In the coastal swamps of western Bangladesh, there are a few options for making a living. Three million people live on the edge of the mangrove forest - their houses are on six-foot poles to protect them from rising waters, crocodiles and the Bengal tigers. For hundreds of years, honey-collectors have ventured into these forests from April to June, often crawling through dense undergrowth in search of wild beehives.
Sundarbans' honey is prized in the cities for its medicinal qualities and sells for $2 a kilo, enough to risk the mauling from a tiger or the sting of a bee. People in isolated regions, like the Sundarbans honey collectors, are amongst the poorest of the world -subsisting on less than $2 a day. They do not avail any financial services to help them invest and improve their lives. Digital technologies are opening up new opportunities to connect them to markets worldwide. By using mobile telephones they can have the access to financial services.
HEAT IS ON: As of now around 2 billion people don't use formal financial services and more than 50 per cent of adults in the poorest households are unbanked. Under the ongoing situation, it is heartening that financial inclusion has steadily been turning as a key enabler to reducing poverty and boosting prosperity. WBG President Kim rightly called for Universal Financial Access (UFA) by 2020. 'We're scaling up support to reach an additional 1bn people, and are working with partners to achieve UFA'.
Not only in India or Bangladesh but also globally it is widely recognised now that without inclusive financial systems poor individuals and small enterprises are left to rely on their own resources or on borrowing from others [usury] to invest in education, health or take advantage of promising growth opportunities. People outside the mainstream financial services - who have access to none of the basic services like savings, credit, insurance, and payment services - suffer financial disadvantages, which include, among others, usury, lack of insurance, higher interest credit, higher cost utilities and no account into which wages, income, payments can be routed.
Exactly, financial inclusion is a state in which all people who can use them have access to a full suite of quality financial services, provide at affordable prices, in a convenient manner and with dignity for the clients. Financial services that are delivered by a range of formal providers (all institutions that provide formal financial services recognized by the Government - commercial banks, savings banks, rural banks, state banks, non-bank financial institutions and other financial institutions like microfinance NGOs, credit unions) have to reach everyone (inclusive of the poor, disabled, rural and other excluded populations), who, in turn, can use them. Here fully included is a term describing individuals who have access to the full suite of basic services, which, in turn, refers to savings, credit, and insurance and payment service.
NOT IN PAPER BUT IN PRACTICE ALSO: The causes of financial exclusion are being widely examined at present by the experts worldwide and at the same time efforts are on to design strategies to ensure financial inclusion of the poor and disadvantaged, which, in turn, has smoothened the road to reach at the MDG [Millennium Development Goal of eradication of poverty by 2020].
In Portugal, about 17 per cent of the adult population had no bank account of any kind in 2000, while less than four per cent of adults in Canada and five per cent in Belgium lacked a bank account. In France, it is termed as 'right to banking' - Article 58 of the Banking Act 1984 recognised the principle of the right to a bank account. In U K [where the number of adults without a bank account fell from 2.8 million in 2002-03 to even 2 million in 2005-06] the accessibility is also through the Post Offices. In Sweden - where lower than 2 per cent of adults did not have a bank account in the year 2000 [compared to Germany where the same was around 3 per cent] - banks cannot refuse to open a saving or deposit account under Section 2 of the Banking business Act of 1987.
France and Belgium have already undertaken initiatives to committing banks to open an affordable account with bare minimum facilities. Termed 'call deposit account' in Belgium, it offers three basic types of transactions: money transfers, deposits and withdrawals, and bank statements. However, individual banks may opt to offer other services if they wish. In Germany, a voluntary code was introduced by the German Bankers Association dating back to 1996 which makes provision for an 'everyman' current account, offering basic banking transactions, without an overdraft facility. Likewise, access to basic banking in the United Kingdom and Australia has been achieved through voluntary arrangements with banks and has not involved formal charters. Britain, for instance, has drafted a banking code, which requires banks to inform customers about their basic bank account and its suitability for their needs. A Financial Inclusion Taskforce, instituted in April 2005, monitors access to basic banking services.
RESOURCES ARE THERE: By 2020, full inclusion can be possible if the ongoing efforts will continue.
The vision is to put the customer at the forefront rather than technologies, recognising the fact that the financial-service needs of the poor have similarities to those of the better off. Hence, the focus is on four major planks - what is provided (savings, credit, insurance, payments mainly); how it is provided (affordability, safety, convenience and then obviously dignity of treatment); who are the recipients (each and everyone - poor, rural, informal, groups, women, disabled, ethnic minorities and the like); and finally who provides (mainstream financial players reflecting transparency - the characteristic of quality financial inclusion via complete disclosure of information by the financial service provider)the same.
A supportive and well coordinated environment can ensure protection of the customer since the latter is the key element in a market-led system.
Thus, addressing financial exclusion will require a holistic approach on the part of the banks in creating awareness about financial products, education, and advice on money management, debt counseling, savings and affordable credit.
Last but not least, the role of the State Governments in facilitating financial inclusion in India is critical. Land settlement rights, computerisation of land records, and providing economic and social infrastructure with pro-active agricultural extension machinery will greatly help in using financial inclusion for sustainable development. Also leveraging the use of IT by collaborative efforts between banks and State Governments can prove to be a win-win situation.
The vision of achieving cent percent economic inclusion - shaped by the very recognition of the fact that access to suitable financial services is crucial to overall development - is rightly slated to receive top priority.
Digital innovations and the spread of smart phones are making it easier for poor people to manage their daily finances, access credit to grow a business or handle an emergency. Yet two billion people today still lack access to basic financial services!
Dr B K Mukhopadhyay, a Management Economist,
is Professor at the ICFAI University,
Tripura, Agartala, India.
m.bibhas@gmail.com