Rural Banking Solutions and Financial Inclusion

Financial literacy – The fourth pillar of Financial Inclusion

teknospire / 27/06/2019

The post first appeared on linkedin. To get more such insights, please connect with me here. While I was privileged to go to school, get educated, watch tv, buy books, during my adolescent days. I never realized some people do not have access to primary education until I saw this ad on Doordarshan – राष्ट्रीय साक्षरता मिशन [National Literacy Mission. My first question to my parents was – why is education so important yet inaccessible ? Guess you reap what you sow, and in 2016 when I was working on my dream project, I was again stuck with the same query only change being education replacing financial education. My mission of enabling change, empowering lives by including them into a formal financial system was based on the knowledge of money, the power to learn, analyze, and grow. Unless people know about the power of money – its growth pattern, method, or savings schemes, why would anyone be willing to attach himself/herself to a system? That’s why I regard Financial literacy as the fourth pillar of financial inclusion, with the other three being – technology, women inclusion, and regulation. Financial Education –What it means and Stats? Financial education helps individuals in understanding numeracy, risk diversification, inflation, and interest compounding. It assists individuals in making informed decisions regarding – balancing a budget, fund the children’s education, buy a home, avail a personal loan, understand the risk associated with debts and ensure an income at retirement. When people are financially literate, they would be keen to explore the products and services offered by banks and use them for their benefits. It accelerates the pace of financial inclusion, where everyone can access the necessary banking facilities rather than relying on the orthodox systems of money market such as borrowing money from Zamindaars or village money lenders As per stats available from Nov 2018, the highest financial literacy in any country is 71%, while in developing and underdeveloped nations its below 25%, what the figure indicates that a lack of knowledge about finance and financial products, many people are unable to access banking and financial services, and are therefore kept out of financial markets making financial illiteracy a critical barrier to financial inclusion. How to Improve Financial Literacy? While improving knowledge in modern days could be done via online apps or courses, our focus should be creating awareness of financial literacy. So how it could be attained, here are few pointers – As an individual – Ask a question? Next time you meet your local vegetable seller or housekeeping staff ask a question – Do you know you can grow your money in Bank with minimal charges? Based on their answer, educate them, make them aware of what financial literacy is and why it is of utmost importance to you and your family. As a firm – Involve in CSR or tie up with an NGO Corporate Social Responsibility or CSR is an ethical way for firms to work for the inclusive growth of the society. Stressing to create equal opportunities’ for the consumers, stakeholders, suppliers would help the firm in gaining brand recognition and building trust. As an example, CRISIL foundation launched a proof of concept for a financial inclusion program in Assam and Rajasthan to empower individuals in making informed financial choices. Another example is a Financial Literacy program ran by Disha Trust and ICICI bank Foundation to increase awareness about organized banking and insurance channels. Pair it up with Digital Literacy On the one hand, awareness of banking products and services are critical, but even the channels via which it would be consumed is crucial, as we aim to provide banking services at minimal cost and that could only be done via digital means. Hence digital skills and financial knowledge are the essential tools for the empowerment of the common people. As a Bank – Upgrade and Launch Banks in developing and underdeveloped nations could collaborate with fintech firms to upgrade to a digital platform and also launch their literacy program. This program could help in empowering consumers with the available financial Inclusion products/services, enable them to make informed decisions and right choices based on their financial needs. Listening from horse’s mouth would also help them in trusting the authenticity and make them aware of their rights and responsibilities as consumers of financial products and enable people to make optimum utilization of the available technology forming a strong financial inclusion eco-system. A couple of examples who successfully did execute these initiatives were RBL Bank, HDFC Bank, and RBI. If you a Bank or NBFC looking to use technology and innovation in expanding the business and enable social inclusion, we are here for you. Teknospire, a fintech firm offers Bank-in-a-box solution with omnichannel, agent/digital branches capability. The 360-degree banking solution reduces the CAPEX for a bank to set up a physical branch, but yet opens doors to expand their business. Our Digital Banking, Mobile Banking, and Agent Banking solution could help regional banks and cooperative banks to push Financial Inclusion further. For details, please contact us here. Watch out this space to get more insights on Banking as a service [BaaS] and Financial Inclusion.

