Quality Assurance

Of Innovation Management in Microfinancing

By

Babu Appat

Pullipparambu, Chelembra, 673 634. babuappat@gmail.com, www.thetrainingclasses.blogspot.com

INTRODUCTION

Quality of services, it goes without saying, is an important aspect in ensuring the outcome of any business activity  is in order of the expected standards.  The aim of micro-financing and other such financial products introduced by many banks these days, globally is financial inclusion, bringing the underprivileged, downtrodden, ignorant masses too under the coverage of suitable banking products, such as saving/current accounts, overdrafts, loans, cash/credit facility etc. Thereby we aim at the overall financial development of all the elements of our present day society. To achieve this aim we must ensure the quality of the services rendered is of the expected levels. If a person is living without a financial product, if a person is outside the banking umbrella, it’s considered as a gross disadvantage.  (S)He will surely be deprived of many provisions of the society, conveniences of life.

There could be many reasons why a person is not covered by the banking services.  It could be the person’s lack of information, lack of awareness about the conveniences of the various banking products, lack of marketing efforts, inadequate  information dispensing efforts of the banking institutions, so that the required information doesn’t reach the target, the fear and barriers created by the employees who come into direct contact with the beneficiaries, personnel related insufficiency, the apprehensions about the various services, too much repetitive paper works, unaffordability on the part of the beneficiaries, poor financial planning of the individual at the grass-root levels and so on. This study discusses these issues in considerable detail. 

Many innovative financial products have been introduced into the market by many financial institutions.  It’s the time of job losses, and bailouts in most part of the world. Joblessness produces lesser purchasing capacity and precipitates a retarded market growth. Retarded market situation hampers national growth and in turn produces lesser job opportunities.  This study discusses the implication of this global economic situation in relation to financial inclusion efforts introduced in India and some other countries.

Any service to be made really effective, the quality of rendering those services has to be improved. 


This study titled “Quality improvement of Innovation Management in Microfinancing” examines the present quality situation of the Indian banks, and suggests ways to improve these services especially in the banking services oriented towards the poor and lower middle class individuals and tiny and small entrepreneurs.

This study begins by defining some common terminologies in banking and related fields, goes on to explain the innovative measures in developing the service providing platform of the financial institutions, recent strides taken in making the banks future ready with the advent of the developments in the IT sector, discusses the relevance of ATMs and critically examines the promotional campaigns of some banks.

Research Modality

The mode of collecting relevant information has been direct interviews of some bank officials, telephonic interviews of some bank-men, resource persons in the subject of banking and finance, direct beneficiaries and prospective beneficiaries of these financial services etc.  Convenience sampling is the sampling modality chosen. .

Published secondary data from books, journals and Internet also has been utilised.  The findings or the suggestions put forth in this study hopefully will be of some real use to the industry or the students who intend to do a study in these lines.

What is Financial Inclusion?

The rich, the elite and the influential easily gets into the limelight. They reap all the benefits of the social allowances and provisions. They often become the preferred group of the rulers and legislators. Financial services provided by the financial institutions of the society, banks and the sort, normally reaches only these groups. There lies a major section of the society who are deprived of any of these kinds of provisions or services. If the society has to develop into a full fledged healthy one, these downtrodden have to be lifted up. Financial and banking services are bare essential requisites of the modern day to provide financial support to the various segments of the society and thus help them achieve financial freedom and progress in life. Financial Inclusion is the sum total of the efforts introduced by various financial organisations to ensure the downtrodden and the underprivileged are also covered under banking and financial supports.

According to Wikipedia, “Financial Inclusion is the delivery of financial services at affordable costs to section of disadvantaged and low income segments of society.”  So it clearly shows that an unrestricted access to public goods and services must be provided to all members of the society. Nobody should be excluded from the ring of beneficiaries. Financial Exclusion has its direct correlation to poverty in the society so banking and payment services should be extended to the people at the grass-root levels of our society to ensure proper national development.

