For effective financial inclusion, an integrated suite of financial products and services has to be offered, says a study by Ernst & Young. The study, commissioned by the Associated Chambers of Commerce on financial inclusion and insurance, said it would be fruitful to integrate micro-savings, micro-credit, micro-remittances and micro-insurance, which are the main components of financial inclusion.
“Currently, research does not indicate the existence of a single, integrated package comprising these services. Several Governments provide these services to the poor. These are mainly carried out by different organisations,” the report said, adding that there was little or no co-ordination.
A standalone, no-frills account could be included in the product suite to open up basic banking services to the poorer customers while the insurance component could be tagged on in the co-insurance model.
In the co-insurance model, risks are underwritten by specific insurance companies — life risk by life insurers and other risks by a health or general insurer.
DISTRIBUTION
On the distribution front, the study said as the insurance business depends on scale, bank channels should be utilised to provide a large number of services to the customers.
Though distribution through channels such as microfinance institutions was in the vogue, they did not have required scale, the study said. The microfinance model for distribution should have a separate channel, focussed on the customer segment.
Global experience showed that there was an increasing dominance of telecom-led distribution models in countries like Ghana and Kenya.
“Several global models and a few Indian ones have shown that financial inclusion is a financially viable business. This requires a critical focus,” it added.