Financial Inclusion in India MicroSave. Preparing for the next wave of revolution

Transcription

1 Financial Inclusion in India MicroSave Preparing for the next wave of revolution 1 1

2 2 2 MicroSave is globally recognized as the local expert in financial inclusion in various markets, including India Key partners and clients International FI consulting firm with 20+ years of experience 11 offices around the world Projects in ~50 developing countries Donors & Funders Government Our impact so far 200+ Clients Implemented >75 DFS projects Developed 200+ FI products and channels PSPs Banks >550 Publications Trained 1,000+ Leading FI specialists globally

3 Inclusion Timeline and Actors 3

4 Financial inclusion in India began in 70s and has seen several interventions with most happening in recent times 4 4 Priority sector lending Nationalisation of Banks NABARD was established No Frills account National Financial Switch Swabhimaan Scheme Immediate Payment Service Aadhaar Project Aadhaar enabled Payment System Small Banks 10 Payment Banks - 11 Differentiated Licenses Regional Rural Banks Inception of SIDBI Operative Guidelines for Mobile banking transactions Microfinance Institutions (Regulations and Development) National Mission for Financial Inclusion - PMJDY Operationalization of ABPS and AEPS National Payments Corporation of India RuPay electronic payment card scheme Scaling up of Business Correspondent model Unified Payments Interface (UPI) Aadhaar Payments Bridge System Bharat Interface for Money (BHIM) app

5 For meaningful financial inclusion in India, working with a number of policy makers and regulators is critical 5 5 Reserve Bank of India (RBI) Central Bank National Bank for Agriculture and Rural Development (NABARD) Apex Development Bank National Payments Corporation of India (NPCI) Payment Coordinator Unique Identity Authority of India (UIDAI) Identity Infrastructure NITI Aayog Policy Think Tank Telecom Regulatory Authority of India Telco Regulator Pension Fund Regulatory and Development Authority Pension Regulatory Authority Insurance Regulatory and Development Authority Insurance Regulatory Authority

6 6 Financial Inclusion Challenges and Drivers

7 7 7 Though there are several challenges but with anchor product and enabling infrastructure, there are several unique opportunities Financial access points (per 100,000 adult) Enabling Infrastructure Ratio of currency to GDP Cash as a percentage of consumer transactions by value Anchor Product: US$71 billion pa G2P payments 1 bn+ Aadhaar enrolments 1 bn+ mobile connections (43% rural), 350mn+ smart phones A cash economy with high cost of cash* 12% 98% Cash as percent of consumer transactions (volume) 68% $3.5B Annual cost of currency operations for RBI and commercial banks in India *Source: IMF Financial Access Survey, 2015; Costs of Cash In India, Institute of Business In the Global Context; Cost and Willingness to Pay, MicroSave; and World Bank Data Bank.

8 The opportunity to bring in change needs to be viewed from the lens of DBT, JAM trinity and ubiquitous payments, as change drivers 8 8 Current Bird Eye View Change Drivers 100% Access 99% of Indian household received a bank account under PMJDY initiative Decreasing Gender Divide About 7-8% more men than women are financially included 80% Financially Included Almost four out of five adult Indians are now financially included Active Use of Bank Accounts 42% of adult Indians are active bank account holders JAM Trinity Government to People Transfer and Direct Benefit Transfer Evolved Payment Systems Current Scenario

9 9 Financial Inclusion Direct Benefit Transfer

10 About 60% of GoI s budget (USD 71 billion) for central welfare schemes is spent on 4 key areas - food, fertilizer, fuel (LPG and Kerosene) and rural employment Scheme Budget (Bn USD) Number of Beneficiaries (Mn) Others 34% Food 31% Food /180 families Fertilizer famers MGNREGA Rural LPG 0.4% Government of India budget LPG Kerosene 1 Not Available Kerosene 2% NSAP 2% LPG 4% NHM 4% MGNREGA 8% Fertilizer 15% Rural LPG NHM (JSY) NSAP Others 24 As per estimates about 40% to 50% of this subsidy does not reach the intended beneficiaries

