Financial Inclusion – Work in Progress

I heard a joke in a conference some days ago - "Two guys were working on the field in tandem, the first one digging a hole and the second guy filling it up….Confused passer-by asked what was happening…. The guys explained that the third guy who plants the tree is absent today… but that doesn't deter us from working".

 

While I laughed, I realized that this is how we have been working - each doing his part with efficacy - but missing the big picture. The above example could be interpreted in the context of financial inclusion as follows:

As evident from the ongoing financial turmoil in US, anything anywhere could go wrong if the end objective is not planned intuitively or at least, well thought of in advance. When all the sophisticated Wall Street Investment bankers were eying big money by selling 'Collateralized Debt Obligation's' and 'Structured Investment Vehicle's', they conveniently forgot an elementary factor i.e. to have a good quality loan portfolio in the first place.

Similarly, providing financial services to the poor is just the means to achieve a larger goal of eradicating poverty and promoting social welfare, rather than an end in itself. As cited in the aforementioned example, we can all claim that the work is deftly being done by all of us but unless we apprehend the real need of the poor, i.e. plant the tree, the delivery of the required services seems a dwindling possibility. We need to identify and bridge the missing links - (like the intermediaries, brokers, TPAs, agents and most importantly – The Re insurers) in the sector with a well-defined, lucidly designed objective in focus, in order to facilitate inclusive growth. 

Now let me explain with some facts……..

"Financial inclusion" is a term that has garnered considerable attention in the recent past, not only in India but in developed countries as well. In fact, India finds itself placed in the bottom rungs in the index of financial inclusion (IFI) structured by the Indian Council for Research on International Economic Relations (ICRIER). So while we languish at the bottom of the Financial Inclusion Ladder, I recently attended a conference focussing on "The Other half of financial inclusion - Insurance for the Poor" as if the first half has been seemingly achieved.

I believe emphasis should be shifted to upgrading the banking sector for all of us, especially the poor who eke out a living by means of debts and mortgages, via moneylenders or from a soi-disant "MFI".  It’s time we look at providing Healthcare, education, savings and insurance along with our Credit. If we are unable to bring about this change, then needless to say, we are expending crucial resources just digging holes and covering them up, unknowingly neglecting the big picture.