Recently I came across an interesting blog on Financial Inclusion by Ajay Shah. He made some important points viz. the unattractive business model, lack of private energy, technological factors and most importantly flawed policy priorities.
We must agree with him that opening more and more accounts under Jan Dhan Yojana did not serve the purpose of Financial Inclusion. But his other concerns are visibly interrelated. The crux of the matter is that we are unable to envisage a viable business proposition based on Financial Inclusion agenda. This is the reason that private participation is missing and technological innovation is not happening to support the Government efforts towards Financial Inclusion.
Let’s take the example of BC model which is being adopted to advance Financial Inclusion. The drawbacks of the model are:
- BC /CSP entities struggle to survive.
- Limitations in the back end technology.
- Leakage/Fraud ,specially in the payment function even after the practice of DBT.
My personal view is that the point number (3) above should be the priority number one for the Government so as to achieve the objective of Financial Inclusion rather than opening more and more accounts. It can happen if proactive measures are taken to promote cashless transactions in rural India. Not sure if there would be any business sense to do so but policy makers including Ajay Shah should do some brain storming on that. The “Rupay” debit card was a great idea but unfortunately the cards got lost in transit or did not get activated because its use and application was not understood and appreciated by a common man.
To the best of my knowledge “Payment Bank” is not taking off primarily due to the skepticism on its business model by private players. Though the Government , on its own is about to launch India Post Payment Bank , we can not downplay the viability angle. What the IPPB intends to do is already being attempted through the BC model and various other financial services companies. We also see the Government efforts in selling insurance products such as APY, PMJJBY and PMSBY not producing desired results.
The ultimate question is how we bring business sense to Financial Inclusion initiatives. But already avoidable time and energy is wasted without pursuing the goal of cashless transactions in rural India. Can we meaningfully engage BCs/ Payment Banks for the purpose?