Bank Regulation, Digital Banking, Fintech Regulation, Rural Banking Solutions and Financial Inclusion

Regulation need to strike a balance to enable Financial Inclusion

teknospire / 13/06/2019

The post first appeared on linkedin. To get more such insights, please connect with me here. This is the third part of my Financial Inclusion series, in case you have missed the two here is the link for part one and two. Regulation in Financial Inclusion has two aspects one is about “laying the right rule” the other is “supervision” that it does not leads to downfall. While many policymakers in underdeveloped and developing nations provide a sturdy base with legalities and processes, some developed and developing nations need supervision that they are not misused. What the history and experts tell… As dictated by policymakers and research reports, Financial Inclusion is a way to lessen poverty and enhance the collective prosperity of society. With access to banking services, communities experience an inclusive growth with improved source of income and promotion of economic growth. However, the measures need to be BALANCED, or otherwise, geographies may face a crisis as happened in the US [sub-prime crisis] in 2007 and India[microfinance crisis] in 2010. Both of these situations had one thing common, the overextension of loans to non-credit-worthy borrowers and relaxation in underwriting standards leading to instability. So, even though financial institutions were able to report high profitability for years through rapid growth in loans, it led to significant indebtedness among non-credit-worthy borrowers contributing to financial instability and social discontent. Hence, while policymakers are keen to empower inclusion, the regulation needs to be in place to avoid uncertainty. On the other hand, in 2015, Bill and Melinda Gates in their annual letter cited regulation as one of the major barriers to implement Digital Banking, one of the “key” in enabling inclusion. The letter quoted – “There is a lot of work ahead to get regulators in developing countries to update their financial regulations. If the regulations limit digital banking, as is still the case in most countries, innovators can’t enter.” How Can Regulation enable Financial Inclusion? Short answer – striking balance. Long answer, the solution could be divided into three categories – One and all Do you recollect the rule that attracted penalty if you withdraw from another bank ATM, more than five times? Finally, the regulation came and hashed it. As irrespective of the bank, a customer is using the same service. Then why a penalty? Putting it another way whether you do an online fund transfer or go to a bank and issue a draft, both services need to be under the same umbrella. But these loopholes are the pain points for the customer. We need regulation that puts in all services to the customer under one roof helping and enabling inclusion. Regular Review Of Policies Everything comes with an expiry date, then why a policy laid in the ’50s would still be applicable? Do you remember a rule where banks used to charge prepayment penalty fees on loans, many might have even paid it. However, RBI in April 2012 reviewed its decision of providing a relief to borrowers from foreclosure charges, helping them to switch to a newer bank with better rates or in case of sufficient liquidity prepay and attain peace of mind. So clearly a quick review of policies can make things better and help consumers in trusting regulators. Support Innovation and Technology We need policymakers and regulators to lay down rules that push “Digitization.” Just as an online shop offers ‘x%’ discount for new user signup, we need a push for people to switch to digital banks. Maybe offering banks a subsidy if its digital users are xx% of their customer base. Even Banks and NBFC’s need to have support from the government in buying digital software that could engage users in availing digital services. Launch of quick and easy KYC norms are other factors that need regulators attention and could empower inclusion. Regtech firms are undoubtedly innovating to assist in making the operations smooth, they could also collaborate with fintech firms in expanding the banking services and enabling last mile banking. At the end, its all about striking the perfect balance amongst the protocols and convenience. And, Teknospire could assist you with that. If you a Bank or NBFC looking to use technology and innovation in expanding the business and enable social inclusion, we are here for you. Teknospire a fintech firm offers Bank-in-a-box solution with omnichannel, agent/digital branches capability. The 360-degree banking solution reduces the CAPEX for a bank to set up a physical branch, but yet opens doors to expand their business. Our Digital Banking, Mobile Banking, and Agent Banking solution could help regional banks and cooperative banks to push Financial Inclusion further. For details, please contact us here Watch out this space to get more insights on Last Mile Banking or Financial Inclusion.