Financial Exclusion

So it’s good we think a little about what Financial Exclusion is. Financial Exclusion is the unavailability of banking and other such social and economic life augmenting financial tools and services to any segments of the society, excluded on the basis of cast, religion, creed, overall financial status, geographical status or anything of that sort. So these sections will be forced to remain in poverty forever or for a longer time in their life. Their transactions will be limited to the cash only level and they will be kept outside the provisions of equitable credits. Financial Exclusion is a barrier to economic development and the need for building inclusive financial systems.  

Most of the world’s poor are financially excluded. Between 2.1 billion to 2.7 billion or 72 per cent of the adult population of the developing countries do not have a basic savings account even. We can simply measure the depth of the financial access by this fact. Recent empirical evidence using household data indicates that access to basic financial services such as savings, payments, and credit can make a substantial positive difference in poor people’s lives. Financial Innovation is a driver of economic growth and poverty alleviation.

Nearly 60 percent of the economies experienced a contraction  in real per capita income in 2009 as a result of the deepening of the global financial crisis. Worldwide volume of deposits and loans shrank, with a median decrease of 12 percent in the ratio of deposit value to gross domestic product

A simultaneous increase in the number of accounts and decrease in the value of deposits support the view that access to savings and payment services is a basic need. The use of these services is inelastic with respect to the macroeconomic conditions. This finding underscores the need to promote access to basic payments and savings services as essential tools in an increasingly digitized and globalized world.

Hitherto we have examined what is Financial Inclusion/Financial Exclusion and why is it necessary to cover the lower segments of the society under banking services. Now let us examine how government and other bodies concerned enforce or effectively implement the various measures of financial inclusion.

At the Pittsburgh summit in September 2009 G20 leaders committed to improving access to financial services for poor people, through supporting the safe and sound spread of new modes of financial service delivery capable of reaching the poor. It’s assessed that a large portion of the adults in almost all countries of the world do not have access to formal or semi-formal services. We must remember that this is happening in a world where access to key financial services are very essential to achieve financial self reliance or even to survive in this world.

Some Measures of Innovation

The modes of implementation of these measures should be really innovative. The delivery of the financial services if innovative and user friendly can have a transformative effect on poor households. We know the introduction of even a small limit credit had its transformative effects on the social set up of the land, or any land for that matter. It has dramatically improved the welfare of the society.

For example, in the villages of Kerala itself the loans provided by some banks with simplified procedure to buy sewing machines, set up a small poultry farm, coir spinning units etc had been readily accepted by the targeted population and had proved to be highly successful in the economic upbringing of the society.  These measures had clearly increased the house-hold income or had helped them to achieve financial stability. These innovative measures had helped them to build up assets and achieve greater resilience to financial upheavals and break downs. Appropriate and affordable savings and credit products payment and money transfer services as well as insurance are all important.

At this juncture where the usage of advanced technology in banking are so developed a major portion of the population who have a mobile phone are not covered by any banking products. As the time and cost of information and communication technology gets reduced and reduced, time is ripe to introduce technological novelties to address financial exclusion. Technological developments has helped us to reduce the cost per access and increase the ease of access. This makes it economically viable for the service providers to introduce innovative tools to baking.

There are so many measures introduced by competent authorities from time to time to ensure more and more convenient and effective banking and financial services are introduced to achieve financial inclusion.

Emerging Innovative Approaches

Now service providers can go beyond the boundaries of time and geography, find ways of meeting the full range of demand of the customers and provide innovative services to the poor and not-so-poor.  ‘Innovative Financial Inclusion’ refers to the delivery of financial services outside conventional branches of financial institutions (banks or microfinance institutions) by using information and communications technologies and non-bank retail agents (including post offices) and other new institutional arrangements to reach those who are financially excluded. In addition to traditional banking services, it can include alternatives to informal payment services, insurance products, savings schemes etc.  Delivery mechanisms include both mobile phone based systems and systems where information and communications technologies, such as Point-of-Purchase (PoP) device networks, are used to transmit transaction details among the financial service provider, the retail agent, and the customer. By introducing the two-way short message service (SMS) based authentication we can transact between any seller and buyer with the help of a financial service provider. Through that we can also teach the common man the ease of e-transaction without using hard currency

G20 Principles of Innovative Financial Inclusion

The following principles  help create an enabling policy and regulatory environment for innovative financial inclusion. The enabling environment will critically determine the speed at which the financial services access gap will close for the masses of people who are currently excluded. These G20 principles for innovative financial inclusion derive from the experiences and lessons learned from experienced policy makers throughout the world especially leaders form the developing world

1. Leadership

Cultivate a broad-based government commitment to financial inclusion to help alleviate poverty.

