Banking and Inclusion
Historically, some of the practices of Financial Services have greatly depended on demand. Trade Finance which has evolved to the level of universality is based on the needs of traders across the boundaries of states and countries, currencies and business law and practices. Such demands, initially come out of denial of services or facilities. Later, these assume the proportion of a need. Needs are serviced by entities who either see a business potential in servicing it or are responsible as a part of governance to meet the needs that arise in the financial markets. But all these services have been provided for those who had the wherewithal to be heard by the markets or the regulators.
All along, there remained a strata of people who could never get themselves heard about their needs. They were also not noticeable due to the low monetary value of their activities. The regulators were all along more busy in streamlining the larger requirements that affected high value monetary activities. The Commercial Banks did not look at them because they never had the skill to address such a large issue. They were content to address the creamy layer and keep floating as a profitable business.
This negligence of an unrepresented segment of society has its impact silently but certainly. Hence, it showed its results in various ways. Loss of opportunity for society to tap the talent of the unrepresented, Deterioration in living and financial standards of the unrepresented, Continued deprivation, Inability to structure the financial path of life’s activities.
There have been sporadic attempts at addressing the issues of exclusion in many places. But all these attempts lacked the combination of will and ability mainly because the resultant value of such pursuits were never convincing. The fear of loss kept compelling the banks and regulators to lose the huge talent and wealth that could be derived by addressing the segment properly.
Technology being one of the major enablers in such pursuits has brought another opportunity for the banks and regulators to effectively bring in a change and funnel the hidden treasure that lies excluded. There are ” Treasure Islands” in all places where the financial system has hitherto not gone. It is only an adventurous spirit that can take us there. It is at best being done today with a spirit of philanthropy and needs a shift in approach from complacence and condescension to adventure and conviction to find the treasure.
The real beginning of Financial Inclusion in the independent India started with the advent of the concept of “Social Banking” and then the Nationalization of Banks. This ensured that Banks make an effort to spread banking in hitherto unbanked areas leaving the known areas of potential and try to explore the potential in areas where traditionally commercial banking could not make any inroads earlier due to perceived lack of business potential. Over two decades, the second and third tier cities got Bank Branches and structured programmes of poverty alleviation and growth of Agriculture, Small Business, Retail resulted in an overall relative prosperity and availability of goods and services which were not previously available.
However, the Government and Reserve Bank of India realized that these efforts of the past were not sufficient to bring the benefits of financial products and services to all and sundry. In its renewed efforts the RBI came out with a landmark guideline to the Banks for Bank-led Financial Inclusion through the Business Correspondent Model in 2006.
Initially, all Banks mainly led by State Bank of India started fragmented pilots to arrive at a viable technology model to service the remote customers through the Business Correspondents. All sorts of technology solutions were explored during the pilot stage. Pos based, mobile based, laptop/desktop based models were experimented meeting substantial success. However, the three major challenges faced were Power, data connectivity and Cash. These challenges still remain.
This unfinished task of Inclusion is of paramount importance for the all round development that the new government envisages. The infrastructure to overcome the challenges would be the primary trigger for the Inclusion of all and sundry into the Financial Mainstream leading to a collaborative business environments which has been sadly missing till now.
The banks have largely stayed cautious about these initiatives because board room pressures for higher profitability as in the absence of proper infrastructure has always aborted the intermittent attempts of the well meaning individuals who wanted to rise above the petty vision of profitability.
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Truly,the strength of the Indian banking system in wake of a general world economic depression & collapse of fiscal systems has been the nationalisation . Technology and infrastructure at grassroots level connects the products devised to meet inflationary trends up curbed over the years. All inclusive banking is certainly the need of the times. Shariat banking too is welcome in our country.