant they are most comfortable with. The product has been embraced by over 11, 000 consumers from small businessmen and traders to daily wage earners and housewives.
Apart from these more established players, many other companies like the mobile wallet fonePaisa or Active.Ai, a platform that offers chatbots for large banks to interact with its consumers, are gaining traction. Despite financial technology making great strides in enabling financial inclusivity, much remains to be done with India still accounting for a significant percentage of the world’s unbanked population.
Metlife Foundation has extensive experience in enabling financial inclusion. In 2013, the foundation committed 200 million USD to help bring financial services to low income individuals. The foundation also provides grants, mentorship and sharing of best practices among organisations working to improve financial inclusion.
Funding and early-stage support remain crucial to enabling innovations in this space and taking them to sustainable scale. To this end, MetLife Foundation and PNB MetLife have teamed up with Verb, a strategic partner, to create Inclusion Plus, an innovation competition that seeks to advance financial inclusion in India by supporting entrepreneurs in the space.
Nonprofit and for-profit ventures are invited to present creative and sustainable solutions with a measurable impact on financial inclusion. The competitors will be eligible for mentorship, media exposure and grants from MetLife Foundation totalling 150,000 USD. Both Artoo’s and Janalakshmi’s programs have already won Early Entry awards at this competition and have also received mentorship and feedback to strengthen their programs. So, if you have ambitious solutions that can accelerate financial inclusion, here’s the launch pad. The competition is open for entries till November 23, 2016. For more information, see here.
This article was produced by the Scroll marketing team on behalf of PNB MetLife and not by the Scroll editorial team.