Or as not-for-profit the Consultative Group to Assist the Poor (CGAP) rather succinctly puts it:
The financial system is, in a sense, the nerve system of an economy. It is the platform used for market transactions to occur, the means by which governments distribute benefits, and the mechanism used by citizens to demonstrate their civic responsibilities by payment of taxes and government services. Ensuring the financial system is inclusive is paramount in the process of creating a more inclusive, equal and peaceful society.
On the one hand, opening financial systems up to the poor and marginalised increases the number of opportunities for wider economic participation. For example, if people have access to different forms of finance, they can invest in education and skills, start and grow their own businesses and protect themselves and their families from unforeseen economic events.
On the other, there are established links between financial inclusion and a country’s overall economic and social development, and it also plays a role in reducing extreme poverty. At the very least, state digital payment systems for paying pensions, salaries and welfare benefits reduce opportunities for corruption, while increasing opportunities for transparency and accountability. As a result, CGAP adds:
While more inclusive financial systems alone will not solve the problem of inequality and build inclusive and peaceful societies, it will certainly be an important contributor, and it is hard to imagine progress without it.
Unfortunately though, 200 million people across rural India – out of a total population of 1.2 billion - have little or no access to such financial services, which range from savings accounts and loans to insurance products.
Digital finance in the last mile
This situation persists despite initiatives such as Prime Minister Narenda Modi’s introduction of a ‘People’s Wealth Scheme’ in August 2014. While the move resulted in more than 300 million people opening no-frills bank accounts, the problem was that a widespread lack of financial literacy meant as many as 58% of them remained dormant. The issue was particularly marked among women, where 8% fewer opened up bank accounts in the first place and 14% more lay dormant.
But according to Phrabat Labh, chief executive of the Grameen Foundation India, an international not-for-profit organisation that works to empower the poor to end poverty and hunger, a key issue is that women are generally considered to be better money managers than men. They are also more likely to invest it in items or activities that benefit the household such as education or home improvements.
As a result, a major focus of the charity over the last three years has been to “take digital finance the last mile to the community, so using digital technology to help include them”. He explains:
A lot of the traditional ways of accessing financial services are unavailable or unreachable for many communities. But even if they were there, people are often reluctant to use them due to a lack of awareness or trust that comes from a lack of experience with financial institutions. There’s a perception that banks and micro-finance are for the rich who have salaries, but most are working in the informal sector and have low levels of literacy.
Last year, meanwhile, the Foundation won Indian IT and business process outsourcing association Nasscom’s Social Innovation Forum Challenge for its work on training female micro-finance borrowers in rural areas on how to use digital payment channels to repay their micro-loans. The award, which included complementary advisory services from Accenture Labs, has now resulted in the development of two new applications that are intended to boost financial inclusion still further, particularly among women.
The first was named ‘Emotional Analytics for Social Enterprises’ (EASE) and builds on the Foundation’s work in training frontline representatives of microfinance organisations in small towns and villages to use digital systems, including its own Grameen Learning Program (G-LEAP), on which EASE runs.
By analysing video and audio input obtained from customers, the Artificial Intelligence (AI)-based online and mobile application enables microfinance advisors to get a handle on their emotions and state of mind.
AI and chatbots
For example, because women are generally considered more effective custodians of micro-finance then men, they are more likely to receive a loan, despite the traditional, male-dominated nature of the environment in which they live. But the problem with this situation is that they may find themselves subject to pressure from their husbands to apply for money, whether they want to do so or not.
If frontline loan officers use EASE, however, one-minute samples of a customer’s voice or body language (via video) are analysed and the results displayed in a mixture of text and emojis, enabling them to ask suitable follow-up questions in order to probe deeper.
The application has already been taken up by one job placement company that helps young people to find jobs, but the Foundation is also talking to other organizations too.
The second smartphone-based app, meanwhile, is called ‘Grameen Guru’. It uses a chatbot and Augmented Reality to help non-literate customers understand written material.
According to Sanjay Podder, managing director of Accenture Labs India, users simply hold their phone over a given brochure, a Guru pops up and tells them what it says in a choice of Hindi, Marathi and English. Customers can also interact with the Guru and ask it questions.
The app has already been rolled out in two pilot projects, one in Maharashtra and the other in Odisha, where a total of 800 frontline workers are catering to the needs of 300,000 local people. While there is currently only 25% smartphone penetration in rural India and 10% of villages have no mobile network, Grameen’s Labh points out that the “overall addressable market is still huge” and will only get bigger over time.
As a result, future aims include licensing the technology to third parties to broaden its reach, and also focusing on new content areas such as health and nutrition and employment.
The secret to creating useful technology is knowing your market and where its challenges lie – and the Grameen Foundation appears to have got it spot on with its use of digital technology to try and solve the often intractable problems faced by people in deprived, rural communities.