South Africa, television and radio have been used for the delivery of financial literacy training. One such project, involved the distribution of financial inclusion storylines through a popular soap opera called Scandal!. The program was aimed at enhancing knowledge, attitudes, and behavior for making sound financial decisions, with a focus on debt management. An impact evaluation of the soap opera showed that its audience exhibited content-specific improvement of financial knowledge, a greater affinity for formal borrowing, reduced use of hire-purchase deals, and reduced inclination for gambling (World Bank, 2013).
Early on in the process, it was recognized that the process of financial inclusion would need to be buttressed with demand-side measures in order to gain traction. In this context, financial literacy emerged as a crucial cog-in-the-wheel in promoting universal financial inclusion and ensuring consumer protection.
A two-pronged approach has been adopted in this regard. First, efforts have been directed towards dissemination of simple messages of financial prudence in vernacular languages. To this end, the Reserve Bank website created a link for financial education, containing material in several vernacular languages, messages on financial planning, games on financial education, and a link for accessing the Banking Ombudsman Scheme for customer grievance redressal. In addition, tailored financial literacy content for target groups have been developed that can be used by financial literacy trainers. Second, a National Strategy for Financial Education was enunciated for the medium term. Besides establishing initial contact with adults and educating them on key saving, protection, and investment-related products, it has also been engaging with curriculum-setting bodies to embed such concepts in the school curriculum.
Despite these measures, large sections of the population continue to remain financially excluded. Although these measures resulted in impressive gains in rural outreach and volume of credit, the structure suffered from weak governance. It was ‘quantitatively impressive but qualitatively weak’. The main reason was that, due to the target-driven approach to social banking, these initiatives were not seamlessly integrated into the business strategy of individual banks. Later in the analysis, we take a closer look at certain demand-side considerations.
Cross-Country Experience
Although financial inclusion is a buzzword worldwide, when looked at from a global perspective, India stands out as one of the BRICS economies in which the government has a documented financial inclusion strategy containing specific commitments (Figure 1).
Financial Access and Use
To carefully examine financial inclusion in the BRICS, we look at measures of financial inclusion from two different perspectives. Accordingly, we focus on three main indicators, in line with Demirguc Kunt and Klapper (2013) and Demirguc Kunt et al. (2015). The first and most traditional one is the ownership of account at a financial institution. This measure focuses on financial access; it does not consider whether the account has been used or not. To rectify this shortcoming, we buttress this with two additional measures focusing on use: first, the saving behavior at a formal financial institution and, second, the use of bank credit. The former captures the willingness of savers (asset side of their balance sheet) to save at a formal financial institution relative to alternate forms of savings. The second looks at their liability side and examines their willingness to borrow bank finance. In essence, these measures comprise the basic triad of financial inclusion: a formal account serves as an entry key to the banking industry because it enables the individual to open a savings account and apply for a loan.
Between 2011 and 2017, most of these measures have witnessed a discernible rise (Table 1). To illustrate, 66% of Chinese individuals had a formal finance account in 2011; this increased to nearly 80% by 2014 and has remained at that level since. Only 56% of individuals in Brazil and 54% in South Africa had a formal account in 2011; these increased by nearly 14 percentage points in both countries in 2017.
In terms of use, the picture is much less persuasive. On average, 14% of Indian individuals saved at a financial institution in the past 12 months in 2014, up just 2 percentage points since 2011. By 2017, this had increased to 20%. The figure is however much lower than the global average of 27%.
Figure 1:Geographic distribution of countries with financial inclusion strategy.
Notes: The map is for illustration purposes only. The actual geographical boundaries are not confirmed.
Source: Economist Intelligence Unit, London.
Table 1:Key indicators of financial inclusion for BRICS (Age 15+).
The situation is very much different as regards the use of formal credit. Just around 14% of the individuals in Russia reported having obtained formal credit in 2017, the highest in the sample, with the global average being 11%. In India, only 7% of individuals borrowed from a financial institution in 2017, the lowest among the BRICS.
On the whole, the evidence is consistent with the view that financial access is a necessary but not sufficient condition to ensure financial inclusion.
Mobile Money
When we look at a disaggregated level and especially on mobile money, the picture is even starker and widely uneven across these countries. More specifically, over 80% of individuals in South Africa used ATM for transactions purposes and well over 50% had a debit card (Table 2). In contrast, these figures were substantially smaller for India. In Russia, close to 20% of individuals used mobile phone/internet for transactions; this number is a mere 1% for India. Overall, the evidence highlights the fact that the wide divergence in the use of finance is, to a large extent, the outcome of the low use of mobile technology.
When we look at access to technology for financial inclusion, we find that, as of 2014, there were only nine ATMs per 100,000 adult population in India, against 59 in South Africa, and over 150 in Russia. Similarly, only 2% of individuals aged 15 years and above had made payments through electronic means against approximately 7% in China (Figure 2).
In terms of remittances send by mobile phones, Kenya has a leading position. In 2017, 63% of its adult population had used mobile phones to send money vis-à-vis 1% in India. Similarly, only 1% of the rural population in India had directly received public sector wages into their accounts in the past 1 year, against 8% in Brazil and nearly 11% in Russia (Figure 3).
Table 2:Disaggregated indicators of financial inclusion for BRICS.
Note: *The 2017 Global Findex database defines account ownership as having an individual or jointly owned account either at a financial institution or through a mobile money provider.
Figure 2:Use of technology in financial inclusion.
Barriers to Financial Inclusion
