Champions of Financial Inclusion

Friday, August 20, 2010

Technology ensuring accountability in social programme implementation in india

Today the buzzword that is doing the rounds of circles of legislation, policy and regulation in our country is Accountability. This sudden focus on accountability can best be described as the outcome of two factors (1) the evolution of a relatively active civil society in India and its calls for action against the corruption that has always characterized policies and programs in our country (a program that has been supported significantly by the resurgent Indian media despite its many faults) and (2) international pressure (a) to incorporate good governance into administration in India as a precondition for funding or joint engagements and (b) manifested in the form of the need to present India as a place that is easy to do business in; to attract foreign players, clients and investors who are absolutely critical for our country in today’s Globalized market led economy. Thus in their implementation of massive schemes involving many hundred crores of rupees, covering wide swathes of territory and encompassing millions of people whose lives they are supposed to impact (examples being Social Security Plan, MGNREGS, RSBY, JNNURM etc) governments have been forced to incorporate structures and frameworks to ensure accountability. This does not mean that corruption has come to an end in these schemes. Massive amounts of corruption still continue and huge leakages continue to happen but at least to an extent the civil society critics have been quietened and international organizations and foreign governments are satisfied that the Indian state is serious about tackling corruption and ensuring accountability in governance.

This brings us to the question. If corruption is still going on what has been achieved? If the purpose of these frameworks is only appeasement and to act as pressure valves why focus so much on these frameworks as role models? The answer to this question lies in the fact that though these frameworks; in the ways they were evolved have numerous loopholes that facilitate corruption to go on unhindered, they have acted, in numerous cases, as pedestals for further developments that have significantly gone ahead to ensure transparency and accountability in these programs. Take for example MGNREGA  (Mahatma Gandhi National Rural Employment Guarantee Act) and how it has been implemented in Andhra Pradesh. Despite having a significantly better system of ensuring audits and accountability than other states Andhra Pradesh, often hailed as one of the states where MGNREGA has been implemented best was still hit by a scam involving grassroots level workers for MGNREGA who stole crores of rupees.

The solution the state implemented subsequently was an innovative mix of policy prioritizing accompanied by private involvement. They introduced a smart card based system for MGNREGA wage payments.It is understood that at the heart of any system of accountability lies the process of specifying a set of responsibilities, clearly recording activities of participants, cross verifying information and records and holding concerned individuals accountable if there are breaches in performance. What the smart card technology that has been implemented in Andhra Pradesh has ensured is the facilitation of these very tasks. First of all, the use of smart cards has ensured that every transaction is recorded accurately including the time, place and amount. To begin with, in the earlier system of MGNREGA cross verification and auditing it was extremely time consuming to process the long trail of paper data. It involved meeting a beneficiary and finding out how many days they worked in a particular project and how much money they received.

With the smart card system and the electronic records that are generated during its usage the process of cross verification of data has become much less cumbersome. Not only has the smart card based system of NREGA payments made accurate record keeping possible at multiple points (thereby facilitating cross verification) It has also helped address the problems associated with fake signatures and helped clarify on entitlements of people (as money cannot be transferred without accessing an individual’s card and confirming ownership by matching against biometrics data stored on that card)
Another equally important feature that this system has facilitated is that it has helped remove the control of information from the hands of those who indulge in corruption. It was a trend with the earlier system of payments that to access paper records auditors would have to approach precisely those who fudged them, and naturally they would resist making it difficult to monitor their activities. Officials were more willing to part with their lives than part with their papers. By taking information out of their control, it has been made more difficult for them to resist providing information or doing damage control with records when they sense trouble as records of payments are also available in the hands of the Business Correspondents and banks.

Technology has thus reduced the costs of cross-verification dramatically and significantly altered the terrain of the politics of accountability. In partnership with RTI (Right to Information) which ensures that information is easily, quickly and cheaply accessible to those who wish to ensure accountability; effective inroads are being made to combat corruption and leakage. The ready availability of information; facilitated by technological innovation and partnered implementation; has thus given a ready fillip to civil society’s quest to ensure transparency and accountability in financial aspects of programs and policies in India.

Thursday, August 19, 2010

Technology as a transformative force in financial inclusion

 “what according to you has been the benefit of today’s modern technology”. “What do you use it for”. these are questions that we constantly encounter nowadays in surveys after surveys that seek to identify the perceptions of different age groups on technology and its uses. Think about it and the first thought the hits one is that technology has made faster communication and information exchange possible and hence brought people closer; reducing time and cost of communication and information exchange. When we say so our thoughts are motivated by that which we regularly use; mobile phones and the internet and email ; that have facilitated our communication to be faster and allowed us to exchange data across vast distance at a fraction of the time it used to take earlier. our answers are touched by a  tinge of bias that lies rooted in an understanding of technology as a possession of the privileged and those able to afford it and capable (in terms of possessing education and the technical know how) of using it. even our understandings of the associations between technology and banking and finance is colored  to a large extent by how it has allowed for international trade and commerce; cross country economic information exchange and planning, global stock trading and electronic money transfers of massive amounts between countries etc.
But today when we look around us what we see is something far more expansive; the ability of technology to be not only a plaything of the privileged but also its ability to transform; in combination with innovative ideas and genuine social concern; the lives of millions of people across the world who constitute the very bottom of the development pyramid and who in no way can be called privileged. It is not charity but business with a social conscience that seeks to earn even while transforming the lives of millions of people for the good. Be it the biometric smart card based branchless banking system that is employed by FINO in bringing financial inclusion to the rural poor across the geography of India (which has opened bank accounts for 17 million + bottom of the pyramid customers and linked them to formal financial system) or the mobile banking technology that today has revolutionized the way people do banking in countries like  Kenya, Brazil and South Africa; technology has today made it possible to overcome geographical, social and economic barriers to take banking to people previously unbanked and under-banked and integrate them into formal financial systems. Added to this is the fact that as far as the customer is concerned these technologies are not complicated or difficult to use; despite the immense sophistication and complexity that characterizes the networks and back end processing systems into which the front end customer interfaces and data input devices in these systems are integrated.
Take for example the system being employed by FINO in India which is the Business correspondent model (BC). Important characteristics of this system currently in place include (1) access to the most remotest regions of the country through agents (bandhus) drawn from these communities and regions who go to customers villages with equipment to facilitate branchless banking processes (2) ability to Capture Customer details including biometric  and non biometric details easily (using fingerprint reader, webcam, mobile software interface, computer interface) and facilitate Unique Identification using the equipment in the hands of the Agent that satisfies banking KYC norms(2) ability to provide non-repudiable and user-friendly authentication mechanism that ensure individuals identity during transactions (3) ability to ensure reliable connectivity up to the last mile supported by the ability of the system to operate in online and offline mode (4) ability to offer Financial products tailored for the specific target group and system ability to be adapted to add on other financial and non financial products (5) ability to support the use of innovative User Interfaces and work in harsh rural environmental conditions and (6) Low Capital and Maintenance costs as compared to costs that would be incurred was a bank to set up branches in rural areas.  By virtue of its inherent features this model being employed in India possesses distinct advantages not merely over the brick and mortar model but also over other models being practiced in other countries
Technology provides numerous solutions to bring financial inclusion to the millions of  teaming masses who are outside the formal financial system. But the fact also remains that technology is never and can never be a standalone solution. It needs to be supported by favorable regulatory frameworks that allow flexibility, growth and innovation while also spearheaded by comprehensive understandings of the geographical, social and economic characteristics of the environment in which it is going to be implemented. If these enabling conditions are ensured then financial inclusion for all is not far away.