The three pillars of India’s Digital Public Infrastructure (DPI) – digital ID, digital payments, and consent-based data exchange – are playing a seminal role in expanding access to financial services for even the most remote consumers and businesses who might otherwise be underserved by the traditional financial-services.
On the sidelines of the Global Inclusive Finance Summit 2024, organised in New Delhi, ETGovernment had an interaction with Sophie Sirtaine, Chief Executive Officer, CGAP, World Bank Group. In conversation with Anoop Verma, Editor-News, ETGovernment, Sophie Sirtaine acknowledged the critical role that DPI is playing in expanding access to financial services. She also talked about some gaps that need to be analysed through proper data and addressed.
What follows are the edited excerpts from the conversation between Sophie Sirtaine and Anoop Verma:
What role is CGAP playing in the area of financial inclusion?
CGAP is an international partnership housed in the World Bank Group. The organisation is dedicated to promoting an inclusive financial environment which enables the financially excluded sections of the population to gain access to modern financial systems. More than 35 leading development organisations are part of CGAP. We are being supported by bilateral and multilateral agencies, foundations and development finance institutions. The core focus of CGAP is to serve as an independent platform for exchanging data or knowledge and coordinating the efforts for financial inclusion.
According to the global research done by CGAP, what are the solutions to the issue of some sections of society being excluded from the worldwide financial system?
Our research indicates that the solution lies in data fundamentally. Data driven innovations are going to drive the next wave of financial inclusion in India and in other countries. India has done a marvelous job in building the technological advanced Digital Public Infrastructure (DPI), but the overarching agenda is unfinished because a significant part of the population, particularly the rural women, are not in a position to benefit from the financial system. The benefits of DPI are yet to reach all sections of society. The Government of India has started the Pradhan Mantri Jan-Dhan Yojana to ensure that all individuals and families, including rural women, have their own bank accounts. How do you see the role of this initiative in achieving the vision of financial inclusion?
Pradhan Mantri Jan-Dhan Yojana is a good initiative for financial inclusion. But more work needs to be done to ensure that everyone has a bank account and they are actually in a position to make productive use of their bank accounts. Right now, several bank accounts belonging to the rural women are lying dormant. We need more data to find out why the accounts are dormant. Only through data will we be able to understand the needs of the rural women and create banking products targeted at them.
What will be the source of the data that is required for improving the state of financial inclusion?
The government organizations and the banking sectors have their own traditional sources of data, which can be used. But we can also consider using alternative data, such as digital trails and the transaction data that you do on platforms such as the UPI. Data from these sources can also be used to develop the profile of women in rural areas and provide them with banking facilities such as micro loans for starting small businesses.
To provide loans, a bank would need to know the credit history of a person. How can the data from UPI transactions be used to build credit history?
Many women in the rural areas do not have a credit history. They are not a client of the banking system and they are not borrowers. But they have a digital trail. They transact on UPI and other such systems. Their transactions on UPI can be studied to test the quality and quantity of their cash flows. Based on this data, the banks can make a call on her credit worthiness. If we want to induct the people who continue to be unbanked into the formal banking system then we have to use data from such non-traditional sources.
One of the core mandates of the DPI infrastructure is to enable seamless online access to critical services for every section of the society. How do you see the progress that DPI has made in achieving financial inclusion?
India has put in place a Digital Public Infrastructure that is fantastic. This DPI is now becoming the global standard for online service delivery. But there are still gaps. Not all Indians are able to access the benefits of DPI. There are women in rural areas who still don’t have a digital ID. It is also a fact that women in the rural areas often don’t have access to mobiles and other devices as much as the men do. The connectivity gap has to be bridged. We need to unleash the power of data for empowering and uplifting rural women. There is a need for gender segregated data. If the data is not gender segregated, then the financial institutions cannot develop innovative solutions that cater to the particular needs of the rural women.
In your opinion, how much time will it take to take services to a level where we are reaching out to everyone?
There is no reason that this cannot be done in five to ten years. India has already accomplished the major task of developing the Digital Public Infrastructure, which allows the government and private institutions to serve women in a contact less manner. You can reach women, even those in the rural areas, at a very low cost.
