Fincian inclusion as tool against poverty

In the coastal swamps of western Bangladesh, there are few options for making a living. Three million people live on the edge of the mangrove forest, their houses on six-foot poles to protect them from rising waters, crocodiles and the Bengal tiger. For hundreds of years, honey gatherers have ventured into these forests from April to June, often crawling through dense undergrowth on their hands and knees in search of wild beehives. They carry torches of smoldering twigs and leaves to smoke out the giant bees, and with their bare hands extract the liquid gold. 

Sundarbans honey is prized in the cities for its medicil 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 gatherers, are amongst the world’s poorest –subsisting on less than $2 a day and without fincial services to help them invest and improve their lives. Digital technologies are opening up new opportunities to connect them to markets worldwide, using mobile telephones to access pricing and fincial services.

As of now around 2 billion people don’t use formal fincial services and more than 50 percent of adults in the poorest households are unbanked. Under the ongoing situation it is heartening that fincial inclusion has steadily been turning as a key ebler to reducing poverty and boosting prosperity. WBG President Kim rightly called for Universal Fincial Access (UFA) by 2020. ‘We’re scaling up support to reach an additiol 1bn people, and are working with partners to achieve UFA’.

Not only in India or Bangladesh but also globally now the very fact is recognized that without inclusive fincial systems poor individuals and small enterprises are left to rely on their own resources / borrowing from others [usury] to invest in education, health or take advantage of promising growth opportunities. People outside the mainstream fincial services  - who have access to none of the products in the full suite of basic services like savings, credit, insurance, and payment services - suffer fincial 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, fincial inclusion is a state in which all people who can use them have access to a full suite of quality fincial services, provide at affordable prices, in a convenient manner and with dignity for the clients. Fincial services that are delivered by a range of formal providers [all institutions that provide formal fincial services recognized by the Government – commercial banks, savings banks, rural banks, state banks, non-bank fincial institutions and other fincial institutions like microfince 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. 

As a global hot topic it is emerging, the causes of fincial exclusion are being located while at the same time efforts are on to design strategies to ensure fincial 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 Cada 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 recognized 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. U K, 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 Fincial Inclusion Taskforce, instituted in April 2005, monitors access to basic banking services.

It is being rightly observed that by 2020 full inclusion is a big possibility keeping in view the ongoing efforts. 

The vision is to put the customer at the forefront rather than technologies recognizing the fact that the fincial-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 filly who provides [mainstream fincial players reflecting transparency – the characteristic of quality fincial inclusion via complete disclosure of information by the fincial service provider] the same. 

A supportive well coordited environment can ensure protection of the customer since the latter is the key element in a market-led system. In fact, fincial inclusion, in true sense of the term, has to fold both the demand [good fincial decision making] and supply [access to suitable products and services] factors to reach the equilibrium.

Thus, addressing fincial exclusion will require a holistic approach on the part of the banks in creating awareness about fincial products, education, and advice on money magement, debt counseling, savings and affordable credit.  

Last but not the least, the role of the State Governments in facilitating fincial inclusion is critical. Land settlement rights, computerization of land records, and providing economic and social infrastructure with pro-active agricultural extension machinery will greatly help in using fincial inclusion for sustaible 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 fincial services is the critical ebler of quality-of-life betterment paving the way for 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 mage their daily finces, access credit to grow a business or handle an emergency. Yet two billion people today still lack access to basic fincial services!!

(Dr Mukhopadhyay, a noted magement economist and an intertiol commentator on business and economic affairs, can be located at m.bibhas@gmail.com)