This month's newsletter brings highlights from the recently released Global Findex Database 2014; the report shows a huge drop in the number of unbanked over the past three years, with mobile money accounts making a significant difference in Sub-Saharan Africa. India shows some improvement in financial inclusion metrics since the last report in 2011; though the phenomenal success of the Pradhan Mantri Jan Dhan Yojana in opening accounts has not been captured in this database, a lot more needs to be done to increase account activity.
Account penetration in India has increased from 35.2% in 2011 to 52.8% in 2014 and debit cards penetration has also risen from 8.4% to 22.1%.
Only 10.4% of the people reported using their debit cards for payments in 2014, while the share of people using ATMs as the main mode of cash withdrawal rose from 18.4% in 2011 to 33.1% in 2014.
The percentage of Indian adults who have saved at a financial institution has gone up from 11.6% in 2011 to 14.4% in 2014.
However, the percentage who reported taking credit from a financial institution has fallen from 7.7% in 2011 to 6.4% in 2014.
Kabir Kumar of CGAP has summarized India's position in a blog post, "From More Accounts to More Accounts Activity in India", noting that many of the positive efforts taken by policy makers in the past few months are likely to show a better picture for India in both accounts and account use in the next Findex report.
Despite growth in penetration, India has both the lowest account penetration and lowest use of account for payments among all BRIC countries. Just 15% of adults report using an account to make or receive payments, compared to about 40% for Brazil and China and over 50% for Russia and South Africa
India has one of the highest dormancy rates at 43%, accounting for about 195 million of the 460 million adults with a dormant account in the world. This contributes to a high dormancy rate in South Asia as a whole which has double the average dormancy rate across all other development regions and eight times the dormancy rates in high-income OECD economies.
He concludes that for effective financial inclusion, the government and banks must go all out in ensuring that the newly opened accounts are used now.
Leora Klapper, lead economist at the World Bank and an author of the Findex report, highlights the fact that access to accounts contributes significantly to empowerment. The New Yorker reports her experiences, emphasising the powerful impact of access to savings accounts on women. Women in India would relate to the stories from Bangladesh and Ghana where bank accounts and digital payments have given women control over their own money. As Klapper notes, it is important to understand the existing barriers and design appropriate products e.g. local retail outlets like mobile phone agents can offer financial services at low fees at the doorstep, meeting the needs of poor women.
Section I: Policy – the latest from India's policymakers
Differentiated Banks: Design Challenges
Shri R. Gandhi, Deputy Governor, RBI, April 18, 2015
Musings of a Departing Forex Market Regulator
Shri. G Padmanabhan, Executive Director, RBI, April 3, 2015
RBI celebrates its 80th Anniversary
Dr. Raghuram G. Rajan, Governor, RBI, April 2, 2015
Snapshot of PMJDY progress
PMJDY bank-wise progress as of 31st March 2015
Jan Suraksha Schemes
Priority Sector Lending-Targets and Classification
Section II: News and Views Digest – the latest from India and abroad
A bank account for all
Financial inclusion: TRAI chief Khullar bats for telcos
The inclusion project
Financial Inclusion: How Banking Is Coming to India's Countryside
Digital financial inclusion in India – taking off in 2015
India Plan Means Extra Costs for Banks
Jan Dhan – easier said than done
On the ground, Prime Minister's Jan Dhan scheme is still a painful affair for bank staff
India's Push for Banks for All Leaves Some Still Outside
How you can help domestic workers achieve financial inclusion
India accounts about a fifth of the global population without bank accounts
Aadhaar world's largest biometric ID system
In 5-10 years, all shopping will be via mobiles: Daniel Schulman
Differentiated banking is key to financial inclusion, says RBI's Gandhi
The 'Ripple' Effect: Why an Open Payments Infrastructure Matters
Microinsurance: Disrupt, Fail, Repeat?
Unlocking Access to Critical Services Through Digital Payments
Empower the Customer to Choose and Use Financial Services
EasyPaisa: Incentivizing Mobile Wallet Usage in Pakistan
Digital Credit: Consumer Protection for M-Shwari and M-Pawa Users
The Complex Smallholder-Arthi Relationship in Pakistan
Global Findex: Income Gap Persists Amid Rising Account Ownership
Picking Winners in the Great Remittance Disruption
The Second Coming of M-Shwari: Beyond Early Adopters
Geography Matters When Talking about Smallholders
Why M-Shwari Works
Smallholder Households: A Financial Inclusion Imperative
Section III: Research – surveys and studies on expanding access to financial services
Enabling Customer Empowerment: Choice, Use, and Voice
Antonique Koning and Monique Cohen, CGAP, April 28, 2015
Early Insights from Financial Diaries of Smallholder Households
Jamie Anderson and Wajiha Ahmed, CGAP, April 3, 2015
How M-Shwari Works: The Story So Far
Tamara Cook and Claudia McKay, CGAP, April 2, 2015
Digital Financial Inclusion: Agenda for India
Policy Brief January 2015
Global Lessons on Partnerships for Financial Inclusion
Policy Brief January 2015
Implementing the Pradhan Mantri Jan-Dhan Yojna
Policy Brief November, 2014
In the media
S V Divvaakar: Pay for financial inclusion
Business Standard, 29 April 2015
Probir Roy & Sumita Kale:Is big always best?
Business Standard, 19 February 2015
Do we need banks for financial inclusion?
Domain-b.com, 17 October 2014
Payments Banks and Partnerships
A short note on Bharat Bill Payment System: Guest Post by Probir Roy
Two Challenges To Help Two Billion Reach Financial Security: Co-authors: Kosta Peric, Jake Kendall
PMJDY: Three questions
PMJDY: Assessing the quality of agents
PMJDY surpasses target before deadline