Column: E-nabling financial inclusion
Friday, February 14, 2014
Financial inclusion is about (a) the broadening of financial services to those people who do not have access to financial services sector; (b) the deepening of financial services for people who have minimal financial services; and (c) greater financial literacy and consumer protection so that those who are offered the products can make appropriate choices. The imperative for financial inclusion is both a moral one as well as one based on economic efficiency. Should we not give everyone that is capable the tools and resources to better themselves, and in doing so, better the country?
We have tried to effect inclusion in the past through mandates—whether it be through direction on branch opening or on lending to priority sectors. That we are still far short of our goals has led some critics to suggest we should abandon mandates because the market will take care of needs; If the poor have demand for financial services, the critics say, providers will emerge to supply it. Markets do respond to need, and competition is a very healthy force for improvement, but market functioning can be impeded by poor infrastructure, uneven regulation, natural or regulatory monopolies, and even cartelisation.
While enlisting competitive forces wherever possible to compete for the bottom of the pyramid’s business, as a development central bank we also need to offer a supportive hand. We have to encourage the development of the products, institutions, and networks that will foster inclusion.