2. Diversity

Implement policy approaches that promote competition and provide market based incentives for delivery of sustainable financial access and usage of a broad range of affordable services (savings, credit, payments and transfers, insurance) as well as a diversity of service providers.

3. Innovation

Promote technological and institutional innovation as a means to expand financial system access and usage, including by addressing infrastructure weaknesses.

4. Protection

Encourage a comprehensive approach to consumer protection that recognises the roles of government, providers and consumers.

5. Empowerment

Develop financial literacy and financial capability.

6. Cooperation

Create an institutional environment with clear lines of accountability and coordination within government; and also encourage partnerships and direct consultation across government, business and other stakeholders.

7. Knowledge

Utilize improved data to make evidence based policy, measure progress, and consider an incremental “test and learn” approach acceptable to both regulator and service provider.

8. Proportionality

Build a policy and regulatory framework that is proportionate with the risks and benefits involved in such innovative products and services and is based on an understanding of the gaps and barriers in existing regulation.

9. Framework

Consider the following in the regulatory framework, reflecting international standards, national circumstances and support for a competitive landscape: an appropriate, flexible, risk-based Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regime; conditions for the use of agents as a customer interface; a clear regulatory regime for electronically stored value; and market-based incentives to achieve the long-term goal of broad interoperability and interconnection.

These principles are a reflection of the conditions conducive to spurring innovation for financial inclusion while protecting financial stability and consumers. They are not a rigid set of requirements but are designed to help guide policymakers in the decision making process. They are flexible enough so they can be adapted to different country contexts.

An excerpt from the G20 Leaders Summit

“We commit to improving access to financial services for the poor. We have agreed to support the safe and sound spread of new modes of financial service delivery capable of reaching the poor and, building on the example of microfinance, will scale up the successful models of small and medium‑sized enterprise (SME) financing. Working with the Consultative Group to Assist the Poor (CGAP), the International Finance Corporation (IFC) and other international organizations, we will launch a G20 Financial Inclusion Experts Group. This group will identify lessons learned on innovative approaches to providing financial services to these groups, promote successful regulatory and policy approaches and elaborate standards on financial

access, financial literacy, and consumer protection.”

Of the two billion adults around the world who are not covered under any banking products/services, 90% are from countries like Africa, Latin America, Asia and the Middle East. Now most people are aware of the fact that access to a wider set of basic financial services through microfinance such as savings products, payment services, insurance etc can provide substantially good amount of poor people with improved opportunities to grow up in their life with better financial freedom, build up assets and become more immune to economic shocks.

Barriers to Financial Inclusion

There are several factors which act as barriers for poor people to access financial services. They include, socio-economic factors like education, gender, age, cast/religion, low or absence of regular income, place of residence, and personal beliefs or problems.

Some major barriers financial service providers experience when expanding appropriate services to poor people are the cost of providing those services and finding the regulatory space to innovate.  As a general rule, transaction costs do not vary in direct proportion to a transaction’s size. Thus serving the poor with small value services is simply not viable using conventional retail banking or insurance approaches

Advancements in technology has helped the service providers to reduce the costs involved and achieve greater ease in rendering the services, dispensing relevant information and carrying out the day to day floor activities. Thus providing sustainable financial services to the excluded lot has become easy and feasible.

Another notable barrier of financial inclusion is the lack of relevant information about various banking services on the part of the target customer, due to his illiterate nature or because of the reluctance on the part of the concerned service providers’ grass-root level employees’ ineffective dispensing of the duties entrusted with them.

