i nc lu s i ve f i nanc e
3
vulnerabilities. The range of views and positions on the
question of financial inclusion, however, serve to illustrate
both the narrow concerns of certain stakeholders as well
as attempts to address the wider correlates of exclusion.
When we look at international definitions and under-
standing of financial inclusion, the concerns emphasize
creating assets and reducing risks for poor microentrepre-
neurs as also small and medium business. It also focuses
on the financial services providers, mainly the MFIs,
and their growth and sustainability. The Netherlands
Platform for Inclusive Finance
4
thus states that ‘through
what is called
inclusive finance,
people living in poverty
are offered a diverse range of financial instruments to
run their businesses, build assets, stabilise consumption
and shield themselves against risks…. By responding to
the need of the client—offering the right product to the
right client—MFIs broaden their market share, reduce
their own risk and grow responsibly.
Because the need for
access to finance applies not only for micro-entrepreneurs but
also for other market segments, we now speak of inclusive
finance
’ (emphasis added). Similarly, Centre for Financial
Inclusion at Accion (CFIA) provides a generic definition
of financial inclusion whereby ‘everyone who can use
them has access to a range of quality financial services at
affordable prices with convenience, respect, and dignity,
delivered by a range of providers in a stable, competi-
tive market to financially capable clients’. Quality and
access are the double heart of CFIA’s vision.
5
Further,
as noted by an EU publication, financial inclusion can
be expressed as something beyond ‘financial access’
but which is a
win-win deal
for both sides in financial
services delivery.
6
Measures and products designed to reach the unbanked
and the poor have been advocated and consciously imple-
mented for decades in India. Here the discussion on
financial inclusion has centred on definitions, coverage
and implementation strategies for the banking system
as set out by government committee reports, govern-
ment departments and the central bank as part of the
programme of poverty alleviation. A range of institutions
and interventions have been promoted towards delivery
of financial services to the poor ranging from cooperative
models and strategies involving asset creation for iden-
tified poor families to lending to and through SHGs.
Specialized institutions like regional rural banks (RRBs)
have been launched but have largely moved away from
the narrow focus on poverty. It is only more recently, dur-
ing the last decade, that both the term financial inclusion
and certain strategies and channels have been employed
and deployed to revive older ideas of universal coverage
of the population with financial services.
A variety of definitions of financial inclusion and
inclusive finance can be found in various reports, docu-
ments and research publications, each of which appear
to emphasize some aspect or the other. According to
Raghuram Rajan, Governor of the Reserve Bank of India
(RBI), ‘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 protec-
tion so that those who are offered the products can make
appropriate choices. The imperative for financial inclu-
sion is both a moral one as well as one based on economic
efficiency.’
7
This also highlighted the role of competitive
financial markets rather than a major poverty focus—not
dissimilar to western positions on financial inclusion.
8
Elsewhere in RBI documents and publications,
financial inclusion has generally been defined as ‘the
process of ensuring
access to appropriate financial products
and services needed by all sections of the society in
general and
vulnerable groups
such as weaker sections and
low income groups in particular at an
affordable cost
in a
fair and transparent manner
by mainstream institutional
players’.
9
The landmark
Rangarajan Committee Report on
Financial Inclusion
(2008) stated ‘the essence of financial
inclusion is in trying to ensure that
a range of appropriate
financial services is available to every individual and enabling
them to understand and access those services
. Apart from the
regular form of financial intermediation, it may include a
basic no frills banking account for making and receiving
payments, a savings product suited to the pattern of cash
flows of a poor household, money transfer facilities, small
loans and overdrafts for productive, personal and other
purposes, etc.’ (emphasis added).
Finally, even earlier, the then RBI Governor, Y.V.
Reddy, had in his annual policy statement of 2005–06
10
urged banks to review their existing practices to align
them with the objective of financial inclusion, defined
as the process of ensuring access to appropriate financial
products and services needed by ‘all’ sections of the society
in general and vulnerable groups such as ‘weaker sections