11 11 11 Fuel - We played a key role in optimising rollout of DBT in LPG (Pahal, Ujjwala) and kerosene. LPG has been successful but lot of effort is needed in kerosene Pahal 150 million HHs DBTL with Aadhaar & bank account 21.3 million duplicate accounts eliminated million 10 million voluntarily gave up subsidy beneficiaries 50 million new connections 178 million HHs More new connections 195 million HHs US$744 million annual savings MicroSave s role Designed processes for routing of LPG subsidy directly to the bank account Helped in preparing and structuring the Give It Up campaign Ujjwala 22 million connections in 1 year 30 million to be on boarded by 2019 Helped in designing the scheme to make Ujjwala universal for every Indian rural household Real time rapid assessment of the scheme implementation resulting in the change in delivery approach and safety messages Kerosene Jharkhand first state to implement 8 more states are interested and experimenting Assessed options for moving the kerosene subsidy to DBT (180 million people) and examined behavioural biases affecting peoples decisions Assessed the implementation of DBTkerosene pilot in four districts of Jharkhand

12 Food Biometric Authentication Physical Uptake (BAPU) Model experience Beneficiary goes to FPS shop Hands over ration card Authenticates identity on Aadhaar enabled POS Makes payment Receives entitled grains and receipt Key findings Are there any challenges faced by the you in accessing subsidy? What do you consider most useful about FPS automation? Would you prefer to shift to any other mode of food grain distribution? 4% FPS automation prevents diversion of food grains by 82% shop owners 5% Yes No 96% 78% FPS automation ensures subsidy reaches the intended customers 95% Yes No

13 13 13 Fertiliser - Fertilizer subsidy is about USD 11 billion with an estimated leakage of 65%. Nation wide roll out of Aadhaar enabled Fertilizer Distribution System (AeFDS) is in progress and we played a critical role in pilots Problem Efforts so far MicroSave s role Directs benefit transfer (DBT) in fertilizers is more complex than DBT in other schemes such as food and fuel because: Beneficiary entitlement is not defined. Beneficiary is also not defined. Presently any one can purchase fertilizer. Subsidy amount is more than twice the subsidized price. Hence it would be huge burden if farmer is asked to pay MRP upfront and then get subsidy in his account. Subsidy component is not same for all products in Fertilizers. Multiple products (Urea, P&K etc) have different subsidy amounts. Subsidy component varies plant to plant for the same product. Pilot in Krishna and West Godavari districts, Andhra Pradesh Pilot in 16 districts across India Roll out across India Helped in conducting pilot Assessed implementation and provided recommendations to improve large scale pilot Assessed 6 districts and provided recommendations to improve solution for nation wide implementation Planning to asses situation during peak season and variations adopted by the states to suit ground level situation

14 Financial Inclusion Evolved Payment Infrastructure and Way Forward 14 14

15 15 15 Retail payment infrastructure, developed by NPCI, is providing various options to a variety of segment NACH National Toll Tag UPI IMPS BBPS MicroSave s role Helped in market research Supported on redesign Conducted several experiments on ground for cash less eco system Activation of new products and services RuPay AEPS APBS

16 16 16 Various components would lead to a digital era with democratised credit to all the segments G2P ($71 billion pa): LPG Kerosene Grains (rice/wheat) Scholarships Pensions Merchant Transactions 20 million+ (largely informal) merchants Utilities Schools etc. Unified Payment Interface Democratised Credit 200,000+ Agents Cash In/Out Mobile Phones (mapped to accounts) Payments Banks and Small Finance Banks + Digital footprint Locker PMJDY: 273 million bank accounts, RuPay cards (214 million), life & accident insurance and overdraft facility Aadhaar: Bio Metric Digital Identity 1 billion+

17 Annexure 17 17

18 18 18 Orality Segment: Large illiterate & innumerate population needs better UI to conduct transactions Orality refers to modes of managing information among people who find text unusable or barely usable. The study tried to understand the experience of BHIM users. This is a huge segment in India. In 2015, illiteracy segment was 29% MicroSave s role Study was undertaken to learn about the challenges that ORAL people face in using BHIM application. MicroSave s recommendations to improve the App experience were around different areas: Intuitiveness Navigation Performance and Others 264 million people!! Key Recommendations VERIFY The purpose was to come up with solutions that can enhance the customer experience for BHIM app and address constraints that the ORAL (illiterate and semi-literate) consumer segment faces in using it. This was an exploratory research that included data collection for potential mobile wallet users, rapid prototyping and usability testing. The study was done using quantitative and qualitative research tools i.e. screenings, personal interviews and focus discussion groups. On-field usability test of the design was also conducted.

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