Financial Inclusion: Access, Usage and the Gap Between Them

Financial inclusion is two readings rather than one. The first asks whether a financial service is reachable by somebody who wants it. The second asks whether, once reached, it is then used, and how often over a stated period. Where the two disagree, the disagreement describes the arrangement: what it asks for, what it costs to reach and what it costs to use. The reading is never taken on anybody standing outside that arrangement.

Two things are written down somewhere for every financial service that has ever been offered. One of them is a list of conditions the service will not begin without. The other is a cost line: what the party offering the service spends in order to reach a place and serve one use there. Financial inclusion is built out of those two things, and neither of them is a fact about anybody they are addressed to. A condition and a cost line are both properties of the arrangement, so both of them can be rewritten.

The whole subject turns on a single sentence: a condition and the person it is addressed to are two different objects. A condition sits in a document. Somebody wrote it, somebody could rewrite it, and it says nothing at all about whoever reads it. The moment a reading on reach quietly becomes a reading on people, it has changed subject without announcing the change, and every conclusion drawn afterwards is drawn about the wrong thing.

What is financial inclusion a reading on?

Financial inclusion reads an arrangement. Not a person, not a place, and certainly not a score anybody carries around. Financial inclusion asks two questions of a service: does it reach, and does it work once it has reached. Both questions are addressed to whoever is offering the service, and both of them are answered by things that party controls.

The everyday version is a street tap. A tap installed at the end of a lane is one fact. A tap that runs when it is turned is a completely different fact. A walk down the lane counting the taps produces an accurate count, and that count says nothing whatever about water. If the tap is dry, the next question is about the pipe, the pressure and the hours supply is released, and not one of those questions is about the people standing near it.

Every genuine finding on this subject is a finding about what some arrangement asks for, charges, or does not reach. The claim is a strong one and it is meant to be. Any statement on this subject can be run through it. A finding that an arrangement will not accept a form of evidence is a finding about the arrangement. A finding that a route stops thirty kilometres short of somewhere is a finding about the route. A finding that a charge is levied every time a balance falls below a line is a finding about the charge. A claim that cannot be restated in that shape is not a measurement.

What does an arrangement ask for before a financial service will begin?

An arrangement asks for a short list, and the list is duller than people expect. Who somebody must be established to be. Which evidence will be accepted as establishing it. How much must be paid at the start, and how much must be kept in the account afterwards. And where and when the arrangement is open for business at all. The four together make a threshold. A threshold has four kinds of line on it and every single one of them was typed by somebody.

Notice what is not on that sheet. There is no line describing anybody. There is no assessment, no verdict and no judgement of any kind. There is a specification of what the arrangement wants to see before it opens its side of the transaction, and that is a completely different sort of object from an opinion about a person. A requirement is a sentence in a document; it has an author, a date and a version, and it can be replaced by a different sentence on any morning somebody decides to replace it.

The second half of this is the part readers rarely reach on their own, so here it is straight out. A condition that has sat unchanged for twenty years is still a choice. Leaving something exactly where it is on each of those twenty mornings is a decision taken twenty times over. Age does not turn a requirement into a law of nature, and the fact that nobody remembers writing it does not mean nobody did.

How to Map a Financial-Inclusion Journey: what stands between a service and its first use?

Four things stand there, and every one of them belongs to the arrangement rather than being a stage anybody walks through. The distinction matters enough to keep saying. Each of the four conditions sits in somebody's document, and each can be looked at directly rather than through whoever it applies to.

One, is there a route that reaches at all. A service delivered only at a counter reaches exactly as far as somebody can travel to that counter and back inside the hours the counter is open, and no further. Reach of that kind is not a fact about travel. Reach is a fact about where counters were put and what hours were chosen for them, and both of those are entries in an operating plan.

Two, will the arrangement accept the evidence that exists. A verification has nothing to work with beyond facts somebody wrote down beforehand. Where nothing was written down, there is nothing for the check to work against, and the check returns nothing. A blank result is a gap in a registerA list kept by some body recording facts about people or things, which an arrangement can look a claim up against. Which registers exist, and what each one holds, is decided by whoever keeps it., and a register is a thing somebody maintains. Know-your-customerThe verification an arrangement completes before it will open an account. What it involves, which evidence counts and how often it is repeated are covered separately and are not stated here. requirements, and how they are actually satisfied, are covered separately.

Three, what does it charge, and what balance does it ask to be kept. Both of those are numbers. Somebody chose each of them and wrote each of them into a schedule, and a schedule of charges is about as far from a statement about people as a document can get.