How to Overcome the Barriers of Financial Inclusion

Innovation, of course, is one of the most effective ways of overcoming the often encountered problems of financial inclusion. We can collect and analyse some of the innovative microfinancial products introduced by some banks of our own geographical region. Recently South Malabar Gramin Bank has introduced a mini loan scheme to the villagers of south Malabar region of Kerala called “Snehagramam”.

South Malabar Gramin Bank (SMGB) sponsored by Canara Bank is one of the largest Regional Rural Banks (RRBs)  in India in terms of total business. The bank was started in the year 1976. The bank claims to have two million customers who are mostly common villagers. SMGB also claims to have done some substantially good work in rural development, they are the pioneers in microfinancing in this part of the world and  they have received a lot of recognitions and accolades for this activity.

“Snehagramam” is a micro loan scheme introduced to save the rural poor workers and small entrepreneurs form the exploitation of local money lenders. The common men used to borrow money form the visiting Tamil money lenders who reportedly extorted out huge interests from the borrowers. The lenders’ men will visit the houses or business establishments of the borrower every week and will collect the money compounded with the interest in installments. The bank says the borrowers find it hard to pay the money back since the rates of interest are huge and not calculated on an annual basis. The main reason why people fell pray to these lenders is the ease of getting a loan from the unauthorised lender. The poor villagers considered the bank officials as too hostile to approach. Even now the opinion of an average bank customer towards the approaches of the bank officials are really bad, and the public is too unfriendly with them.

SMGB officials said they have done many things to change this opinion and their employees are now trained to render better services in a friendly manner. So “Snehagramam” was an innovative microfinancial product innovative in its concept and innovative in its approach and application. The banks officials even visited the houses of the target population, collected primary data on the proportion of the unofficial loans being disbursed in those regions and the modus operandi of these illegitimate lenders. Then “Snehagramam” self help groups (SHG) were formed. They formed some groups called clubs in the villages to directly monitor the financial needs of the poor and near poor village dwellers. The bank approached the people who were taken loans from the local money lenders and assessed the outstanding amount. 


Then through simplified procedures loans to these individuals were sanctioned and the amount of money has been given to them to make a one-time settlement of their dues to the money lenders. They can repay the bank in simplified equated installments. Then the bank helped the people who made a proper repayment with loans for increased amounts to help them start new businesses or modify their existing ventures. This project has helped to save the villagers from the clutches of the illegal money lenders and have helped them to develop their financial health.

Innovation and Penetration of Microfinance Product

The efficient and effective penetration of Microfinance and Rural Financial Products in India was done through Federation of Self Help Groups.  Self help groups were the launching pad for the microfinance product penetration and practiced by almost all the MFIs. Some of the NGOs/MFIs that penetrated largely through SHG Federation are, PREM, BASIX, SKS Microfinance, KAS Foundation, BISWA, Ashmita, Sanghamitra etc.

One of the major initiations on the penetration rural financial product was taken by the Government of India in 1999 through the extensive network of the formal banking sector i.e.,  196 Regional Rural Banks (RRBs) spread over 14,000 branches in 375 districts nation-wide, covering, on an average, about three villages per branch. The rural banking system demonstrated an even more impressive coverage touching the nook and corner of India. Together, the RRBs, the nationalized commercial banks and the credit cooperatives — comprising of Primary Agricultural Credit Societies (PACS) and Primary/State Land Development Banks (P/SLDS) — have one branch for every 4,000 rural residents (Bhatt and Thorat, 2001).

The effective microfinance product penetration by private and/or Non-government MFIs into remote areas and large number of clients was due to two important innovations,

1.      Individual counseling/personal counseling to the clients by MFI/NGO staff/sales force,

2.      Designing the income generation activity/business plan by the client with the active help of MFI/NGO

Microfinance Summits

For the past seven years an organisation called Access Development Services is organising Microfinance India Summits every year. Perhaps it’s now established as an international conference dedicated to Indian Microfinance; a single platform for sharing the unique Indian experience. At the same time this summits also helps us to have a glimpse of the international trends in these lines. It gives us ample opportunities for adaptation of the best practices in vogue in other parts of the world. Policy makers, practitioners, promoters, academics, researchers and thought leaders share their experiences on various panels, and about 1000 delegates from both within and outside the country participate in the Summit. It bridges the unnecessary hiatus between models and methodologies and helps to build consensus on the critical challenges and issues. In the past, the Summit themes have helped in focusing on key issues including "Inclusion, Innovation and Impact" (2005), "Urban Microfinance" (2006), "Formal Financial Institutions - the challenges of depth and breadth" (2007), "The Poor First" (2008) and "Doing good and doing well- The need for balance" (2009)

