Editorial & Op-ed


Financial inclusion: Indian women have something to bank on

By Bindu Ananth & Amy Jensen Mowl
For the first time, the majority of Indian women have been financially included. Fresh data show that the proportion of Indian women with individual accounts in formal financial institutions (primarily banks) reached 61% in 2015, a sharp increase from 48% in 2014, lagging men by only eight percentage points. A close look at these numbers reveals opportunities and challenges to build on this quiet, and important, victory.

Customising financial services

By Shilpa Sathe & Deepti George
In the series ‘Finance Matters’, we have examined the various elements that enable the provision of high-quality financial services, particularly for the under-served segments of the population. In this column (the last in this series), we summarise this thinking and paint a vision for the future of financial service access for households.

Simple products not always best

By Shweta Aggarwal & Shilpa Sathe
A common refrain that one hears in the context of financial services for low-income households is the importance of “keeping it simple”. A simple product, combined with “financial literacy”, is the most common prescription for financial inclusion.

Challenge of financing SMEs

By Arun Kumar
India is home to about 26 million small enterprises (with investments less than 50 million) that account for about 20 per cent of the country’s GDP . While small enterprises drive economic growth with their ability to innovate and employ in large numbers, the biggest challenge faced by them is access to finance.

No money to govern rural India

By Anand Sahasranaman
In India, gram panchayats (GPs) were given constitutional legitimacy following the passage of the 73rd Constitutional Amendment Act, which was meant to decentralise power and responsibility to them to improve local public service delivery and governance.

How markets can serve farmers

By Uday Krishna & Rajendra Kumar
Agriculture incomes in India are volatile because of a number of unforeseen factors, such as weather, disease/pest infestations and/or market conditions. With 65 per cent of the population dependent on agriculture, it is essential to manage both production and price risks.

Making money transfers work for migrants

By Abhay Agarwal, Amulya Champatiray & Shardul Oza
Gopal G., a native of West Bengal, moved to Delhi 14 years ago to find a job to support his 11-member family. In Delhi, he works with a goldsmith, earning Rs 3,600 a month, much of which he sends back home.

Historical data, vital to design

By Aslam Hussain Nadri & Ashutosh Shekhar
Households slip into “bad states of the world” due to several reasons, including accident or death of the earning member, medical emergency of a family member, poor or excess rainfall that ruin crop production, theft or fire.

Options for low-income households

By Rajat Bansal
A defining characteristic of the finances of low-income households is the irregularity and seasonality of cash-flows, and the generally small surplus.

Micro-realities of financial inclusion

By N Raghav & Nitin Chaudhury
Low-income households need financial products that allow them to make frequent, low-value transactions. Transaction-size barriers should be as low as possible by reducing cost of service delivery.

Channel designs for financial inclusion

By Arun Seethamraju
Financial inclusion is as much about convenient channels of delivery as it is about appropriate products.

Managing risks in microfinance

By Gaurav Kumar
Microfinance institutions (MFIs) essentially act as financial intermediaries, bridging the gap between mainstream financial institutions and low-income households for a specific type of credit need that is short-term and unsecured. The concept of risk lies at the heart of any such financial intermediation.

MFIs, markets need each other

By Kshama Fernandes
The goal of an investment professional is to maximise the risk-adjusted return on the overall portfolio through diversification within and across asset classes. High repayment rates, low volatility of returns and low correlation with other asset classes make microfinance an interesting asset class.

Investing in financial inclusion

By Vineet Sukumar
An investment banker has to develop sector-specific guidelines and methodologies to help him deal with small and disaggregated clients, and scale up low-ticket transactions. The investment banker plays a key role in transferring risk and capital between high-quality companies and well-capitalised investors.

India needs a better debt market

By B.R. Diwakar
A well-functioning capital market is an important prerequisite not only for financial inclusion, but also for economic development and growth.

Missing links in financial inclusion

By N.Raghav & Raman Taneja
Infrastructure facilities such as clearing houses, depositories, stock exchanges, and commodity exchanges are the backbone of any financial system. They allow the system to work efficiently, manage risks, maintain effective communication channels, enable predictability and transparency and, above all, allow the system to scale and serve every stakeholder.

Government Policies and Financial Inclusion

By Suyash Rai
Markets typically exist within the boundaries set by the state. The financial markets are no exception to this. Mobilisation and allocation of capital – the key roles of the financial system – are done within the framework defined by the government.

