Discussion in Progress |
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.