"Mission of Microfinance - Need to Reflect and Reaffirm" was the subject of the Summit of 2010. The summit had done an in-depth analysis of the current trends of the Indian microfinance sector. Topics relating sustainability, transparency, social performance, commercialisation of the sector, client protection etc had been discussed in detail in the summit sessions.

A table is given below, which will give us details about the depth of involvment of the Self Help Groups (SHGs) their importance and magnitudes of involvement in the microfinance operations.

Final data on microfinance sector

(to be read with the provisional data provided in theState of the Sector Report

Microfinance India 2010)

SHG-Bank linkage programme ( as per final data released by NABARD) 31 March 2010 position.

Number of SHGs that had savings with banks ..................................6.95 million

Number of SHGs that had loans from banks......................................4.85 million

Amount of SHG savings outstanding with banks ..............................Rs 61.98 billion

Amount of loans to SHGs outstanding.............................................. Rs 280.38 billion

Average loan outstanding per group   ................................................Rs 57795

Average loan outstanding       ................................... ....................... Rs 4445

Growth in clients over the previous year ...........................................8.4 million

Growth in loans outstanding over previous year ...............................Rs 58 billion

For more detailed information refer to ‘Status of microfinance in India 2010’, published by

NABARD. (www.nabard.org)

Financial Inclusion in India

India has a population of 1.2 billion. Of its total adult population only 1/4^th portion has access to formal financial services. Financial inclusion is nothing new in India. To expand and improve the access of the poor to financial services, a range of innovative financial products has been tested, tried and introduced into the market over the past century. In the beginning of the 20^th century itself laws and regulations have been formed to enable cooperative financial organisations to serve the rurals of India. After India winning independence in 1947 most of the financial institutions were nationalised. This itself has been with the main intention of spreading the reach of the major financial organisations to a more wider population of the nation especially those who lived in the rural areas. 


In the 1970s to further strengthen these efforts Regional Rural Banks (RRBs) a special set of financial institutions were started. And in the 1980 social entrepreneurs started the self help groups (SHGs) bank linkage programme whereby the commercial banks have been encouraged to issue loans to 10-20 member women groups.

Initially the Indian SHGs were constituted to render non-financial help such as training for starting self employment projects, to people lived in the rural areas. Some of them mobilised funds and opened accounts in banks and arranged loans for its beneficiaries. With the bank linkage programme SHGs were able secure large volume loans for its members. Today there are around 5 million SHGs receiving loans form banks with nearly 65 million members. Refer the above given chart for more details.

As an assistance from the NABARD (National Bank for Agricultural and Rural Development) the SHGs received nationwide acclaim and government recognised them and promoted their activities. The Banks were encouraged to lend the SHGs with the help of NABARD and the priority sector lending policies of the government. In the 1990s we witnessed a spurt in the activities of this system. The Indian SHG were unique in terms of its size and reach, though they had varied levels of sustainability. Some SHG bank-linkage programmes have cost effective programmes and repayment was prompt, others were not that feasible and relied mainly on the subsidies offered by the government. They had very low repayment rates. The SHGs provide many livelihood opportunities to the poor and they engage in many social upliftment programmes other than financial assistance.

By the 1990s government formed laws and regulations to include private sector to play a more pronounced role in the banking system of the country. The economic reforms brought in by the central government paved the way for the emergence of a new breed of private microfinance service providers- Microfinance Institutions (MFIs). Initially they were non-profit societies of owner-less legal entities. Then they grew to become profit making Non Banking Finance Companies (NBFCs),

The transformation from non-profit MFIs to for-profit NBFCs has been a complicated one often leaving the nonprofits and other often newly formed entities (such as mutual benefit trusts for the benefit of clients) with unclear voting rights or influence over the newly formed NBFCs. Most often the original founders controlled whole of the affairs (Sriram 2010). In the recent times instead of starting an MFI and transforming it as a for-profit NBFC has been changed to the formation of Start up NBFCs. Thus the complicated transformation and the associated problems have been avoided to a greater extent.

