Interactive Discussion on "Digital Financial Inclusion in India"

Discussion in Progress

Financial inclusion, broadly defined as the process of ensuring access to financial services and timely and adequate credit needed by vulnerable groups such as weaker sections and low income groups at an affordable cost, has emerged as a promising pathway for empowering individuals and families to cultivate economic opportunities.

The rural households and the weaker sections of the population still live in physical cash economy, where storing of physical assets such as cash, jewelry and livestock is still prevalent. These forms of savings earn them no interest and can actually lose value over time. Overall, living in a physical cash economy becomes a costly affair for these poor households, whether it is relying on informal payment couriers to send money home or borrowing money through moneylenders who charge exorbitant interest on the money borrowed. 

There is a huge gap between the poor households and the formal economy and there is need to bridge this “cash-digital divide” which makes it costly for even for banks and insurance companies to transact with them.

Enabling the rural population to use digital accounts can address these problems. It can not only connect them with the mainstream economy but also helps them in saving their earnings through farming or through daily wage labour in interest-bearing accounts outside the home. This will also help them better connect with electricity companies, government agencies, and other service providers.

In this context, the Governance & Public Policy Initiative-Centre for Policy Research (GPPI-CPR) organized an interactive discussion with Members of Parliament on August 5, 2014. The meeting was attended by 14 current and former MPs.  

The discussion focused on – The need for digital financial inclusion: why is it important? Welfare impacts of digital financial inclusion and the pathway; Regulatory and policy barriers; & Success stories from other developing countries.

The discussion was co-chaired by Mr. Prem Das Rai (Sikkim Democratic Front) and Mr. Shivkumar Udasi (Bharatiya Janata Party) both of whom have earlier been on the Parliamentary Standing Committee on Finance.

The presentations by Mr. Kabir Kumar, Microfinance Specialist who helped launch CGAP's program on technology-enabled business models for financial services, provided a comprehensive overview of digital finance and a sense of what is happening in different countries and what are the public policy pathways to promote digital finance.

Mr. Anand Sahasranaman, Executive Director of the IFMR Finance Foundation, a policy research institution focused on issues of financial system design such as customer protection and institutional design of the financial system, in his presentation, demonstrated the digital financial landscape in India and provided an overview of where things are in India and the challenges, backed by some case studies.

The presentations where followed by an intensive discussion, with participants taking the opportunity to highlight important issues as well as seek clarification.