From Social Banking to Financial Inclusion: Understanding the Potential for Financial Services Innovation in India

This study chronicles the evolution of India's financial landscape and features months of intensive research, data collection across 146 financial products, and interviews with almost 30 of India's leading financial institutions. The country's extensive web of financial service providers as well as the incidence of large-scale exclusion are contradictory features that make it a market worth examining. The report highlights innovative efforts by the Indian government and private sector to provide poor citizens access to financial services. It also offers insights into why these efforts are not actually encouraging more people to formally save. The report states that more can be done for the majority of adults across India who do not have access to formal financial services, and calls for a fundamental shift in thinking that focuses the sector more on better understanding the value in banking the poor. Recommendations include:

• Financial inclusion efforts must focus on moving beyond simple financial access to developing products that, according to market research, meet the particular demands of the poor;
• Government of India should develop policies that incentivize business correspondents to promote and market No Frills Accounts;
• Financial institutions must leverage linkages to government-to-person payments (MNREGA), biometric identification programs (UIDAI), and growing mobile phone networks.