By 2010 there were ate least 30 MFIs operating as NBFCs with considerably good growth trajectories. These organisations have been promoted by government policies and direct investment. The government owned Small Industries Development Bank of India (SIDBI) has increased thier lending to MFIs steadily. To support the small industries has been the declared mission of SIDBI. Since loans provided by the commercial banks count along with the priority sector lending they also increased the lending to MFIs.

In the last few years MFIs were also capitalized by equity investments from specialized microfinance investment vehicles (MIVs) and, more recently, mainstream private equity funds.

By 2010 these new MFIs were expanding at an annual rate of 80 percent, and had reached 27 million borrowers across India (Srinivasan 2010), nearly all this outreach achieved through a standard group-based loan product common to South Asia. Importantly, these MFIs are effectively barred by regulation from taking any deposits and instead rely heavily on debt

with commercial banks to fuel their growth.

We have seen the present nature of financial inclusion in India, its various modes of enforcement, evolution of its functioning through some years and innovative approaches to provide better quality services to the needed population. Now let’s see how the QUALITY of these innovative improvisations can be assured to be of the best possible.

Some Quality Improvement Suggestions

The Quality Assurance as far as the innovation in microfinance sector is concerned can be viewed from two angles:  1. From the Product concept and its make up.  2. The rendering Modality or Service style.

1.    Quality of Innovation of the Product

As in the matter of any product concept there are  lot of aspects which we have to take care to ensure the product offered actually satisfies the need of the customers, in its best possible way.

Study the Need structure

The first endeavour a company have to engage itself is to collect as many details of the existing need, and form a clear understanding about the need. Then think of the most convenient way to satisfy the need. After that find out the most feasible way in rendering the product capable of satisfying that need in its best possible manner. Shape the product in accordance with the information received and inferences made on it. 


Think of value addition possibilities, if any feasible ways of value addition is located, incorporate those features also in the product. After completing the production, test the product in the selected markets, take feed-backs and modify it feasibly. Introduce to selected market and expand as opportunity arrives.

 If it’s not an existing or felt need, company has to form a clear understanding about the need it’s going to educate the customers. Need convincing strategies has to be formulated and implemented effectively. In concurrence to that, the product is offered to the market. All the other procedures mentioned above is repeated as in the case of an existing need of the market.

Study and improve the Product structure

For financial product improvisation also the procedures are almost similar. We conduct a pre-formulation survey and collect all the details about the condition that is prevailing in the targeted population. Along with the survey itself customer education endeavours can be combined if we had already launched upon a product idea, vague or clear. Then again Financial Service Provider (FSP) must modify their offering according to the market findings.

In the case of SMG Bank’s “Snehagramam” Product also this “information collection and product modification stage” has not been properly carried out. They came out with a tailor made product and offered it to the market  as such.  The researcher is not of the opinion that the product has not been capable of serving its purpose, but only hinted that the offer could have been made more customised, for better acceptance and market sustainability. So Offer Optimisation efforts should be carried out with an aim of achieving the best possible quality product.

The coverage of SMEs, small business firms of the target loacalities, by the “Snehagramam” project has not been as good as the coverage of households of the villages.

2.    Quality of Innovation of the Service

The quality of the service, the work done at the floor of the bank, is very crucial as far as a financial product is concerned. There are two ways of bettering this: 1. Machine augmentation and 2. Man augmentation.

Material or Machine based Augmentation Efforts of Services

The stationery or forms and files regularly used can be bettered to improve the quality of services. Thoughtfully designed forms and files reduces clerical work and provides ease. At the same time it improves the overall efficiency of the system. Even in the digital era this holds good, because instead of the printed forms and files, there virtual forms and files are used. Both are the same. These virtual forms and files also have to be adopted to the changing times. There also the Quality of Innovation has to be ensured by set norms and parameters.

