Financial Inclusion isn’t a new theme; institutes in India and the rest of the emerging markets have been toiling away to work out a solution. The ecosystem has been a comprehensive one with – government, regulation, private enterprise, NGOs. On the face of it; with the concerted effort of all these heavy lifters one would have assumed the problem to be resolved; in reality – we haven’t even scratched the surface.
Consider the following –
- In a deeply corrupt “system” the government launches multiple initiatives towards direct subsidy
- Results – Drive towards formal banking system
- India with a population of 1.2B with the drive of an aggressive PM initiates a massive financial inclusion drive
- Results – origination of nearly 400M Jan Dhan accounts zero balance accounts
- The same progressive PM then proceeds to pull the trigger on the most disruptive event in India in the form of the much talked about demonetization drive
- Results – even the pan wala selling illegal loose cigarettes starts accepting digital money.
One would have thought that these are systemic changes and would have resulted in a sustained drive towards formal and digital banking.
In truth –
- Jan Dhan –
- Bulk of Jan Dhan accounts lie with a zero balance
- The few that do have a balance are used only a few times each quarter
- Demonetization –
- Once cash was back in the circulation; most in the unorganized sector have returned back to cash with operational issues cited for a return to the norm.
Place this in context that in an urban and semi-urban if you interact with the people from the unorganized sector you notice that they are –
- Able to save some money
- Have acquired some basic consumer wants such as TV, fridge etc.
- Some are even able to invest though in “traditional” forms in gold and small plot of land
- Are obsessed about their children’s future and work hard to provide them better opportunities.
Why does none of this happen in the formal economy? Why do people not use bank accounts for their transactions? Why do people not invest in financial products? Why do people expose themselves to exploitive moneylending practices?
These and many more “why’s” form the reason for our developing Finlok. We hope we can motivate a small change in people’s behaviors and unlock long term value for them in the process. We hope with Finlok to motivate them towards using bank accounts for simple transactions for pay and receive using a financial model that they swear by. Our objective is to gradually build a financial profile for them enabling us to offer additional products around investments, credit etc.
No doubt the journey is long but each journey starts with the first step. The road is still long and these are only baby steps.