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1 1 Financial Inclusion in India – MicroSave Preparing for the next wave of revolution
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Financial Inclusion in India – MicroSave
Preparing for the next wave of revolution
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MicroSave is globally recognized as the local expert in financial inclusion in various markets, including India
Key partners and clients
Our impact so far
200+ Clients
>550 Publications
Trained 1,000+ Leading FI specialists globally
Implemented >75 DFS projects
Developed 200+ FI products and channels
International FI consulting
firm with 20+ years of
experience
11 offices
around the world
Projects in ~50 developing countries
Donors & Funders Government
PSPs Banks
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Inclusion Timeline and Actors
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Financial inclusion in India began in 70s and has seen several interventions with most happening in recent times
Nationalisation of Banks
1970-72
„Priority sector‟
lending
1976
Regional Rural Banks
1982
NABARD was established
1990
Inception of SIDBI
2004-05
National Financial Switch
2008-09
„No Frills‟ account
2010-11
2012
2013
2014
2015
2016
Operative Guidelines for Mobile banking
transactions
National Payments Corporation of India
Aadhaar Project
Immediate Payment Service
Swabhimaan Scheme
Microfinance Institutions
(Regulations and Development)
RuPay electronic payment card scheme
Aadhaar Payments Bridge System
National Mission for Financial Inclusion -
PMJDY
Aadhaar enabled Payment System
Scaling up of Business Correspondent model
Differentiated Licenses
Operationalization of ABPS and AEPS
Unified Payments Interface (UPI)
Small Banks – 10 Payment Banks - 11
Bharat Interface for Money (BHIM) app
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For meaningful financial inclusion in India , working with a number of policy makers and regulators is critical
Reserve Bank of India (RBI)
National Bank for Agriculture and Rural Development (NABARD)
National Payments Corporation of India (NPCI)
Unique Identity Authority of India (UIDAI)
NITI Aayog
Central Bank Apex Development Bank
Payment Coordinator
Identity Infrastructure
Policy Think
Tank
Telecom Regulatory Authority of India
Pension Fund Regulatory and Development Authority
Insurance Regulatory and Development Authority
Telco Regulator Pension Regulatory Authority
Insurance Regulatory Authority
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Financial Inclusion – Challenges and Drivers
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Though there are several challenges but with anchor product and enabling infrastructure, there are several unique opportunities
A cash economy with high cost of cash*
Enabling Infrastructure
*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.
Annual cost of currency operations for RBI and
commercial banks in India
Ratio of currency to GDP
Cash as percent of consumer transactions (volume)
Cash as a percentage of consumer transactions by value
Anchor Product: US$71 billion pa G2P payments
12% 98%
68% $3.5B
1 bn+ Aadhaar enrolments
1 bn+ mobile connections (43% rural),
350mn+ smart phones
42 69 98 223 265
548 554 569
933
Financial access points (per 100,000 adult)
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The opportunity to bring in change needs to be viewed from the lens of DBT, JAM trinity and ubiquitous payments, as change drivers
99% of Indian household
received a bank account
under PMJDY initiative
42% of adult Indians are
active bank account holders
Almost four out of five adult
Indians are now financially
included
About 7-8% more men
than women are
financially included
100% Access
80% Financially Included
Active Use of Bank Accounts
Decreasing Gender Divide
Current Scenario
Current Bird Eye View Change Drivers
Government to People Transfer and Direct Benefit Transfer
JAM Trinity Evolved Payment Systems
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Financial Inclusion – Direct Benefit Transfer
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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 2016-17
(Bn USD) Number of
Beneficiaries (Mn)
Food 22 800/180 families
Fertilizer 11 95 famers
MGNREGA 6 110
LPG 2 195
Kerosene 1 Not Available
Rural LPG 0.3 35
NHM 3 0.83 (JSY)
NSAP 1 32.9
Others 24
Food 31%
Fertilizer 15%
MGNREGA 8%
NHM 4%
LPG 4%
NSAP 2%
Kerosene 2%
Rural LPG 0.4%
Others 34%
Government of India budget
As per estimates about 40% to 50% of this subsidy does not reach the intended beneficiaries.