Computerisation of the service floors is one latest technique of ensuring quality and speed of services. Installation of proper hardware, impregnation of apt software and putting trained men behind these machines alone will not be enough

Capability Augmentation of the Personnel

Routine trainings given to prepare the service-providing-men are not enough to ensure the quality of the services. They must be given intense trainings. The in-house trainings can be made to assume the structure established academic courses. On successful completion of which certificates can be given to the trained personnel.

Apart form that the parameters set to ensure the quality of the services must be formulated intelligently and with great care. “Intelligenntly” because the parameters adopted must be capable of ensuring the quality of the service rendered, and must be capable of measuring and monitoring the individual performances. “With great care” because strategies and parameters must be formulated with implementation ease in mind and must be capable of ensuring employee compliance.

Any services provided by any level of employees in the system should have an industry standard. The industry standards must be arrived at by taking into consideration of all the players both private and public and after consultation with subject experts and experienced professionals. In its level of average or peak level, an allowance must be made for betterment. That level must be taken as the expected level of performance for all employees.

Take the example of a teller in State Bank of India counter. He completes 300 transactions in an eight hour shift. Then it’s compared with the completed per day transactions of a teller in ICICI Bank or HDFC Bank. Average time taken for each transaction (routine) by tellers of many sample organisations is to be compared. Average duty time interruptions like tea break/Lunch break/guest visit/toilet break and interruptions like unofficial telephone calls/news paper reading etc must be monitored properly and acceptable standardised norms for all the FSP must be introduced. Service personnel must be informed/explained about these and made to comply with the set standards. Norms and standards of minimum expected levels of performance must be strictly enforced.

The digitized tools introduced to dispense tokens, to avoid queue is actually causing the customers to wait for long, because the queue moves forward only at the press of the next button by the teller. Formerly the customers used to swarm to the counter and press the teller for action. This pressure is now removed and a teller at ease is having diminished efficiency.

Introduction of Mobile Phone based payments at PoP (Point of Purchase) will help us even do away with hard currency to a great extent. This will also help us avoid or reduce the number of costly (Automatic Teller Machines) ATMs. A man capable of engaging himself in an e-transaction only can avail the services of an ATM, then why should we bring him back to conventional  hard currency usage?

As per the Microfinance Summit 2010 reports only 1/4^th of the adults are covered by the banking services. Ensuring the Quality of Innovation in Financial Inclusion itself can bring a turn-around in this situation. We can think of a “all families covered by banking services” campaign to this end. Mobile banking through RRBs or Cooperative financial institutions can achieve this goal easily. They can bring all families and all business owners to take accounts in their bank, if this project is thoughtfully implemented.

By avoiding import, installation and continuous maintenance of the costly Automatic Teller Machines we can save a lot foreign exchange.

Another important Quality Impregnation Measure that can be tucked into the Financial Inclusion efforts is “Standardisation of Bills”.

Sales Bill Standardisation

There are umpteen number of private and government organisations raising bills routinely for the products sold or services rendered. They raise a printed or virtual bill to support the claim, receive and record payments. Many different organisations prepare this in many different forms and styles. These styles has to studied and a decision has to be made on a standard format for all types of bills with minor variations to denote different classes. A bill raised should be accepted by the banks and the bank should debit and credit the giver and receiver accordingly. The bank can deduct VAT or other state/central taxes as per norms and debit it to the concerned sales/service tax accounts of the state. Standardisation of the form and procedure of bill is the only effort we have to do in this. We save a lot of effort on the part of the business entrepreneur and as well as on the part of the government machinery. It’s eco-friendly since it saves costly paper and hazardous inks. The staff of state and central tax departments can be rehabilitated in Financial institutions.