Digital Banking, Rural Banking Solutions and Financial Inclusion

Women are the “Changemakers” to Financial Inclusion

teknospire / 30/05/2019

The post first appeared on Linkedin. To get more such insights, please connect with me here. My last post on LinkedIn spoke about “extra push” from government, brands, banks, and technology. While these are guiding lights of the Financial Inclusion game, the torch-bearing initiators in each household are women. Women the changemakers of the society, it’s worth mentioning the famous quote from Erick S Gray – Whatever you give a woman, she will make greater. If you give her sperm, she’ll give you a baby.. If you give her a house, she’ll give you a home. If you give her groceries, she’ll give you a meal. If you give her a smile, she’ll give you her heart. She multiplies and enlarges what is given to her. So, if you give her any crap, be ready to receive a ton of shit!” Indeed, women who take care of savings, child’s education, an extra hand to earn if she is included in financial and social inclusion, can involve a home. That’s the power of WOMEN! However, what sounds so ideal is not entirely true! Women in Financial Pyramid A look at the different surveys conducted talking about involvement in financial planning, decisions, and discussion – A survey conducted by Apollo Munich Health Insurance in collaboration with AC Nielsen found that Indian women still viewed as supplementary bread earners According to the World Bank’s Global Findex Database 2017, in developing economies female account owners are, on average, five percentage points more likely than male account owners to have an inactive account. In India, however, this gender gap is about twice as large, says the report, adding that 54 percent of women with an account made no deposit or withdrawal in a year as compared to 43 percent of men. An estimated $300 billion credit shortfall for women-owned micro-, small-, and medium-sized enterprises in emerging economies, and women are also more likely to be dissatisfied with banking services worldwide. While you may not believe these surveys, look around you – your home, extended family, friends, community helpers, female colleagues where do you see “women” in the financial pyramid? Also, did you notice they have the power to drive the financial discussion, and that’s the key to Financial Inclusion. Bridging the gap of Financial Inclusion with Women We just realized the power of WOMEN, but how do we harness it? Start small Start with your housekeeping or house helper at home, educate them with the power of Digital Banking. Offer them to pay salary via digital means, help them and show them how 100 rs in a bank for three months can earn them interest. Government and banks are advocating and offering a zero-balance account for all. Take it to the next step, availing of mobile banking for funds transfer to their native place or assisting them with a loan for child’s education. Ask her to involve her neighbors and friends. Be the Guiding Light A famous quote says it all – if you want a change, be the change. Could you be the guiding light connecting the grass root individuals to government initiatives or banks? One of the famous example I could quote is Mrs. Chetana Sinha Ji of Mann Deshi Foundation a social activist working rigorously to empower women. She has worked at the grass root level to provide banking services exclusively to a bank with her initiative Manndeshi Bank. In one of the interviews with Teknospire, she quoted about her experience of starting Manndeshi bank. She shares, one of the women came to her asking – I just have 5rs, would bank allow me to open an account? Would you be the guiding light for many such people? Banks expanding and empowering women Banks need business opportunities, new customers and always look for expansion. Targeting the “female segment” could help them gain more business, and this could be done at reduced CAPEX. Just for example a bank looking for opening a branch can opt for a digital banking solution via “mobile” or gather “agents as entrepreneurs” to launch Agent Banking to a new area. If you are willing to be a guiding light or a bank expanding the digital services, we are here for you. Teknospire a fintech firm offers Bank-in-a-box solution with omnichannel, agent/digital branches capability. The 360-degree banking solution reduces the CAPEX for a bank to set up a physical branch, but yet opens doors to expand their business. Our Digital Banking, Mobile Banking, and Agent Banking solution could help regional banks and cooperative banks to push Financial Inclusion further. For details, please contact us here Watch out this space to get more insights on Last Mile Banking or Financial Inclusion.

