Informal Economy Workers & Financial Inclusion

Currently people are debating about the contribution of ‘Informal Economy‘ to the GDP. As per SBI’s Research department report, India’s informal economy has shrunk to 20% of its GDP.

To know more about it kindly refer the below mentioned blog.

Is India’s informal economy 20% or 50% of its GDP? (finshots.in)

When it comes to Financial Inclusion of Informal Economy Workers the big question is -

Lack of usage of Financial Products ?

Nowadays this is the point of discussion when it comes to Financial Inclusion

So institutions in this sector need to figure out the requirement

Flow of money 💸💸> Investments 🏛️🏛️> use this investment to consumptions 🔁🔁 (i.e. usage)

It involves looking beyond credit to other important aspects– availability of saving services, insurance, and investment opportunities.

The traditional bank and NBFCs need to come up with innovate ways of

• Underwriting

• Accessibility

• Processing

Quantifying key parameters to assess progress made under financial inclusion is essential for designing suitable policy interventions from time to time.

As per National Strategy for Financial Inclusion 2019-2024 it need to be across the three dimensions of access, usage and quality.

• Access

  • Physical Points of Service

  • Digital Points of Service

• Quality

  • Financial Literacy and Capability

  • Grievance Redressal

• Usage

  • Formally banked accounts

  • Adults with credit at formal institutions

  • Adults with insurance

  • Cashless and Mobile Based Transactions

  • Frequency of Account Usage

  • Remittances

So, lack of usage of the product is not the fault of the informal workers, but the fault of the product. To solve this we need to start with the basics i.e.

What they 👩‍🦰👱 want?

For this Financial Solutions provider first need to clear the assumption they have built around Financial Literacy and need to move away from marketing-led growth to Product-led growth (an end user-focused growth model).

---

Views expressed are personal. Please be free to give your suggestions/inputs or counter-arguments. I will be happy to discuss them. You can follow me on LinkedIn or Twitter