Barriers in delivering finance

By Puneet Gupta & Jayshree Venkatesan
Though India has deep financial infrastructure comprising a large number of bank and post-office branches; agricultural cooperative societies; and, now, micro finance institutions; there still remain gaps that have prevented us from leveraging the full potential of this financial infrastructure.

Is SHG model better than microfinance?

By C.A. Farzana Najeeb
In the past few weeks with microfinance under public scrutiny, the self-help groups (SHG) channel is being positioned as a cheaper alternative of delivering microfinance compared to MFIs.

Analysing the MFI cost structure

By Puneet Gupta & Nitin Chaudhary
Having understood the deep transformative potential of access to finance and the barriers to accessing it, here’s a look at the fundamentals of the MFI cost structure in delivering finance.

Financial inclusion needs friendlier products

By Jayshree Venkatesan & Puneet Gupta
Well-targeted financial products can go a long way in meeting the varied needs of low-income households. The fact that financial inclusion remains an unfinished task points to the absence of such instruments to address the needs of the poor.

How access to finance can reduce poverty

By Nachiket Mor & Bindu Ananth
Poverty can be seen in many ways. One aspect that is of specific interest to us is the poverty of income, characterised by the inability of the family to afford the bare necessities of life, and a sense of complete loss of control over its future.

Suitability means going from buyer beware to seller be sure

By Bindu Ananth
In this livemint article Bindu writes about Suitability being a shift to “seller be sure” from “buyer beware”; deriving from the KGFS experience on the ground.

Big concerns over small loans

By Nachiket Mor & Bindu Ananth
Microfinance, an effective tool for financial inclusion, remains an embattled sector today. Nachiket Mor and Bindu Ananth discuss various elements of the sector in this article.

Basic economic freedom: Why can’t we get it done?

By Nachiket Mor & Bindu Ananth
Access to finance, which is a necessary precondition for the poor to build their stable lives on, provides them basic economic freedom – something that can be easily done under existing conditions. But that there are millions outside the formal financial system is appalling; argue Nachiket Mor and Bindu Ananth in this article.

Don’t reject structured finance

By Sona Varma & Suyash Rai
In this Live Mint article, Sona Varma and Suyash Rai argue that global crisis should not used as an excuse to reject financial products that can spur growth such as the originate to distribute model, a widely practiced variation of the traditional financial intermediation.

Finance as Noise-Canceling Headphones

By Nachiket Mor & Bindu Ananth
In this article, Bindu Ananth and Nachiket More explain the true role of finance in an individual’s life. Other than moving resources across time and various states of the world, they write that it should be able to “slide into the crevices and craters that inevitably occur in every life”.

Debunking myths about the poor and financial services

By Sona Varma & Suyash Rai
In this article, Sona Varma and Suyash Rai bring out the deeply transformative power of finance for the poor.

Govt needs to revisit priority sector lending policy for more effective financial inclusion

By Nachiket Mor & Bindu Ananth
There has been much discussion recently about the distorting nature of various indirect subsidies such as those being offered via price controls on fuel and fertiliser. There is a case to include in this important debate the subsidies implied via financial sector policies, in particular, priority sector lending (PSL) requirements that guide the allocation of 40% of net bank credit (NBC). One of the significant bottlenecks to the growth of the Indian economy has been the small size of the financial sector.

Strong consumer protection regulation need of the hour

By Bindu Ananth
In this article, Bindu Ananth explains what makes consumer protection in financial services different from consumer protection for other products and services, and calls for a comprehensive consumer protection regulatory regime for financial services in order for us to rely fully on the market’s ability to achieve financial inclusion.

Free and fair competition among MFIs can help lower interest rates for poor borrowers

By Ratul Lahkar and Viswanath Pingali
In this article, Ratul Lahkar and Viswanath Pingali argue that in certain circumstances, recommendations of the Malegam Committee, such as an interest-rate cap and limitation on the number of loans can have detrimental effect on borrower welfare.

Will the For-Profit Model be Accepted in the Social Sector?

By Nachiket Mor & Bindu Ananth
In this article, Nachiket Mor and Bindu Ananth argue for the presence of private for-profit organisations to solve the challenge of providing basic services such as financial services, health, education, drinking water for India.


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