Financial Inclusion and the Urban Economy- IFMR


“Financial inclusion” is a theme that, in recent times, has gained tremendous policy importance. With growing realisation that financial services are in the nature of a public good, there is an increased impetus to ensure that national economic and financial policy promotes the agenda of complete access to financial services for the entire population.

It can be argued that the aim of financial sector policy should be to include three critical segments to achieve meaningful financial inclusion: low-income households, small and medium enterprises and local governments. Households, for instance, have myriad financial needs in terms of savings, loans, insurance and remittances, but it is not clear how many of these needs are addressed today.Small and medium businesses have financing as well as other requirements for growth that are not forthcoming from the formal financial sector. Local public infrastructure, such as water supply and sanitation, impact the fundamental well-being of households and the provision of these services is the responsibility of local governments, which are perennially short of funds.

Our theme is designed to delve into the issues underlying the current state of access to finance and the pathways in which such access can be enhanced. We will explore, in depth, these issues with practitioners and researchers to highlight not just current shortcomings, but also to explore innovative models of financial services provision, the challenges on the ground, and ways in which to address them.

One of the core issues we will explore is the lack of data and evidence from the ground, and the deleterious impact this has on financial inclusion. We will look to evolve new practitioner-centric research agendas to address crucial data gaps. The generation of relevant data and its usage for appropriate product development and policy making could have a transformational impact on the future of financial inclusion.


Plenary 1: Financial Access to the Informal Economy

This session will provide an introduction to financial inclusion and highlight its criticality as a tool of development.  It will delve into the issue of how the availability of data at various levels is critical to not only identifying the excluded and providing them a gateway to financial services but also to the development of appropriate financial products and financial sector policies that forward the agenda of financial inclusion.

Speakers will discuss the consequences of financial exclusion in urban India, especially in the context of informal households and enterprises in the urban informal economy. They will highlight the institutional responses to the provision of financial services for traditionally underserved sectors and how the lack of availability of data has adversely impacted such provision. They will also provide instances of how institutions have worked around these constraints and generated data to provide access to finance. Speakers will throw light on the critical issue of customer identification information, its regulatory importance, and how technology can be leveraged to confront this important problem.

The discussions with the speakers will be used to flesh out precise data gaps and chart out possible mechanisms for generating this data that can improve the quality of financial inclusion outcomes in India.


Aadhaar Flattening India (file size:1.80 mb)


Plenary 2: Operationalising Financial Inclusion

This session will look to distil the perspective of practitioners involved in operationalising business models that further the cause of financial session.

Speakers will highlight the challenges involved in actually implementing financial inclusion- through public and private institutions working on the ground in urban India. They will also discuss the need for richer data to drive improved product development and policy making, so as to improve economic outcomes for low income households, informal enterprises and migrant workers. In particular speakers will focus on the nature of their business models and how they surmounted the problems of lack of data and information, the data they have themselves generated and how this has ultimately impacted the cause of financial inclusion. Speakers will also highlight other existing data and information gaps that need further work.

The discussions with the speakers will be used to flesh out these data gaps and chart out possible mechanisms for generating this data that can improve the quality of financial inclusion outcomes in India.


Plenary 3: Financing Local Governments

One aspect of financial inclusion that traditionally has been neglected is the financing of cities, especially small and medium cities in urban India. Many Urban Local Bodies (ULBs) in India are starved of funds for much needed social and physical infrastructure improvements. Speakers in this session will introduce and analyse the issues involved in financing ULBs and how information is a critical component to enable access to finance.

Financing a ULB is critically influenced by the perception of its riskiness and assessing this risk requires a thorough understating of the workings of the city government.  Rating agencies traditionally focus on the financial information in assessing risk and determining ratings, and there is not as much focus on the operational capabilities of cities. A comprehensive understanding of the ability of cities to raise capital and service debt is possible only a thorough assessment of the operational, financial and systems capacities of cities. Making these assessments is predicated on the availability of data on these parameters.

Speakers in this plenary will highlight the current philosophies and modes of financing, the quality of financial data, and the impact of poor data on infrastructure and service outcomes. They will also speak about innovative new models for financing infrastructure in cities and how these have circumvented traditional challenges. The discussions with the speakers will be used to flesh out precise data gaps and chart out possible mechanisms for generating this data that can enhance the quality of decision making in cities.


