SE-RABM-02:

ICT for Agricultural Management

Session 7 &8
Prof D V Deshpande
dvdesh@gmail.com
(M) 9919225539
Coverage in topic 3- ICT For Financial Inclusion
(2 sessions)- Session 7& 8
• Types of Financial Inclusion ICT Services
• Transfer and payments
• Agricultural credit
• Savings for agricultural needs
• Insurance
• Common ICT Platforms for financial inclusion services
• Issues and challenges for ICT in financial inclusion service
• Advantages of and opportunities for ICT in financial inclusion services
3 types of ICT interventions covered in this
course
1. ICT For Production systems management
2. ICT for market access
3. ICT for financial inclusion
Financial Inclusion Definition
• Dr C Rangarajan, Chairman, The Committee on Financial Inclusion
(2008) defined Financial inclusion:
• “Financial Inclusion may be defined as the process of
ensuring access to financial services and timely and
adequate credit where needed by vulnerable groups
such as weaker sections and low income groups at an
affordable cost”

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Meaning and importance of financial
inclusion
• Poor people suffer due to lack of access to mainstream , safe and
transparent financial system like banks & post office
• Poor are exploited by money lenders & other entities due to lack of
awareness and apprehensions
• Many farmers & other people commit suicide due to financial
problems
• Without Financial Inclusion – Inclusive growth not possible
Objectives of Financial Inclusion
• Empower the poor, weak, women, farmers, SC/ST
• Banking the unbanked
• Reaching the unreached
• Getting out of clutches of money lenders
• Financial inclusion integral part of “Inclusive
development”
• Last mile connectivity
• Financial Inclusion--- Livelihood connection

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Financial Inclusion covers

Savings

Insurance
Financial & social
Advice security
FINANCIAL
INCLUSION

Credit Payment &

Remittance

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 How ICT Helps in financial inclusion through
Financial Service Providers (Like Banks, Post
Office, Life insurance Co., etc.)
1. Extend their reach into remote areas, by
eliminating the need for full service branches,
which also reduces costs
2. Improving access to financial services by
putting more direct control into the hands of
local operators/agents or the customers
themselves
Financial service : 1Transfers and payments
• Transfers/ remittances:-
• The most recognized and successful solutions in the provision of financial
services to rural areas are those offering payments and transfers
• The most widely known example, M-PESA (M= mobile & PESA = money in
Swahili Language of Africa) in Kenya is a service enabling people living in cities
to send money (money transfers) to their families in villages in an easy,
trustworthy and low-cost way
• M-PESA (M= mobile & PESA = money in Swahili Language of Africa)
• The individuals at each end of these transactions use their own mobile phone
for processing the transfers and visit the local shop for depositing and
withdrawing the cash
• The service is typically called a direct person-to-person (P2P) service
• For long time it was not allowed in India but later allowed
Process of M-PESA
3 MIN FILM: M-PESA Mobile Money.mp4

Depositor
goes to
Cash is deposited
agent & in “Wallet” Depositor can
deposits Money kept in an transfer or
withdraw cash
account by
cash Phone co. from agent
Safaricom
Mobile no is
account no.
Indian initiatives on ICT in Financial Inclusion
• Allowing a variety of banks –
• “Universal banks” like Commercial banks, cooperative banks
• Regional Rural Banks
• Cooperative banks – rural and urban
• Small Finance Banks
• Payment Banks
• Expansion of banks- branch opening policy liberalised and huge no of
branches opened in rural areas
• Banking system- CBS – Core banking system – most important base-
allowing inter branch and interbank transfer through NPCI (National
Payment Corporation of India)
• Liberalising KYC rules for account opening
Alternate delivery channels
• Technology driven models- NPCI – National Payments Corporation of
India
• Inter-operability
• Adhar enabled Payment System (AEPS)
• ATMs- the number has now touched 2.55 lakh (2022)- around 6000 of
cooperative banks – both urban & rural
• Business correspondent (BC) using laptop or micro ATM
• Corporate BC
• Self Help Group (SHG) as BC- Bank sakhi BC of aryavart gramin bank 2016.mp4
• Bank Sakhi/ Bank Mitra
• Internet banking
• Mobile banking- BHIM App

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Models related to savings
• PMJDY: (Pradhan Mantri Jan Dhan Yojana) – 44 crore
accounts – Rs 1,50,000 crore deposits (2022)
• World’s biggest programme for bank account opening
• BSBDA- Basic Savings Bank Deposit ccount- basic
account with minimum balance
• Conducted in campaign mode & Mission mode

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Insurance/social security
• 1. Sukanya Samriddhi Yojana- ‘Beti Bachao Beti Padhao’
• 2. National Pension Scheme- additional tax benefit up to Rs 50000/-
• Atal Pension Yojana- for poor – pension starts at 60
• Pradhan Mantri Jeevan Jyoti Bima Yojana- For premium of Rs 330
insurance of Rs 2 lakh
• Pradhan Mantri Suraksha Bima Yojana (PMSBY)- accidental death
insurance of Rs 2 lakh for SB a/c holders for premium of Rs 12 per
year

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Credit related models/ initiatives
• KCC- Kisan Credit Card- (started 1996) cumulative 7 crore issued
• Rupay Kisan Card
• Crop Insurance
• SHGs- Self Help Groups- now 85 lakh SHGs with 10 crore households connected
• JLGs- Joint Liability Group- 25 lakh
• GCC- General Credit Card- 36.3 lakh issued
• MUDRA bank- Micro Units Development Refinance Agency (started 2015)-
• Shishu- upto loan of Rs 50000
• Kishore- upto loan of Rs 50k to 5 lakh
• Tarun- upto loan of Rs 5 lakh to 10 lakh
• Stand Up India (started 2016)– for loan of Rs 10 lakh to 1 cr for SC/ST/Women

