i nc lu s i ve f i nanc e i nd i a re port 2014
4
and low income groups’ in particular at an ‘affordable
cost’ in a ‘fair and transparent manner’ by mainstream
institutional players.
It will be seen that each of these statements emphasizes
some different aspect of the financial inclusion discourse
and process. While one directly addresses weaker sections,
another emphasizes values like affordability, transparency
and appropriateness. Yet another emphasizes access to all
individuals as also the need to enable them to understand
these financial services. It also emphasizes the need for
a suite of products to cover various needs of the poor
households. As the different nuances of the international
and Indian understanding suggest, financial inclusion
as a project can be viewed from many perspectives by
many stakeholders with different expectations regarding
its scope and outcomes.
1.2 REAL FINANCIAL INCLUSION
Ranged across the mainstream players and agenda are a
set of stakeholders that emphasize the needs of the work-
ing poor and the scope of ‘real’ financial inclusion. An
exhaustive list of such needs is provided by Samit Ghosh
who states that real financial inclusion is about providing
a comprehensive set of services which meet the total needs
of the working poor. Their financial needs are basic—‘a
safe place to save, credit for business, farming, animal
husbandry, emergencies, education, family needs and
housing, remit funds to support families and business,
life & medical insurance for protection against frequent
exigencies they face and pension to support them at
old age’.
11
Given the many differing perspectives, the question
arises as to what is
real
financial inclusion whether finan-
cial access is a sufficient condition for financial inclu-
sion. There is general agreement that financial inclusion
should also pertain to the
use
of financial services, not
merely the
access
to financial services.
12
In this context, it
becomes necessary to distinguish between the
supply side
represented by institutional initiatives and the
demand
side
as projected by people’s needs and capacities.
At another level, it is also important to appreciate that
financial inclusion is
not a binary condition
with people
either included or excluded from the financial sector
but is a continuum represented by the extent to which
needs are covered by mainstream service providers with
the financially excluded having limited or no access to or
ability to use financial services. Both supply and demand
determine financial exclusion, with low financial literacy
and distrust of the formal banking system constituting
barriers on the demand side. Financial education thus
is seen as critical to advancing financial inclusion and
consumer protection.
13
Indeed, banks in India have taken
up the establishment of financial literacy and counselling
centres in a big way.
Some observers state that real financial inclusion
should involve viable business models for reaching low-
income households in a sustainable way. Real financial
inclusion thus pertains also to the capabilities of clients
to make informed financial choices towards their devel-
opment and should be seen as a long-term process, not
a short-term objective. Financial behaviour is not only
defined by access to finance but is significantly shaped
by an individual’s environment and personal attributes.
Human capital, including knowledge, skills and attitudes
as well as physical, cultural and economic properties such
as health, social status and assets, define whether a person
is willing and able to take financial decisions that are ben-
eficial to him/her. In reality people do not always choose
the financial services which might have been the best
for them. The Financial Capability approach provided
by Bickel and Mehwald (2014) integrates these aspects
and works as an add-on to existing financial inclusion
concepts.
14
In order to apply this thinking, stakeholders
(government, financial service providers, and develop-
ment agencies) need to start focussing on the quality and
impact of financial services along with the quantity and
number of accounts, clients, etc.
In this context it is also pertinent to note that although
financial inclusion initiatives are targeted towards the
general population (including women), most initiatives
are introduced without comprehensive understand-
ing about women’s socio-economic conditions, intra-
household bargaining position, and restrictions on
mobility. Highlighting the above, Deepti and Tiwari
(2014) argue that providers must also acknowledge the
legal, social and cultural contexts that limit women’s
access to financial services. For financial inclusion to
have the desired impact, policymakers must consider the
social, cultural and economic constraints women face
when accessing financial products and services. They must
identify strategies such as division of money for personal