Digital Banking, Rural Banking Solutions and Financial Inclusion

Financial Inclusion needs an extra push!

teknospire / 02/05/2019

The post first appeared on linkedin. To get more such insights, please connect with me here. What is the longest distance you traveled to avail a service? Okay, I am not talking about marathons! But while you are reading this on your smart device waiting for a booked cab or live cricket score, pause as many individuals across the globe do not have access to formal banking system within 5 km radius. Would you walk to your bank to get cash or make a fund transfer? Sounds like a problem! A days wage in urban cities Imagine your housemaid or daily worker at a construction site, can they skip a day’s work to go to the bank and open an account? It would cost them a day’s wage that lights up his home. Yeah, you can argue that they carry a mobile phone, what is stopping them from accessing banking services? But as simple as it sounds, opening a bank account is not easy for them with no proper address proof or valid documents for KYC. Even if with government schemes like Pradhan Mantri Jan Dhan Yojna [PMJDY] they might be the proud owner of an account, but majority of this set do not use them for savings, to receive pays, to pay bills, or to avail loan as going to a bank, depositing the money is again cutting a day’s wages. What Needs to be Done A digitized system like salary automation for daily wagers, housekeeping or domestic helps to make it easy for them to avail banking services via digital channels. With an account in place, use of mobile to pay bills, shop @local stores or transfer funds to their native place could be seamless. Government initiatives that help vendors opting for a digitized mode with a tax rebate or a recognition/honour. Awareness in rural places Individual staying in rural areas across the globe face crunch when they need loan [for farming or kids’ education or setting up a small scale industry] but lack of bank branches make it real trouble. Then comes the business minded “middlemen” who provide loans at such a higher rate that leads to a lifetime indebtment to an individual. Many people in rural places are also not aware that a savings bank account can help them earn some interest, so better to keep the money in the bank than in a locker at home. Lastly, the lack of knowledge that banking could be availed via a simple phone owned by them is just the root cause of not availing banking services. What Needs to be Done Regional and Cooperative banks availing banking stack as a service as against buying and integrating multi-vendor ecosystem which had been the technology-related challenge Create awareness among people on how “banking can help” and “how to use it.” While technology has a part to play in the digital revolution, its the individuals and banks who need to participate and go with the flow. If you are a Bank looking to adopt or expand the digital services we are here for you. Teknospire a fintech firm offers Bank-in-a-box solution with omnichannel, agent/digital branches capability. The 360-degree banking solution reduces the CAPEX for a bank to set up a physical branch, but yet opens doors to expand their business. Our Digital Banking, Mobile Banking, and Agent Banking solution could help regional banks and cooperative banks to push Financial Inclusion further. For details, please contact us here Watch out this space to get more insights on Last Mile Banking or Financial Inclusion.

Agency Banking, Digital Financial Services Platform, Financial Inclusion, FinTech, FinTech Trends, Inclusive Banking, Open Banking, Rural Banking Solutions and Financial Inclusion

Financial Inclusion: What will it be like for years to come?