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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
2014 2017
150 million HHs
DBTL with Aadhaar & bank
account
128.70 million
beneficiaries
178 million HHs
195 million HHs
10 million voluntarily gave up
subsidy
US$744 million
annual savings
21.3 million duplicate accounts
eliminated
50 million new
connections
More new connections
22 million connections in 1
year
Jharkhand first state to
implement
Pahal
Ujjwala
Kerosene 8 more states are interested
and experimenting
30 million to be
on boarded by 2019
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
• 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
• Assessed options for moving the kerosene subsidy to DBT (180 million people) and examined behavioural biases affecting peoples decisions
• Assessed the implementation of DBT-kerosene pilot in four districts of Jharkhand
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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
Are there any challenges faced by the you in accessing
subsidy?
4%
96%
Yes No
What do you consider most useful about FPS
automation?
FPS automation prevents diversion of food grains by shop owners
82%
78% FPS automation ensures subsidy reaches the intended customers
5%
95%
Yes No
Would you prefer to shift to any other mode of food
grain distribution?
Key findings
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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
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.
Problem Efforts so far MicroSave’s role
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
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Financial Inclusion – Evolved Payment Infrastructure and Way Forward
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Retail payment infrastructure, developed by NPCI, is providing various options to a variety of segment
UPI
IMPS
BBPS
AEPS
APBS
RuPay
NACH
National Toll Tag
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
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Various components would lead to a digital era with democratised credit to all the segments
Unified Payment Interface
Aadhaar: Bio Metric Digital Identity – 1 billion+
PMJDY: 273 million bank accounts, RuPay cards (214 million), life & accident insurance and overdraft facility
“Democratised” Credit
Cash In/Out
200,000+ Agents
Merchant Transactions
20 million+ (largely informal) merchants Utilities Schools etc.
Mobile Phones (mapped to accounts)
Payments Banks and Small Finance Banks
•LPG •Kerosene •Grains (rice/wheat) •Scholarships •Pensions
G2P ($71 billion pa):
Digital footprint
Locker +
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Annexure
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MicroSave’s recommendations to improve the App experience were around different areas:
Intuitiveness
Navigation
Performance and
Others
Orality Segment: Large illiterate & innumerate population needs better UI to conduct transactions MicroSave’s role
• Study was undertaken to learn about the challenges that ORAL people face in using BHIM application.
• 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.
Key Recommendations
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.
VERIFY
264 million people !!
In 2015, illiteracy segment was 29%
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MicroSave Offices
Delhi Lucknow
Hyderabad Manila
Jakarta
Kampala Nairobi
Port Moresby
MicroSave (India) Head Office: Lucknow Tel: +91-522-2335734 Fax: +91-522-4063773 New Delhi Office: Tel: +91-11-41055537/38 Hyderabad Office: Tel: +91-40-23516140 [email protected]
MicroSave (Kenya Office) Shelter Afrique House, Mamlaka Road, P.O. Box 76436, Yaya 00508, Nairobi, Kenya. Tel: +254-20-2724801/2724806 Fax: +254-20-2720133 Mobile: +254-0733-713380 [email protected]
MicroSave (Uganda Office) Ntinda Ministers Village Plot 27, Valley Drive P.O. Box 29111 Kampala, Uganda. Phone +256-312 202342 Mobile: +256-706 842368 [email protected]
MicroSave (UK Office) The Folly, Watledge Close, Tewkesbury, Gloucestershire GL20 5RJ UK Tel. +44 1684-273729 Mobile +44 796-307 7479 [email protected]
MicroSave (Philippines Office) Unit 402, Manila Luxury Condominiums, Pearl Drive corner Gold Loop, Ortigas Center, Pasig City, Metro Manila, Philippines. Tel: +(632) 477-5740 Mobile: +63-917-597-7789 [email protected]
MicroSave (Indonesia Office) ANZ Tower 23rd Floor, JI. Jend. Sudirman Kav. 33A, Jakarta Pusat 10210, Indonesia. Tel: +62 82122 565594 [email protected]
MicroSave (PNG Office) Corner of Musgrave Street and Champion Parade, Port Moresby, Papua New Guinea. TeleFax No.: +675 321 8823/321 8854 [email protected]
Tewkesbury
Ho Chi Minh
