India may benefit from financial access initiative

In this October 10, 2013 photo, World Bank president Jim Yong Kim speaks at a news conference during the World Bank/IMF annual meetings at the IMF headquarters in Washington.

AP In this October 10, 2013 photo, World Bank president Jim Yong Kim speaks at a news conference during the World Bank/IMF annual meetings at the IMF headquarters in Washington.

World Bank chief Jim Yong Kim has said that achieving universal access to financial services was “within reach thanks to new technologies, transformative business models and ambitious reforms”

Among the flurry of events conducted alongside the annual World Bank-International Monetary Fund meetings in Washington this month, one initiative held out the direct promise of a major boost to poverty alleviation efforts in India — a new multilateral effort for achieving universal financial access by 2020.

Speaking in a dialogue with Queen Máxima of the Netherlands, who is the United Nations Secretary-General’s special advocate for inclusive finance for development, World Bank chief Jim Yong Kim said that more than 50 countries had made commitments to financial inclusion targets and “If they fulfill their commitments, if other countries also set bold targets, and if the private sector responds by unleashing its resources and know-how — then we can reach universal access by 2020.”

The Bank — and International Finance Corporation-led effort — is based on the recognition that 2.5 billion adults worldwide are “unbanked” and that close to 200 million micro-to-medium enterprises in developing economies lack access to affordable financial services and credit, leaders at the event noted.

Less than a year ago a report on financial access of the poor in India, authored by the New America Foundation think-tank, found that despite the Indian government’s “ambitious attempts in recent years to provide financial services to its poorest citizens” the desired effect had not been achieved with “65 per cent of adults excluded from the formal financial sector.”

At the time NAF’s Jamie Zimmerman, who worked on the report, said, “Research shows low-income Indians can and do want to save; but government efforts aiming to make it easier for them to do so in a formal way have not yet made it compelling.”

On the goal of universal access to financial services Mr. Kim said this month that it was “within reach thanks to new technologies, transformative business models and ambitious reforms,” adding that by as early as 2020 instruments as e-money accounts, debit cards and low-cost regular bank accounts could significantly increase financial access for those who are now excluded.

Recognising that 650 million people still lack sufficient access to financial services in India the Reserve Bank of India introduced a regulation in 2006 allowing banks to use the services of third-party, non-bank agents to extend their services right to people’s doorsteps, the multilateral Consultative Group to Assist the Poor recently noted.

Although since then the number of “brick and mortar bank branches” has risen to over 99,000 and the number of ATMs to over 95,686, IMF figures suggest that there are still only 11.38 commercial bank branches 11.21 ATMs per 100,000 adults. In the U.S., for example there are 35.26 commercial bank branches per 100,000 adults according to IMF statistics.