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WEBSITE OF PSB LOAN IN 59 MINUTES (1 HOUR) https://www.psbloansin59minutes.com/hom
Credit
Financial services - Payments:
• DBT- Direct Benefit Transfer – Government transfers
payments Rs 2000 per farmer or subsidies- LPG subsidy
(Govt to Person – G2P)
• MSP- Minimum Support Price – payment for purchase of
food grains
• Business-to-person (B2P) – traders/ govt paying to people for
goods/ services
• P2P- Peer to Peer- direct lending from one person to another
using the P2P company like “Faircent”
ICT for farmers- Highest bidders paying
farmers via M-PESA Kenya
• In Ng’arua region of Kenya, Kenyan farmers are
able to circumvent intermediaries and sell their
maize directly to the highest bidder through
Sokopepe, an online commodity marketing
platform created by the Arid Lands Information
Network, an NGO
Credit risk management:
• ICT can also help in predicting likelihood of default for banks
• By tracking “Digital footprints” of digital transactions
• Cash can not help hence Govt wants “Cash less”
• Credit rating agencies rating – CIBIL (Credit Information
Bureau (India) Limited)– track these transactions and
create report-
• CIBIL SCORE: > 750 score is good- range 300 to 900
 Tracking animal health through ICT
• Institute for Financial Management and Research (IFMR), with its insurance
company partner HDFC Ergo, uses RFID tag technology
• Radio-frequency identification (RFID) uses electromagnetic fields to
automatically identify and track tags attached to objects to verify the
location and ownership of each animal being insured
• Field officers and veterinarians then scan the tag each time the animal is
visited, using hand-held scanners connected to netbooks.
• This triggers a requirement for the staff member to enter data on the visit
into the database
• Veterinarian visits help reduce the likelihood of disease or fraud
• IFMR’s management information system (connected via VSAT at each
branch) is also connected to its insurance company
• LOAN OUTSTANDING
• 1.6.22 REPAID 500
• 1.1.2023 1000- 500 (500 PRINCIPAL & 50 INTEREST ) +
DOCUMENTATION CHARGE 20 = 570
• LOAN DISBURSEMENT: 1.1.2022 1000
Advantages of and opportunities for financial
inclusion services
• Time and cost efficiencies:
• Very time & cost efficient as the costs are very less as compared to traditional
methods
• Empowerment of the poor due to transparency and information sharing

• Smart technologies- integrating existing system and also linking all

the important transactions/ entities
Common ICT platforms for financial inclusion
services
• ATMs:
• The most widely known type of customer-facing technology is the ATM.
• ATMs have long been tested and used throughout the world, including India
• ATMS are mostly operated by banks but there are companies operating “white
label ATMs” – these companies offer ATM service to all the banks’ customers
• ATMs are less costly than branches but the low volume of business often does
not warrant the cost of purchase, installation and maintenance
• it is difficult to send people to repair and replenish the ATMs
• Many ATMs in rural areas are vulnerable to theft and damage
• ATMs need high level of dedicated, strong connectivity to the ATM network,
which many rural areas cannot offer
• New innovations are being done- “Card less withdrawal”
Computers (desktops, laptops, netbooks and
tablets)
• Computers are often used to extend financial reach into rural areas as
they have higher functionality and data retrieval than POS or mobile
phones
• They have generally become less and less expensive over time.
• Quality of reception is better
• Facilities like storage are there
• Safety may be better with firewalls, anti-virus software etc.
POS Machine devices
• POS- means Point-of-sale/ or point-
of-transaction devices
• These are the most commonly used
devices for agent banking across the
developing world, as the technology
for credit and debit card transactions
has been implemented in a stable
manner for many years
• Much cheaper than ATMs and
computers- many credit card
companies give them free to the
shop keepers
• POS devices allow entry of basic
alpha-numeric data and the swiping
of an ATM or smart card for
customer authentication
Mobile phones:
• Mobile phones are increasingly becoming the device of choice for
improving financial access in remote areas because of:
• the almost ubiquitous mobile phone networks, in developing countries
• low cost of mobile phone devices
• Most of the banks have developed their own Mobile Apps which are the
interface for banking operations
• Along with convenience the risk of cyber frauds has also increased
• How can you prevent cyber frauds in your account?
• As a general rule don’t share PIN no. of ATMs , password for internet banking and OTPs
whenever you have to get OTP
• Change password periodically
Issues and challenges for ICT financial
inclusion services
• Overemphasis on technology: The technology is not the financial product;
it merely provides access to the needed financial services
• Publicizing technology often overshadows the real purpose, which is just to
offer what has always been available in a better way
• The most important issues in improving access to finance in rural areas
have very little to do with technology
• The key solutions are more to do with solving customers’ real needs and
executing the services – both of which are more human-related than ICT-
related
• “ICT people do not really understand what customers need or what are
their problem areas”- this is traditional bankers view- but do you agree?
Advantages of and opportunities for ICT
financial inclusion services
• Lower-cost technology: For the past few decades, technology for
financial institutions as a whole has improved dramatically and
dropped in cost significantly
• Efficiency and innovation - through higher productivity and lower
cost
• Increasing flexibility and control for the customer
 Concluding comment
•ICT can play very important role in
improving Financial Inclusion for all
especially, poor people
•There is huge potential for these
services in India and other developing
countries
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