Four, does using it once give any reason to use it again. Most maps leave this one off altogether, and it is the condition that decides whether an opened service is ever used again. Crossing the first three conditions gets a service opened. Nothing about crossing them says whether the account that was opened does anything anybody needs done.

Read the four across and one property shows up in all of them. Each is a sentence somebody wrote. Each sits in a document with a name. And each can be rewritten on a Tuesday morning, after which the same service reaches somewhere it did not reach on Monday, with nobody outside the arrangement having done a single thing differently.

Access vs Usage: what does each of the two readings count?

Almost every muddle on this subject comes from having seen the two words only in the same sentence. So define each fully before setting either against the other.

Access counts what exists and is reachable

An access reading counts things: a point of serviceAny place or route through which a financial service can actually be reached. A counter is one. A device, an agent or an application is another. within reach of somewhere, an account that has been opened, a facility that is available, a route that works from where the service is wanted. Each is a thing that could be photographed where it stands. An access reading is good for exactly one thing: it says whether a threshold was crossable, once. Crossability is a genuine and useful fact, and a great deal of work goes into producing it.

And here is the limit, and the limit is structural rather than a shortcoming of anybody's method. A count of things that exist is a count taken at a date. A count reports a position, the way a photograph does. A photograph of a road contains no information about traffic. An access reading is silent, by construction, on whether anything happened afterwards. What is counted is not movement, so no amount of care in taking the count changes that.

Usage counts what moves

A usage reading counts movement: how often the service was used, over what stated span of time, and for what. A usage reading is a different kind of number, in the way a speed is a different kind of number from a distance. Neither can be got from the other by being more careful.

Every usage reading carries its period or it is not a reading at all. Dropping the period is the commonest way a number on this subject gets quietly ruined, so the rule is worth applying every single time. Once in a year and once a week are the same three words written out, and the two are wildly different facts. A reading that says a service was used, and does not say over what span, has given nothing anybody could use.

Where does the gap between the two readings actually sit?

The gap between the two readings needs describing exactly. When an access reading is high and a usage reading beside it is low, something between crossing the threshold once and crossing it a second time is not working. And that something is always a property of the arrangement. There are only so many candidates, and they are all checkable.

How much does it cost to use each time. How far away is that point of service, and what does the round trip take in fares and in hours. How long is the queue on arrival, and how long are the opening hours. Does the money that actually arrives arrive in a form the account can take at all. And does the account do anything that needs doing. Each of those is a question with an address: somebody knows the answer, it is written in a document, and it can be looked up.

A gap between access and usage is a question addressed to the arrangement. Turned into a question about people, it stops being a measurement and becomes a guess. A guess of that kind cannot be falsified at all: nothing exists to go and check. Every one of the candidates above can be checked in an afternoon. None of the guesses can be checked at all.

The everyday version, and it is worth keeping because it travels: a post box installed at the end of a lane is access. A post box that is emptied on a schedule is usage. If letters go in and nothing comes out, the fact discovered concerns the collection round. Standing at the end of the lane forming views about the people who posted the letters would be an odd way to spend an afternoon, and it would not get the letters delivered either.

What does it cost an arrangement to deliver a service once?

Now the mechanism sitting underneath the word distance, and the mechanism is not really about distance at all. A point of service costs the same to keep open whether one use passes through it in a year or fifty thousand do, so the cost of delivering one use is simply that fixed cost divided by the uses. The whole mechanism is one division, and a division behaves the way divisions behave.

A number makes the shape visible. A point of service costs Rs 6,00,000/- a year to keep open. The six lakh is a setting chosen to make the arithmetic legible rather than anybody's reported cost. At 1,000 uses in the year, the cost of delivering one use is Rs 600.00/-. At 12,000 uses in the same year it is Rs 50.00/-. The Rs 6,00,000/- on top never moved. Only the divisor did.

Now the two things this division explains, and the many things it does not. The division explains why a route reaches a place with a lot of traffic through it before it reaches a place with little, and that is a statement about arithmetic in a cost line and about nothing else in the world. The division says nothing about anywhere, about anyone, or about what anywhere deserves. A divisor is a divisor.

And here is the half that matters more. Change the route and the whole division changes. A service that can be reached without a counter has a different fixed cost and a different set of uses to divide it into, so it has a different cost of delivery, so it reaches differently. Every layer of shared infrastructure that has ever mattered on this subject worked by moving that cost line, and not one of them worked by moving anybody. Which shared layers those are, and what each takes off a lender's cost, was settled earlier.

