India has focused on financial inclusion since the 1950s. The methods and scope have evolved and progressed over time, with focus on innovative efforts to widely provide financial inclusion. There is evidence of innovative steps and new experiences in India. These efforts are recognised at the international level, as can be seen by a recent World Bank publication, ‘Financial Inclusion Strategies Reference Framework’, which shows examples of multiple strategies and policy steps taken in a range of countries, and India is one of the most cited examples of such initiatives. I am particularly happy to see they have mentioned health payments in Bihar as an example of channelling social payments through financial accounts.
Despite making efforts for a long time, financial inclusion is limited to a small section of India’s population. Also, there are differences in the extent of financial inclusion across Indian states. Both low financial inclusion and unequal financial inclusion should not come as surprises. They are similar to the situation the world over. Today, globally, we have two billion people and millions of micro, small and medium enterprises are not covered by financial inclusion. If we extend the coverage of basic financial products to relatively simple products like savings accounts, loans, insurance, payment systems, pension plans and remittance facilities, half the global population will be financially excluded. The situation is especially worrisome after the recent sharp economic and financial decline, increasing the number of vulnerable population and showing greater need for safety nets and access to finance.
So, financial inclusion is a major concern for policymakers across the world, including developed and developing countries, though the incidence is higher in developing countries. The objective of financial inclusion has come centre stage for all nations, as countries realise the large extent of linkages of finance with economic activities, including trade and social programmes.
G20 leaders announced initiatives on financial inclusion, financial education and consumer protection. I will share with you several of these to highlight both international initiatives and the areas which become relevant for financial inclusion.
G20 leaders have established, inter alia, the Global Partnership for Financial Inclusion, whose efforts include helping countries put into practice the Principles for Innovative Financial Inclusion, strengthening data for measuring financial inclusion and developing methodologies for countries wishing to set targets.
The main standard-setting bodies are asked to jointly explore complementarities with the Global Partnership for Financial Inclusion and consider recommendations and lessons learned from Global Partnership studies.
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Emphasising SMEs, a small and medium enterprise (SME) finance forum, was launched and Global Partnership’s SME finance policy guide was welcomed. Access to finance for women-owned businesses and SMEs in the agricultural sector is a priority. Progress was made with commitment to establish a finance framework that mobilised resources for the SME Finance Challenge and successful SME financing models. SME Finance Compact was launched to support development of innovative approaches for SMEs and implement the SME Finance Policy Framework.
G20 groups are working on achieving a general consensus on data and measurement issues, including common definitions of components of financial inclusion and consistent methodologies to inform, measure, and set targets. They also facilitate countries in implementing data initiatives and setting targets.
The G20 Basic Set of Financial Inclusion Indicators developed by the Global Partnership were endorsed. These include formally banked adults and enterprises (separately), adults with credit by regulated institutions, enterprises with outstanding loan or credit by regulated institutions and number of points of service for population.
Emphasised commitments from G20 and non-G20 nations to design effective policies to promote financial inclusion in national agendas and create high-level coordination under G20 Financial Inclusion Peer Learning Programme. Endorsed the High Level Principles on National Strategies for Financial Education and the action plan to develop approaches to support the implementation of the High Level Principles on Financial Consumer Protection.
Launched the Mexico Financial Inclusion Challenge, focusing on Innovative Solutions for Unlocking Access through new models of financial services that address barriers to financial inclusion.
We can see these initiatives cover a number of areas and show despite considerable focus on financial inclusion for a long time, it is an area with evolving techniques, policy initiatives, innovations, and service providers. In some cases, these initiatives specify internationally agreed steps or frameworks for addressing specific issues. Further, the widely differing conditions show initiatives have to be specific to the situation and no size fits all.
This does not mean information on best practices and effectiveness of policies is not necessary. Rather, it should be used as a basis to formulate suitable policies. Two international initiatives become highly relevant in this context.
One is the availability of a forum where stakeholders can discuss experiences with others who have addressed similar issues. This is the aforementioned Peer Learning Model for Advancing Financial Inclusion with the Alliance for Financial Inclusion (AFI), which has 87 institutions from 80 developing nations and provides a platform to exchange experience and concerns.
Another key component is to have a framework which identifies the main issues that should be considered to promote financial inclusion. Here, I again mention the ‘Financial Inclusion Strategies Reference Framework’ document, which provides the relevant aspects to consider with respect to data, targets, strategy, including agreement on financial inclusion goals, policy and regulatory reforms, new financial services and delivery mechanisms, and monitoring progress on goals. It also provides examples from a large number of countries for each of these categories. As I said earlier, India is one of the more active nations in this regard.
Excerpts from a speech by WTO Deputy Director General Harsha Vardhana Singh on ‘Inclusion Around the World: Learnings from the Rest’, at a conference organised by GovernanceNow, Patna, on August 25