Financial Inclusion

Financial inclusion or inclusive financing is the delivery of financial services, at affordable costs, to sections of disadvantaged and low income segments of society

Financial Inclusion in INDIA

Among 100 countries, India has been ranked 50

34% of Indian individuals have access to banking services compared to world average of 41% RBI and GoI has taken innovative steps RBI has simplified the KYC (Know your customer) norms for opening a No frill account Micro finance is another tool which links low income groups to the banks Banks are now permitted to utilize the service of NGOs, SHGs as intermediaries in providing financial and banking services through the use of business facilitator and business correspondent model

Controversies

Aggressive microcredit policies introduced without the appropriate regulations oversight

Consumers becoming quickly over-indebted to the point of

committing suicide
Lending institutions saw repayment rates collapse after politicians This crisis has often been compared to the mortgage lending crisis

in the US
The Indian crisis can be taken as an example of the importance of

having the appropriate regulatory and educational policy framework in place

Type Industry Successor Founded Founder Headquarters India Revenue

Private/Community owned Textiles, Home furnishings, handloom apparel William Bissell 1960 John Bissell New Delhi, $65 million

 Products of Fabindia are mainly sourced from villages helping to

provide and sustain rural employment in India Currently produced by over 40,000 artisans and craftspeople across India Hand-crafted products also encourage good craftsmanship Issues in sourcing the products from far flanged thousands of artisans Unconventional approach Fabindia sources its product from across India through 17 community-owned-companies; a certain percentage of the shares of which are held by artisans and craft persons

 The artisansthere are 40,000 of them todaybecame

shareholders in their respective companies They bought their shares at Rs 100 a piece About 16,000 artisansmore than half of Fabindias supplier basehave bought shares in their community companies Its one thing to have artisans as shareholders and quite another to determine the value of their shares
% share
15 10 49 26 Artisans AMFPL Fabindia employees external investors

Sucess stories
In three years, Raj Kishore, an artisan from, 30 km off

Jaipur, has come a long way since producing sheet after sheet of block prints for a living Proud owner of 5,000 shares in DAH, the Jaipur-based community-owned company promoted by Fabindia Investment appreciated five-fold the shares are currently valued at Rs 26.75 lakh, bought at Rs 5 lakh at Rs 100 a piece Already recovered a substantial part yearly dividends received Rs 1.5 lakh last year for three consecutive years "This small company has given us a reason to think beyond our simple vocation," says Kishore. A whole new world of higher earnings through dividends and capital appreciation is opening up for him

Yunus and the Grameen Bank

Yunus: Economist trained in the US and teaching at Chittagong University ( southeast Bangladesh) 1976: Yunus started a series of experiments lending to poor households in nearby Jobra

Activities financed: rice husking, bamboo weaving

Financing out of his own pocket could not meet growing demand Yunus convinced the Bangladesh Central Bank to help him set up a special branch that catered the poor of Jobra

Objectives
Finding: poor borrowers without collateral making profits and repaying Eliminate the exploitation of the poor by money lenders Create opportunities for self-employment for the vast multitude of

unemployed people in rural Bangladesh

It is based on "trust", not on legal procedures and system
reverse the age-old vicious circle:

low income, low saving & low investment Into virtuous circle of "low income, injection of credit, investment, more income, more savings, more investment, more income"

Controversies
Banks to retire their CEOs at 60, and Yunus, now 71, wants to retain

control of Grameen, claiming it will collapse without him

Bangladesh government removed Yunus from the bank, a move he

has battled without success all the way to the Supreme Court Other issues
1.

Grameen Bank charges between 24 to 36 per cent and levies service charges An utterly odd situation when a Norwegian television documentary accused him of diverting huge aid funds to a business concern Norwegian Firm defended him

2.

 Allegations of hidden political agenda, He floated a political

party but later dismantled it due to a lack of support

World Bank president, James Wolfensohn and Secretary of

State Hilary Clinton intervened to back him

But the West's support to him is so loud that, it appears, even if

the final court verdict goes against him, a negotiated settlement may be found so that the Nobel Laureate's image and his contribution to the institution are well protected, and the independence and smooth functioning of the Grameen Bank remains undisturbed