On the way to Financial Inclusion…


Financial Inclusion is defined as delivering banking facilities/financial services to all the people in a transparent and equitable manner at affordable cost.

The ‘Committee on Financial Inclusion in India’ defined it as

“the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as the weaker sections and low income groups at an affordable cost”.

The financial inclusion provides business opportunity for the financial institutions at the bottom of the pyramid to expand the volume of business. Profitability can be increased only by finding newer avenues for deployment of funds.

FInancial Inclusion

After nationalization of major banks in India in 1969, there was a significant expansion of branch network to unbanked areas and stepping up of lending to agriculture, small industry and business. The focus then shifted on establishing the basic right of every person to have access to affordable basic banking services.

Soon it was realized that ensuring people have savings account was not enough & for achievement of the primary objective, lately the discussion on financial inclusion in policy and academic circles has shifted beyond the extension of institutional credit at the expense of providing savings as provision of only savings account does not imply financial inclusion (its usage by the account holder & Financial Literacy is more important). Financial Inclusion must aim at incorporating credit markets and plethora of banking services.

The purview of Financial Inclusion should encompass not only delivery of banking, but also other financial services like insurance, pension, remittance, mutual funds, etc. delivered at affordable, though market driven costs. The process started with opening a no-frills account but there must be a continuous development to facilitate provision of banking and financial services. Usually the person would need a bank account, where he/she can save small amounts at regular intervals ideally with savings being collected at their place of work or a specified point of transaction (SPOT) in the locality; micro-credit for new business/ working capital to increase stock and business. Savings history and credibility checks to be used as a proxy for collateral, Insurance (life/Health) for minor illnesses and hospitalization, investment plan for child’s education, pension and other investment avenues.

Once the first step of safety of savings is achieved, the poor require access to schemes and products which allow their savings to grow at rates which provide them growth beyond mere inflation protection. The thrust of Financial Inclusion Framework lies in following critical parameters:

The initiatives taken by the government are reckoning however the execution and follow up is lacking.  The government is harping on the Business Correspondent model to percolate to the lowest level.

One organization which is constantly working towards this initiative is Financial Inclusion Network and Operations Ltd. (FINO) founded on 13th July, 2006, a company focused on the BC model being rolled out in the country to achieve financial inclusion. FINO specializes in building & providing technologies to enable financial institutions (FIs) to serve the under-served and the unbanked sector and also to service the technology requirements of entities engaged in servicing the bottom of pyramid customers. One of the biggest challenges in the micro banking industry is the huge amount of paperwork and human effort traditionally involved in supporting micro-transactions and credit scoring potential customers. Other hurdles include Information gap, accessibility and reach, infrastructure, illiterate populace & fool proof identity.

The concept of FINO was germinated to overcome all the above mentioned hurdles and make financial services available to the unbanked. Recently it has added a money transfer feature to its ‘Fino Tijori’, a self-operated stand-alone machine that offers the functionality of account deposit, balance enquiry, mini statement, and request for loan options.

FINO Tijori is a Biometric Smart Card based no frills saving account product designed specifically for the Banks / MFIs in the Microfinance space. The Card becomes a combination of passbook and ATM card, and provides features like Balance Inquiry, Deposit and withdrawal of Cash.

FINO Tijori is the basic building block which the Bank / MFI can use to offer other financial products like loans, remittance, insurance etc. to their customers by issuing multi-application smart card. It is easy to access and is user friendly therefore meant for anyone and everyone.

Fino Tijori offers ease of use & learnability to any user, who otherwise has no idea on how to make banking transactions. Saving and storing money is an ordeal for the migrant workers in metros who leave no stone unturned to save a penny to support their families back in villages. FINO has devised smart solution to this problem. Now, all that user (read labourer, worker etc.) does is walk up to the closest business correspondent (BC) transaction point, deposit money and even remit it to his family anywhere in India at any time of the day!

So that every paisa saved to support his family reaches the destination without any hitches. The other not so viable options available to send money home once in two months are through friends or postal money order (which involves huge time & risk).

How Fino Tijori Works

Both the remitter and beneficiary are given individual bank accounts operated with a biometric card on Fino BC transaction points. The remitter can deposit money at any Fino point, transfer the money to the beneficiary by instructing the BC agent to do so and the beneficiary can withdraw from any other Fino point using his/her secure biometric card. And if customers have registered their mobile numbers with Fino, an alert is also sent to both the remitter and beneficiary. The money, which is deposited in a bank account, even earns a 3.5 per cent interest, till it is remitted to the beneficiary.

Spreading the benefits all over..

Fino has plans to deploy these machines all over India in order to help people deposit such small sums of money throughout the day & has already tied up with Union Bank of India and ICICI Bank, and is in talks with other banks too. Currently, the remittance origination centres are in Delhi, Mumbai, and Surat, while destination points are in the eastern Uttar Pradesh region. So far 100 micro-deposit machines (MDMs) have been deployed in Delhi and Mumbai, and are being tested with respect to customer convenience/usage and acceptability.

According to FINO, in the three months since its launch the company is handling about 3,500 transactions a day with an aggregate value of Rs 2 crore. With plans to scale up to 200 MDMs by March 2011, the company plans to offer the facilities from 11 origination cities and also add Gujarat and Bihar to its destination network.

  1. Harishchandra Sukhdeve says

    Lack of access to capital from formal sources drives rural people to the usurious, exploitative private moneylenders. Already vulnerable to vagaries of climate and manipulative market forces, these farmers are also exposed to indignities by the moneylenders causing acute distress, sometimes resulting into suicides. Money-Lenders Free Villages (MLFV) is the solution. Get a Web Search for MLFV for more details.

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