Digital Inclusion, Social Inclusion, Financial Inclusion

The Inextricable Triumvirate


High-growth-medium-income countries like India are fraught with the challenge of having to reduce the high proportion of poor people in the economy. This challenge is being addressed expeditiously with a sharper focus on ‘financial inclusion’, through major state-lead initiatives such as the Pradhan Mantri Jan Dhan Yojana (PMJDY). Simultaneously, ‘digital inclusion’ is also being achieved through rapid proliferation of information and communications technologies (ICT), specially mobile phones, at affordable cost to overcome the problem of delivering financial services to people physical located in geographies (like remote rural areas) where the providers of financial services do not find it viable to have a physical presence. However, we argue that providing a bank account and digital connectivity is a necessary but not a sufficient condition to achieve a high level of financial inclusion in any country. The third leg of that inextricable triumvirate ‘social inclusion’ is almost always overlooked when aggressively pursuing financial inclusion and digital inclusion goals. The ‘socially excluded’ (i.e. the poor, disadvantages members in any society) are also usually ‘financially excluded’ implying that social inclusion and financial inclusion have a ‘causal’ relationship. We therefore posit that a concerted effort to include the socially excluded in the mainstream will significantly accelerate achieving the goal of full financial inclusion. Using the idea of ‘invisible infrastructure’ postulated by Page and Pande (2018), we propose to undertake a field study covering select districts in India (a) where financial inclusion has been achieved to a large extent and (b) where the financial inclusion outcomes have been dismal and establish that the higher level of social inclusion in the former has indeed been the differentiator. The findings from the study should help identify those ‘social inclusion’ variables that would help expedite financial inclusion in the ‘lagging districts’.

P C Narayan

Professor P.C. Narayan is a Professor at Indian Institute of Management (IIM) Bangalore. His current research interests include financial risk management, issues of solvency and liquidity in banking and financial markets, cross-border capital flows involving emerging markets and financial inclusion including micro-finance.