The World Bank’s Global Findex Database 2017 estimates that the share of adults with bank, financial institution, and mobile money provider accounts in India has doubled to 80% since 2011. In fact, India has the highest percentage of accounts among G20’s top 10 emerging markets in the world. We’ve come a long way in our financial inclusion journey, but to be honest, this is just the first step. At the moment, actual usage of bank or financial institution accounts remains low. Without greater and consistent usage of bank accounts, the promises of financial inclusion—growing and successful businesses, more equitable economic growth, and improving financial security and prosperity for all families—will fall short.
The Government of India has been actively driving the financial inclusion story in India. Initiatives such as the Jan-Dhan Yojana and the Aadhaar programmes have helped bring a large number of Indians into the formal financial system. The increasing penetration of smartphones and mobile internet in India is another positive development for the financial and digital inclusion efforts. But with this infrastructure and enabling environment in place, the focus must now shift to encouraging more people to use the banking platforms and remain active in the digital economy. Here’s how we can achieve this objective:
Public private partnerships (PPP)
India is a vast country with unique challenges that cannot be solved by government interventions alone. Private companies must build on existing policy infrastructure to extend the reach of financial services to every region. There is enormous potential for working with micro and small businesses, which currently lack access to capital, credit, and financial resources. I can confidently say that PPPs are the way forward for this sector and it is time to scale up efforts in India. Our experience in Kenya proves it. In Kenya, we created a private-private partnership with Unilever to empower up to 40,000 informal micro retailers by helping them access formal credit for the first time. In less than a year over 12,000 shopkeepers have joined the financial mainstream and are growing their businesses. Only the power of the private sector–multinational companies, local banks, and micro enterprises–can drive such large scale and sustained change in a short period of time.
Digital and financial literacy
While there is an increased awareness of financial and digital transaction platforms, there is a gap in understanding how these can help merchants improve their income and ease of doing business. A study by IFMR Lead indicates that only 1 in 2 merchants is aware of newer mobile and Internet banking options. Most are not using any of these platforms either. Banking, financial services, and insurance (BFSI) players must work with strategic partners to educate merchants and people new to the banking economy on digital transactions.
Bridge the gender gap
India has a significant gender gap when it comes to women in business. Women find it more difficult to secure loans, and run their ventures independently as compared to men. Focussed programmes to educate women on financial matters, train them on running successful businesses and improve access to financial services will go a long way to bridge this gap. Collaborating with organisations working at the grassroots almost always yields good results. For example, the Mastercard Center for Inclusive Growth works closely with Mann Deshi to help empower women to lead financially productive lives. The Center provides business training, financial, and digital literacy support to rural women business owners. Together we have helped women expand their small enterprises into thriving engines of economic opportunity. The Center is accelerating our support to help 10,000 women-led businesses to expand their revenues, and create new jobs, particularly in rural and underserved areas.
Comprehensive digital solutions and awareness
According to India’s Consumer Economy (ICE 360), 38% of micro merchants felt digital payments would not make it easier to secure loans. Yet another article by IFMR Lead indicates that two-thirds of small merchants were unhappy about the costs of travel to their lenders location as well as the way the loan system worked. Clearly, there is a gap between reality and perception that must be bridged. The good news is that the basic infrastructure is already in place. The phenomenal rate of smartphone penetration in the country is the biggest asset for private and public sector entities working on financial inclusion initiatives. Thanks to social media apps, increasing number of Indians are today comfortable using digital platforms. All that remains is to persuade small entrepreneurs and merchants that digital transactions and financial services are safe, secure, and beneficial to the growth of their businesses. When we provide entrepreneurs with know-how in combination with greater freedom to determine which digital solutions best meet their needs, the full power of Indian ingenuity, diligence, and productivity will be unleashed.
As the world grows increasingly connected, access to networks and resources is emerging as the biggest success factor for individuals and businesses across the world. India has taken the first steps towards universal financial inclusion by helping bring in most of the population into the formal banking economy. Now it is time to help millions of Indians use the financial and digital platforms properly to access the resources and support they need to succeed. After all, inclusive growth is the only way to shared prosperity.
Views are personal.
The author is executive vice president, sustainability and president of Mastercard Center for Inclusive Growth.