Move the control down to the thin end and the shape of the fall shows itself. Almost the whole of the fall is over in the first quarter of the range. By 15,750 uses in the year, a quarter of the way along the control, the cost is already down to Rs 38.10/- a use. The whole journey from Rs 600.00/- to Rs 10.00/- is 95.24 per cent done. A small addition of traffic through a thin point of service changes its economics far more than the same addition to a busy one, and that single fact explains more about where routes go than any amount of description would.

Which barriers are structural, and what is each one a property of?

Five of them come up again and again, and the useful thing is not the list. The useful thing is the column beside the list, naming what each barrier is a property of. Without that column the list is a set of words. With it, the list is five addresses where somebody could go and change something.

Two of the five deserve a sentence more. Records that do not exist is the one most often misread. The absence looks as though it sits on somebody's side when it sits in the payment method. Money handed over in cash creates no record of itself. There is no ledger entry, no statement line, nothing that could later be looked up. So an arrangement asking to see a record of earnings before it will begin is asking for something the payment method never produced. The missing record is a fact about how the money moved, full stop.

And time is the odd one out. Of the five, it is the one whose cost lands on somebody who has already got past everything else. The route reached, the evidence was accepted, the charge was paid. Then there is a queue, and the queue is the arrangement working at whatever pace it works at, during whatever hours it chose. The queue and the opening hours are entries in a staffing plan, and a staffing plan is exactly as rewritable as a schedule of charges.

What does the cost of delivery look like inside one bank's own year?

Suvarna Commercial Bank Limited, a made-up lender, is never called large or small beside anything else, and no claim is made about how much of any market it holds. The bank is useful for one line in its accounts, and one gap.

Take the year's figures and build them rather than quoting a ratio. Interest earned for the year was Rs 18,600 crore and interest expended was Rs 11,160 crore, so net interest incomeThe gap between what comes in on a lender's lending and what goes out on its borrowing, over a stated period. Where that gap comes from is covered separately. for that year was Rs 7,440 crore. Add other incomeEverything an institution earns over a period that is not interest, such as fees and charges. What sits inside the line is covered separately. of Rs 2,400 crore and total income for the year comes to Rs 9,840 crore. Operating expensesWhat an institution spends on running itself over a stated period, as distinct from what it pays out on the money it has borrowed. for the same year were Rs 5,040 crore. Divide, do not quote. The division to run is Rs 5,040 crore over a total income of Rs 9,840 crore, and it gives 51.22 per cent.

More than half of everything this bank earned in the year went on running itself, putting the cost of delivery at the centre of the business rather than at its edge. The size of that share is the whole reason the division matters. If delivery were a rounding item, moving it would change nothing and financial inclusion would be about something else. Rs 5,040 crore against Rs 9,840 crore is not a rounding item. Running the bank is the larger half of what the bank earns. The name of that ratio, and how it behaves across institutions, is covered separately under the cost to income ratioThe share of a period's total income that goes on running the institution. Reading it from one institution to another is covered separately..

Now the gap. Suvarna Commercial Bank reports depositsMoney handed to a bank that the bank must return, and may put to work until it does. Which deposit products exist, and what separates one from another, is covered separately. of Rs 1,92,000 crore and no count whatsoever of the accounts holding them. No count of points of service either, and no count of people working at them. A lender's accounts are built to report money rather than reach, so the first number anybody wants on this subject is the one those accounts were never built to carry. A national count is published instead by the Reserve Bank of India at rbi.org.in, and as a series on its data site at dbie.rbi.org.in.

Where do the figures on this subject come from?

Every national figure on this subject is a published series with an address, and a series is looked up rather than recalled. Coverage percentages, counts of accounts and of people, targets, rankings against another country and before-and-after comparisons all move on dates somebody else sets. Every number above belongs either to one made-up bank or to a setting of the control, and each is marked as such where it sits.

The reason takes a line. A wrong figure of that kind, if it looks right, does not stay put. A wrong figure travels onward as somebody's fact about a whole country, and gets repeated in that form by people who never saw where it came from. Something unverifiable that travels well is the worst thing a reference could carry. The national figures are published by the Reserve Bank of India at rbi.org.in, and by its data site at dbie.rbi.org.in when a series rather than a headline is what is wanted.

The same applies to every condition named here without a value filled in. Which identification must be obtained and verified before an account is opened. Any balance a deposit account is asked to keep, and any charge attached to falling below it. The conditions on which one party may serve an account holder on behalf of a bank away from a branch. And directed lendingThe share of its lending an institution is required to place into activities named centrally, and how that share is measured. Which activities and what share are set centrally and are not stated here., meaning the share of lending an authority directs towards named activities and how it is measured. Each is settled centrally, and each gets rewritten every so often.