BANGALORE: The Financial inclusion (FI) quotient of a country is recognized as a key determinant to gauge that country's overall economic and social development. Even in developed financial markets there are concerns about those excluded from the banking system, especially, migrant workers. The barriers to access formal banking system have been identified as relating to culture, education (financial literacy), gender, proof of identity, remoteness of residence, income and assets, etc.

Currently in India, 134 million households are financially excluded, which is 60 percent of country's population. Moreover, Financial Exclusion in Urban India is about 44 percent where as exclusion in Rural India is about 76 percent. Among the recent Government initiatives it has been proposed that a National Rural Financial Inclusion Plan should be launched with a clear target to provide access to comprehensive financial services to at least 50 percent of the financially excluded households (approximately 55.77 million) by 2012 through regional and semi-urban branches of Commercial Banks and Regional Rural Banks. The remaining households are to be covered by 2015.

The Finance Minister in his budget for 2007-08 announced the setting up of two funds for FI of about Rs.. 500 Crore each; the first the 'Financial Inclusion Fund' (FIF) for developmental and promotional interventions and the second, the 'Financial Inclusion Technology Fund' (FITF) to meet cost of technology adoption. The scope of these funds is being worked out. Setting up of financial literacy centers and credit counseling on a pilot basis, launching a national financial literacy campaign, forging linkages with informal sources with suitable safeguards through appropriate legislation, evolving industry-wide standards for IT solutions, facilitating low cost remittance products are some of the initiatives currently under way for furthering FI.

The objectives of FITF are to enhance investment in Information and Communication Technology (ICT) aimed at promoting financial inclusion, stimulate the transfer of research and technology in financial inclusion, increase the technological absorption capacity of financial service providers and users and encourage an environment of innovation and cooperation among stakeholders.

Presenting its view on the current Financial Inclusion Quotient of India, at MindXchange, 'Charting a Roadmap for IT-enabled Financial Inclusion', which took place on 18th September, 2008, Anand Rangachary, Managing Director, Frost & Sullivan, South Asia and Middle East, said  'Our motivation to host this MindXchange resulted from our consulting engagements with large Public Sector Banks where we realized that almost all banks struggled to implement their ideas in reaching out to the financially disadvantaged. Even though there was good understanding about the financial requirements of this section, lack of sustainable technology has proved to be a huge dampener.' 

Explaining the usage of the Stakeholder's Triad framework, Kaustubh Dhavse, Dy. Director, Information and Communication Practice, Frost & Sullivan, South Asia and Middle East, said, "Software uploaded on a mobile phone in a regional language will facilitate transactions, which will be linked to the bank's server through the IT-Telecom platform. Banks will operate through already established outlets, which can be a post office, Kirana store or Gram panchayat house. This shared outlet will be linked with the bank's server through the IT-Telecom platform. Once the linkage is established, varied transactions can be carried out and more number of accounts can be added. This model has been designed to reduce the cost per transaction over a defined time window. It will also provide a facility to avail services of a financial institute from any shared outlet spread across the country.'

According to research organisation Frost & Sullivan, Financial Inclusion needs to be a part of the corporate strategy of Financial Services Institutions and Financial Service Providers need to work closely with technology companies to develop joint mechanisms and conduct service delivery pilots to check viability.

According to Forst & Sullivan , services offered over the technology layer need to take into account the socio-economic structure and usability patterns (especially of/for rural women customers) to ensure fair participation. Moreover, a consortium needs to be set up between various technology service providers for faster and more cost-effective implementation. Product/Service Design needs be better managed and priced at par with spending capacities of MFIs, SHGs, Cooperatives and RRBs; lastly, there is a need to constantly evaluate various International Models and test feasibility within local context.