The debate on financial inclusion has lately been overly focused on issues of fundamental rights—privacy and security—which loom large over the state and fate of Aadhaar, and the ball has finally landed in the Supreme Court. In all this, we have lost sight of an equally important piece: the state of telecom infrastructure to enable transactions, transfers and withdrawals of funds, without which financial inclusion will be a non-starter.
In fact, there is broad consensus that delivering a cost-effective financial services landscape will leverage technology and telecom connectivity. However, the critical role of telecom companies doesn’t seem to hog the public space and, even more importantly, does not reflect in the monitoring dashboards of the PMJDY Mission Directorate, which bears on its shoulders the brunt of delivery and reporting progress.
Conventional metrics of telecom service—urban and rural teledensity—coverage fall short in explaining adequacy for financial transactions, especially the authentication process for withdrawal or transfer of funds using mobile phones. On the other hand, the fact that national teledensity is 77.3%, and urban coverage more than 100% in every service area, can be a delusion. Even rural teledensity of 47.8% masks the huge disparities across states, weighed down by the low numbers in Bihar, Madhya Pradesh, Odisha, Assam and eastern Uttar Pradesh. More importantly, this data is useless in monitoring financial inclusion: access and usage of financial services.
First, the telecom nomenclature of 22 service areas (states, large metros and groups of states) does not link up with the PMJDY’s unit of measurement—the Sub Service Areas, covering habitations of 1,500 or more people. This data is currently not available on the public domain, and not even available to the industry associations, mainly because telcos are required to report only aggregated data for the 22 service areas.
Second, teledensity is inadequate to capture the requirements for technology platforms on which financial inclusion landscape is being built: electronic payments, NEFT, RTGS, mobile banking, IMPS and (courts permitting) Aadhaar Enabled Payment Systems. Thus, the more relevant metric for financial inclusion is to check if the access and quality of wireless internet or broadband services is sufficient for individual applications and platforms.
Trai data for March 2015 reveals all-India internet subscriptions of 302 million, 11% over the previous quarter. Of these, 283 million were wireless—almost 99% being through phone and dongles—and 19 million wired connections. Broadband subscriptions (minimum download speed of 512 kbps) are significant, 99 million compared against 203 narrowband subscribers. Interestingly, mobile phones and dongles are the main modes of internet connection, accounting for 84% of broadband and 98% of narrowband connectivity.
Internet/broadband penetration gives us the realistic picture of the last-mile challenges to financial inclusion.
Crunching these numbers, internet coverage in rural India is an unimpressive 12.89% and even lower for broadband -2.94%. Even for urban India, broadband density is only 19%, compared to 143% teledensity.
What this means for financial inclusion is that, even with a 100% population coverage in terms of bank accounts and creation of customer support points accessible to all habitations with a population of 1,500 and above, appropriate telecom service coverage lags far behind.
In other words, the ubiquity of the mobile phone is not a sufficient condition for readiness towards financial transactions: a fundamental premise for mobile banking, payment bank services, and other innovative products and services such as AEPS and IMPS.
What needs to be done
As a first step, the telecom footprint needs to be monitored more granularly to check availability and quality of internet and broadband services at the locations of ‘Bank Mitras’ (business correspondents or BC) across India. Conversely, deciding the location of Bank Mitras should also take into account the availability of sufficient data transmission capabilities in the SSA.
The absence of mandatory requirement to report data at the district, block or sub-service area levels denies appropriate analysis of our readiness towards financial inclusion. Such granular assessments call for tower footprints and bandwidth availability to be mapped to the locations of BC outlets.
While tower location data is not a trade secret—telcos even provide tower services to competitors—the data need not be on public domain. All that is needed is leading telcos—Airtel, Vodafone, Idea and state-owned BSNL—provide the PMJDY Mission Directorate with current status and quality of telecom coverage and a likely date of service commencement for each enlisted SSA. The list of SSAs itself is on the public domain. This simple step will go a long way in accelerating the last-mile progress towards financial inclusion. For what is measured is usually achieved.
The author is with the Indicus Centre for Financial Inclusion firstname.lastname@example.org