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Newer Avenues for Investment in Financial Services - The Next Big Thing is Small
Frost & Sullivan, Jan 2012, Pages: 39
Creative Business Models are Important for Financial Inclusion
The research service identifies the reasons for financial inclusion, correlation between Human development index and financial inclusion. Then, it suggests newer avenues for investments in financial services in India.
The scope of this service includes Low Cost ATM's, Micro Finance, Micro Insurance, Banking Correspondents, Technologies facilitating Financial Inclusion, No Frills Bank Accounts. The issues faced by newer avenues is also studied. The major challenges included the quality of human resource, financial literacy, managing technology, channels of distribution, capital for scaling up, lack of information, faulty regulations.
INTRODUCTION TO FINANCIAL INCLUSION
- Over these years, banks have evolved from being a physical infrastructure-based (staffed branches) to technologically supported system with other channels such as ATMs, Plastic Money, and Internet. However, these benefits have been restricted to certain sections of the society. Financial inclusion refers to the process of ensuring access to financial services and timely and adequate credit where needed by groups such as weaker sections and low income groups. It includes providing no-frills account, micro credit, micro insurance, and adoption of banking correspondence model.
- The reasons behind financial exclusion are low income levels amongst consumers, lack of access to financial services, financial illiteracy, and higher transaction cost of the service provider.
- Initially, financial inclusion was considered as a social initiative; but, of late, it is seen as a business opportunity to cater to millions of poor citizens. Increased efficiency and advancement in technology are one of the important reasons behind this shift. One of the other reason for increased focus toward financial inclusion is the initiatives taken by governments, central banks, and self help groups (SHG).
- Financial inclusion is one of the effective ways to eliminate poverty. It has been noticed that the correlation between financial inclusion and human development index (HDI) is high. It is easier for the government to transfer subsidies and other benefits of social programs involving cash transfers effectively to a financially included household.
- The financially excluded households are spread geographically and it is difficult to cater to them through traditional delivery systems. In addition to newer customized products and services, there is a need to have knowledge of local conditions for an institution in this space to be successful.
UN INITIATIVES FOR FINANCIAL INCLUSION
- The CGAP Technology Program
- Regional MSME Investment Fund for Sub-Saharan Africa (REGMIFA)
- International Finance Facility for Immunization (IFFIm)
- The Business Call to Action (BCtA)
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