CGAP CEO Urges India to Ensure Poor People Are Included in the Digital Finance Economy

WASHINGTON, D.C., Jan. 20, 2021 – India has made remarkable progress in increasing rates of financial inclusion to the majority of citizens over the last decade, but it remains unclear whether the roughly 470 million new bank accounts opened since 2011 are reaching poor people in ways that improve their lives or that adequate systems are in place to protect consumers from financial harm, CGAP CEO Greta Bull told leaders in finance, development, and government on Wednesday.

Addressing the Inclusive Finance India Summit, Bull praised the country for raising its rates of financial inclusion from 35 percent in 2011 to 80 percent by 2017, according to the Global Findex surveys, and for reducing the gender gap by 6 percentage points. The improvement largely stems from its pioneering melding of technology and finance through its Unified Payments Interface (UPI), an instant real-time payment system that can connect to mobile platforms. She however cautioned that the progress could sideline the country’s poorer segments who are increasingly left behind by both the digital and financial divide.

“While I think we can all acknowledge that the UPI played an instrumental role in getting resources to poor families during the crisis, I have nagging concerns about how accessible the banking and payments infrastructure is for poor households more generally,” said Bull, who leads a member consortium that works to advance the lives of poor people through financial services.

As COVID-19 crisis emerged, India used the UPI to successfully send social payments to 428 million recipients of various relief programs – an illustration of how digital technology and new business models could completely change the ability to connect households with financial services. Bull proposed a number of ways that India can ensure that poor people, especially those who operate largely in the cash economy, are included in the wave of financial expansion and innovation that is completely changing the ability to reach excluded households:

• Be aware of the risks of exclusion: Ensure policies focus on providing people with cash-in-cash-out points that allow them to convert digital money into cash and back again, and that they have affordable smartphones so that the digital divide does not grow.
   
• Anticipate the risks that technology brings: In addition to long-standing risks of over-burdening poor people with debt, aggressive debt collection practices, predatory pricing, and fraud, technology brings new challenges for finance that need to be addressed of data privacy and protection, identity theft, and cyber-security.
   
• Listen to customers: Ensure that there are robust mechanisms in place – call center, chatbot, or Interactive Voice Response system – to respond to customer complaints. But go further and engage consumer associations and include consumer advocacy groups in regulatory advisory bodies.
   
• Ensure accountability: Regulators should take a proactive customer-centric approach and require providers to report on how and whether customers have choice, whether service terms and conditions are clear, and adequate recourse mechanisms are in place.

“The burden is on the financial inclusion community to make sure rapid innovation is matched by attentiveness to the accompanying risks. To make this truly inclusive will require a proactive effort to ensure that the poor have both viable on-ramps into the digital economy and, once they are there, are equipped to navigate it and have ample protections against the potential harms that can arise,” the CGAP CEO said.

Inclusive Finance Summit

Convened annually, the Inclusive Finance India Summit is a multi-stakeholder event, conceived and co-created by organizations who have a vision for all segments of the population benefiting from being a part of the formal financial system for inclusive growth. It is a curated platform for enabling dialogue and learning from innovative policy and practice in the region from global and local sector experts.

It engages the foremost governmental, regulatory, business, market enablers, academia in the financial sector to shape global, regional, national and industry priorities in financial inclusion. Inclusive Finance India Summit seeks to inform, support and influence the policy making process for advancing financial inclusion in India.

Resources

CGAP CEO Greta Bull's Speech During Inclusive Finance India Summit

About CGAP

CGAP is an independent think tank that works to empower poor people, especially women, to capture opportunities and build resilience through financial services. We test, learn and develop innovative solutions through practical research and active engagement with our partners on building responsible and inclusive financial systems that help move people out of poverty, protect their gains and advance global development goals. Housed at the World Bank, CGAP is supported by over 30 leading development organizations committed to making financial services meet the needs of poor people.