Deep Dive 1: Financing public infrastructure in small cities: types of data and impacts

This session will have practitioners, researchers and administrators discussing the issues involved in the financing of infrastructure in small cities in the country. Participants will bring in diverse points of view on issues relating to infrastructure financing. The practitioner perspective will revolve around the financing of infrastructure projects and the data gaps that come in the way of designing sustainable projects. The research view point will bring out the quality of current financial data of small cities and its impact on decision making. The administrator view will delve into government decision making processes for infrastructure financing and the types of data on which these processes are based on. Through these various perspectives, we aim to develop a holistic of view of the data challenges that impact infrastructure provision in small and medium cities in India today.


Data Quality and Analysis (file size:800 kb)

Financial Inclusion for the Migrant Poor Experience (file size:2.50 mb)

Reaching the unreached (file size:2.60 mb)

Ujjivan (file size:870 kb)


Deep Dive 2: Access to finance for individuals, households and enterprises: Data and decision making

Speakers in this session are practitioners successfully engaged in the area of financial inclusion. During this session, speakers will introduce their business models and experiences in providing access to finance to individuals, households and enterprises that have traditionally been excluded from formal financial services. Specifically, they will discuss how a lack of high-quality data has affected their work, and highlight how they have succeeded in expanding financial access to the traditionally excluded, despite the information constraints.

In addition to discussing the specific evidences gaps which need to be addressed, speakers will reflect on the means and methods of their own data collection as they filled in some of these gaps and also recommend ways forward to address the lack of data. They will discuss how the lack of data interacts with financial access outcomes in the contexts of urban microfinance services, financial services for rural-urban migrant workers and infrastructure interventions for unbanked populations.


Deep Dive 3: Financing housing for the poorest urban households: Access to finance and data gaps

This discussion will focus on the impacts of poor data on housing arrangements of lowest income urban households and their housing finance needs. Housing practitioners will discuss the issue of urban housing from different perspectives: financing for middle and low income ownership housing, enabling households to build incrementally and rental housing options and challenges for migrant populations. Speakers will discuss issues such as land tenure (and associated data challenges), access to finance and other customer-related knowledge gaps that prevent the development of effective housing markets.


Deep Dive 4: Data Creation as Meaningful Participation in the Informal City

Calls for greater participation in urban governance and in planning processes have been escalating in recent years. Participation was mandated under the JNNURM for the writing of the City Development Plans, and now is required under the Rajiv Awas Yojana as well.

One reason why these calls for greater participation are interesting is because there is clearly a lack of information for planning in cities. This is particularly true of the informal sector – with large numbers of buildings, settlements, forms of work, workplaces, service connections, and infrastructure that are unrecorded by the government. As a result, existing government data is highly exclusive – it focuses only on the formal sector, while the majority of the urban poor lives and works in the unrecorded informal sector. Such a context presents a real challenge for those trying to plan for inclusive infrastructure or to monitor infrastructure and service quality and program implementation for low-income city residents.

In this context, participation may provide a means of overcoming this lack of data, by providing all citizens, including the poorest, a means through which they can express preferences about local infrastructure and service needs. Several groups in India have taken this one step further – by using innovative means of citizen participation to actually create the information needed for planning.

However, the concept and practice of ‘participation’ has proven to be highly problematic. Many different kinds of citizen inputs have been interpreted as participation, without the accompanying empowerment that participation is supposed to have, what some theorists have referred to as the “tyranny” of participation. Without stringent guidelines for what constitutes adequate participation, many cities have put extremely thin participatory processes in place. In many cases, citizens have been permitted to ‘participate’ but have not been given much control over outcomes.

This session will look more closely at the potential and pitfalls of citizen participation in overcoming data gaps in urban governance, with a particularly close examination of participatory data collection. The session will explore the kinds of data gaps that prevent more inclusive urban planning, the barriers that prevent the collection of this kind of data, and how participatory processes can overcome these barriers. It will also ask whether there are any inadvertent benefits from the lack of data about the informal sector.