Last-mile Challenges Hold Up Inclusive Growth

January 2021


The uncertainty of the past year continues, even as vaccines have already begun rolling out. The global economy remains under a cloud as the UK, Europe and now Japan come under severe restrictions once again. Yet, India has pulled through and recovery is well on its way, with some fluctuations in high-frequency indicators - GST collections were at an all-time high in December, a record food-grain output is expected from the rabi season, the manufacturing sector held up while services eased slightly, auto sales continue strong growth, growth in power consumption was robust with an all-time high in peak power demand. The labour market remains complex - CMIE reports a six-month high unemployment rate as labour participation has increased but jobs are still scarce, the scenario is better in urban areas than rural. The supply of jobs for NREGA works is also lagging behind demand, and the government will be hard-pressed to budget more this year. 


Over the past year, the DBT architecture laid out through the JAM trinity has been working quite successfully to payout transfers. PMJDY data shows that the government stimulus seems to have paid off in some part to alleviate the pain during the lockdown - Anand Raman has graphed the average balance in accounts peaking in May, noting that over the year around 40 million new accounts were added, and the average balance has increased by nearly Rs 200 over last year. Of course, there are still many problems to be fixed at the last mile like internet connectivity and stability, identification of beneficiaries. Mukesh Sadana has looked at data on transaction failures on UPI and interestingly, though connectivity is an issue, technical declines do not form the majority of failed transactions. What needs greater attention is “business declines” i.e. a customer entering an invalid pin, incorrect beneficiary account etc., calling for better customer awareness and support. Read more about the last mile challenges that induce exclusion in this report by Rajendran Narayanan and Sakina Dhorajiwala.   

CGAP has an excellent Focus Note out on agent networks, and in its five-country analysis, India’s journey has been showcased as G2P-led, through public sector banks. There are six recommendations made in the note for policymakers, including providing a more diverse service offering, beyond CICO, that meets rural customer needs, particularly women. There can be a business case made out through tie-ups with private entities in India - e.g. EKO Financial Services is growing business through a new model using open APIs.  

Digital payments are soaring on the UPI platform. Read detailed analysis of digital payments trends through this year. The RBI has initiated a Digital Payments Index, to be released on a semi-annual basis. This is a good move to track progress on five different parameters - Payment Enablers, Payment Infrastructure – Demand-side factors, Payment Infrastructure – Supply-side factors, Payment Performance and Consumer Centricity. At the same time, the RBI has operationalised the Payments Infrastructure Development Fund (PIDF) Scheme, Rs 350 crore subsidy to add 30 lakh touch points every year in smaller towns across the country. A laudatory scheme, the guidelines appear to be a trifle bureaucratic. From Indicus, we cannot help feeling that more relaxed compliance requirements are possible with enhanced digital supervision from the RBI, which will go down better in today’s fast-moving innovative fintech world. Read Rajesh Bansal on the need to scale up RBI’s supervisory capacity by developing an integrated supervision platform (ISP) with automated near real-time reporting by the regulated entities and using Big Data Analytics.


Some Other Highlights

•    WhatsApp focuses on financial inclusion, rolls out micro-pension & micro-insurance pilots in India
•    The challenges at the last mile for financial inclusion remain overwhelming, despite all the progress in the Business Correspondent network over the past five years. CGAP has put together an  excellent overview of the growth and status of the Business Correspondent network in India.
•     The National Family Health Survey 2019-20 results are out for 22 states, Pallavi Nahata put together the data in charts for The Best And The Worst States For Women Financial Empowerment. 
•    Do read the blog post by Catherine Highet, Arisha Salman, Nisha Singh of CGAP on why the digital gender gap will not close by itself.
•    Shri Shaktikanta Das, Governor, Reserve Bank of India, gave an address on the National Strategy on Financial Education 2020-25 on December 16, 2020
•    Six innovative payments solutions to look forward to through RBI’s regulatory sandbox.
•    lack of gender-disaggregated data in India, that hampers effective inclusion. 
•    Fintech industry accelerates financial inclusion, to push faster digital adoption.

Editor: The Indicus Centre for Financial Inclusion was launched in 2011 to distil and disseminate information on accelerating the poor’s access to high-quality financial services. ©Indicus Centre for Financial Inclusion. All rights reserved. 4thJanuary 2019

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