Vandana Kaul / 07/11/2018

Financial Inclusion helps lift people out of poverty and can help speed economic development. It can draw more women into the mainstream of economic activity, harnessing their contributions to society. – Sri Mulyani Indrawati, Indonesian economist, Minister of Finance of Indonesia since 2016 Economic growth of a country depends on factors like national income, per capita income & per capita consumption, technological advancement and even its political structure. An equilibrium between savings and consumptions is another factor which decides economic growth. Walter Bagehot, the famous classical economist, stated long ago that a strong financial system is crucial for economic growth and that the lending should be “quickly, freely and readily”. Translated to suit modern day scenario, to strengthen financial systems you need to encourage economic activities like Financial Inclusion, Digital Banking & Fintech. Let’s explore what and how Financial Inclusion can do and what it holds in the future for developing countries like India, Nepal, Bangladesh, and other African and Asian economies. Defining Financial Inclusion Financial inclusion can be broadly defined as the process of making financial services available to people, especially the weaker sections and low-income groups of the society. It includes the timely and adequate availability of a wide range of financial products and services like: Bank accounts for saving & transactional purpose Equity products Insurance Saving products Loans For economic growth in developing countries, this aim is furthermore towards ensuring financial inclusion to the unbanked and the underprivileged community who are either unaware of or unable to affordable financial services and products. Penetration of financial services to all sections of society at a swift pace can be achieved through Digital Banking and FinTech. Goals to achieve Financial Inclusion are: To maximize the use of the latest technologies to transform the existing traditional financial or banking service models. To better the existing products or services of the financial sector. Financial Inclusion – Impacting Economies of Developing Countries Impact of Financial Inclusion, especially via Digital Banking or FinTech, can be exponential. A survey report by McKinsey Global Institute, which has been endorsed by the World Economic Forum also, states that there are more than 2 billion individuals and 200 million businesses (small, medium and micro) with no formal access to financial services like savings or credit. Those who have access are often required to pay heavy fees or charges. It goes on to state that if through Digital Banking, financial inclusion is ensured then the following impacts are expected: GDPs of developing countries like, India, Ethiopia, Nigeria, and similar Asian economies will increase by 6%. The absolute value of such increase may reach a whopping $3.7trillion by 2025. This incremental GDP thus created will generate an additional 95 million new jobs across industries. Addition of 1.6 billion unbanked individuals will create a big pool of loan borrowers. Around $2.1 trillion of the loan amount to these individuals or small sized businesses is expected. Governments can bring down tax collection leakages and gain up to $110 billion per year. Governments stand to gain up to $400billion every year when they convert traditional accounts to digital accounts as they can now save 80-90% of cost on managing traditional accounts. Increase in customer base will result in an incremental revenue generation of $4.2 trillion. All these predictions sound exciting, right? Read on to know some of the many concrete benefits of financial inclusion. Concrete Benefits of Financial Inclusion The few of the many, main benefits of financial inclusion are: Better Penetration of Services With financial inclusion in place, reaching the rural populace will be made possible providing them easy access to bank accounts, cash payments, cash receipts, and account statements. The authentication and fulfillment of services can be done by fingerprint and online receipts respectively. Boosting Economic Growth The banking ecosystem will be strengthened as the cash economy will be reduced and the habit of saving will be inculcated in rural masses. Direct Subsidy Transfer The government subsidies will be directly deposited to the bank accounts of beneficiaries. The funds will thus reach the intended recipients instead of middlemen forestalling leakages and corruption. Encourages Entrepreneurship Financial inclusion will motivate formal banking and transparent credit availability which will release people from the clutches of unofficial money lenders. Adequate credit will prompt entrepreneur initiatives which will further enhance economic outputs and prosperity of the country. Financial Inclusion – Headway The progress of financial inclusion in the context of emerging economies like India has been substantial. The same has been highlighted in the Department of Financial Services GOI reports as: 35.5% of households availed banking services in 2001 which grew to 58.7% in 2011. This growth is significant in rural India –from 30.1% in 2001 to 54.4% in 2011. The CRISIL- Inclusix which includes branch penetration, deposit penetration, and credit penetration was 35.4 in 2009 and has grown to 40.1 in 2011 to 58.0 in 2016. IMF ‘Financial Access Survey 2018’ reported the following- Low-income countries like- Bangladesh, Myanmar, Guyana and many African countries have successfully used mobile payments for Financial Inclusion. These countries have more than twice the number of bank accounts per 1000 adults than the developed economies. What a sky-high improvement! Additionally, the IMF Financial Access Survey 2018 also reported an increase in the number of ATMs per 100,000 adults, branches of commercial banks per 100,000 adults, deposit and loan accounts with commercial banks per 1000 adults. Mobile money transactions number per 1000 adults was the most attention-gainer with a significant rise! Financial Inclusion does not mean only access to services but how those services are useful for the user. One of the parameters which are considered by various organizations while mapping FI is the safety and convenience of the financial service or product. A survey done by the World Bank Group, measuring the Financial Inclusion and Fintech revolution, reported that globally the percentage of adults using digital payments for receiving and making payments increased by 11% between 2014-2017. In developing countries, it is higher by 1% i.e. 12%.