Bill assumes the role of currency and without bill transactions and tax evasions can be brought to zero or the minimum. This is suitable for manual as well as computerised operations. By establishing and authorising any or all firms it is possible to receive and give any payments in favour of any person or organisation. If this is effectively implemented we can bring all the individual of the nation with unique id and password and a bank account. Can avoid the dangers of fake currency. All payments and receipts are recorded so it is helpful to maintain proper law and order also in the country. This can help prevent money laundering and financing of terrorist activities. Accepting liquid cash for bigger amounts should be discouraged immediately and stoped altogether in the course of time.

Any competent software firms will be able to prepare, install and maintain the software required for the computerised operation of this system.

There is more to this system. It’s time and cost efficient. Provides extreme ease and convenience. If individuals also can be authorised to raise/receive these bills even the daily wages for coolies and local workers, even the day today casual purchases can be paid using these bills, and they also open and maintain bank accounts. The money is not money till it’s endorsed duly by ther buyer/seller or giver/receiver. So theft is not possible. Bribery is not possible.

A nations’s whole population can thus be brought under the banking umbrella. Even the economic disparities and economic crimes can be brought to zero or the minimum. The difference between micro/macro finance even doesn’t exist then.

Yes, there is more to it; can be discussed on any fitting fora, opportunity permitting.

Hope this study, the observations done and the suggestions made thereby, be of some use to the intended parties and the general public.

SUMMARY.

The objective of this study is to critically analyse the Quality Assurance of the innovative measures adopted in the Indian and International scenario of Financial Inclusion.

This study explains the purpose, modes of collecting and analysing the data etc. in its introduction.

The global banking scenario, especially the microfinance structure is explained in brief. 

Need for innovation in the area of Financial Inclusion is discussed.

Then this study analyses the present quality level of the innovation management in financial inclusion and banking services. Suggests ways to ensure better quality in it.

The research modality adopted in this study is described.

Then the study goes on to explain what financial inclusion is.

Financial Exclusion also is briefly explained in this study.

After that some measures of innovation is discussed.

Discussion goes after that to emerging innovative approaches.

The G20 Principles of Innovative Financial Inclusion is discussed then.

The study is added with an excerpt from the report of the G20 leaders summit.

The next topic discussed is Barriers to Financial Inclusion.

Thoughts then migrate to the topic” How to overcome the barriers financial inclusion” after that.

Innovation and Penetration of Microfinance Products is discussed.

Description of the Microfinance Summits follows that.

A table on the “Final data on the microfinance sector” by NABARD is added in between.

The discussion then reaches “Financial Inclusion in India”

Suggestions for quality improvement is sandwiched in between.

Opinion on “product based quality improvement” and “service based quality improvement” are mentioned then.

Study of the “Need structure” and “product structure” also is added in this study.

Material-based and Man-based quality improvement measures are pointed out.

The relevance of ATMs is discussed

Mobile banking is discussed.

A novel suggestion about the “Sales Bill Sandardisation” is made in this study.

An appeal by the researcher to seriously analyse this suggestion and discuss it in detail is made hereby.

The study closes with a wish of it being of some benefit to the general public.

ACKNOWLEDGEMENT

The study owes a lot to the inspiration first, directions next and supports over and above everything, given by Prof. Dr. M A Joseph, Dept. Of Commerce and Management studies, University of Calicut. He guided me in everything.

The study would not have been possible with the help of the staff and management of State Bank of India, Ramanattukara, HDFC Bank Ramanattuakara, ICICI Bank Ramanattukara, Service Cooperative Bank Chelembra, South Malabar Gramin Bank, Chelembra, Rural cooperative bank, Chlembra, Malappuram District Cooperative bank, Chelembra, Mahila Cooperative Bank, Ramanattukara and managing director & staff of  IT Coop, Malappuram.

The customers and accomplices of the business organisations of the region who frequent these banks also have helped in arriving at many conclusions in this study.

Papers published by Access Development Services

Reports of Microfinance Summit, microfinance summit 2010, NABARD, CGAP, World Bank, Ausaid project and websites of the above mentioned banks, NYTimes, Business Line, BBCWorld, Financial Express, Wikipedia, bloomberg etc were helpful in drawing conclusions and making observations in this study.

Indebtedness to everyone is recorded, gratitude to everyone is conveyed, and contributions are acknowledged.