A recipe for deepening financial inclusion

Early this week the second annual economists' conference  of the South Asian Network on Economic Modelling (Sanem) devoted a session exclusively  to IT and     Financial Inclusion. The central  concern and purpose   of  financial inclusion is to provide  unbanked population with an efficient and affordable access to financial services. How IT and digitalisation can be  harnessed to the task  also came under discussion.
It makes a  tremendous economic sense to   reach out to financially excluded  for three  major reasons: First,  they are too  large a  mass of people  engaged in the informal or unorganised sectors to be excluded from the pale of  financial services.   Secondly, their small earnings make a big total; and last but not least, they not only need reliable channels for monetary transactions but also account for a sizable quantum of  financial dealings put together.
Analysts expressed  disappointment over  banks being caught in a scramble to wean away  big business clients ignoring efforts to deepen financial inclusion. Salehuddin Ahmed, a former governor of Bangladesh Bank, faulted  banks for not having offered 'any new or attractive product for the marginal people'. He was quoted as saying, "There were 47 banks, now there are  56; and 10 more are  to come. They  will  do more of the same-will go to those who have money." It is kind of stating the obvious that regulatory fetters would have to be removed or relaxed to enable the banks to expand their financial reach to the marginal people. Neither 'overregulation nor no regulation' on the part of Bangladesh Bank  holds the answer; rather a balanced mix of policies would be effective.
However, if an enabling environment is created, the banks may refrain from 'Carrying coals to Newcastle', as an old maxim goes. 
Mobile Financial Services (MFS) offer a  potentially good option for financial inclusion. BKash model can be replicated, an expert says arguing that it is not a bank  and  the mobile operators have a role as well. Critics however, tend to point to hefty charges at 1.85 per cent realised by mobile service providers. The CEO of BKash has given a breakdown of TK1.85 per Tk 100 as follows: 77 per cent goes to agent, 7.0 per cent to mobile operator and 16 per cent to BKash. Adding that the previous agent's  commission at 85 per cent has been reduced to 77 per cent, BKash chief argues a further lowering of the commission may be counterproductive placing the system in jeopardy.
BKash says only 2.0 per cent of their 20.69 billion (2.69 crore) worth of accounts have regular banking accounts which underlines the need for deepening financial inclusion.
Countries that are regarded as successful in MFS operate a hybrid model where banks, mobile operators and other stakeholders can participate in providing the services.
There is ample scope for MFS to expand because around 70 per cent of the government-to-government payment goes through the digital channel. A third of public-to-government transactions is conducted  digitally. But for person-to-person transactions, only 3.0 per cent having adopted  a digital model, there's a scope for growth, to be sure.
Anir Chowdhury, policy adviser of Access to Information  Project under the Prime Minister's Office,  identifies  a major challenge in   interoperability in MFS: One operator's wallet holder  cannot send money to another operator's wallet. Therefore, work is going on to introduce interoperability and ensure security in digital transactions.
The other challenges of costs, quality, security and financial literacy will have to be met in order for financial inclusion to acquire depth and dimension as  an engine of growth.
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