Regulation in Financial Inclusion has two aspects one is about “laying the right rule” the other is “supervision” that it does not leads to downfall. While many policymakers in underdeveloped and developing nations provide a sturdy base with legalities and processes, some developed and developing nations need supervision that they are not misused.
What the history and experts tell…
As dictated by policymakers and research reports, Financial Inclusion is a way to lessen poverty and enhance the collective prosperity of society. With access to banking services, communities experience an inclusive growth with improved source of income and promotion of economic growth. However, the measures need to be BALANCED, or otherwise, geographies may face a crisis as happened in the US [sub-prime crisis] in 2007 and India[microfinance crisis] in 2010. Both of these situations had one thing common, the overextension of loans to non-credit-worthy borrowers and relaxation in underwriting standards leading to instability.
So, even though financial institutions were able to report high profitability for years through rapid growth in loans, it led to significant indebtedness among non-credit-worthy borrowers contributing to financial instability and social discontent. Hence, while policymakers are keen to empower inclusion, the regulation needs to be in place to avoid uncertainty.
On the other hand, in 2015, Bill and Melinda Gates in their annual letter cited regulation as one of the major barriers to implement Digital Banking, one of the “key” in enabling inclusion. The letter quoted –
“There is a lot of work ahead to get regulators in developing countries to update their financial regulations. If the regulations limit digital banking, as is still the case in most countries, innovators can’t enter.”
How Can Regulation enable Financial Inclusion?
Short answer – striking balance.
Long answer, the solution could be divided into three categories –
At the end, its all about striking the perfect balance amongst the protocols and convenience. And, Teknospire could assist you with that.
If you a Bank or NBFC looking to use technology and innovation in expanding the business and enable social inclusion, we are here for you.
Teknospire a fintech firm offers Bank-in-a-box solution with omnichannel, agent/digital branches capability. The 360-degree banking solution reduces the CAPEX for a bank to set up a physical branch, but yet opens doors to expand their business. Our Digital Banking, Mobile Banking, and Agent Banking solution could help regional banks and cooperative banks to push Financial Inclusion further. For details, please contact us here
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