This is a completely new concept that’s now coming down into use in the everyday analysis of the financial strategy to upscale the poor into sustainable prosperity cycle. A recent World Bank blog (April, 2019) clearly lays down the agenda for achievement on this score by steps.

To understand what is at stake here, we need to start with human capital development. It is accepted that focused efforts are needed to develop human capital at the grass root level. This implies that we need to work towards providing the deprived/poor section of the society with access to education and health care. Education creates skills that can be sold in the market and health provides the much needed sustainability for uninterrupted flow of earning. Once these two are made available cracking the vicious cycle of poverty becomes that much easier.

What would financial deepening do to help in this effort? This is where the aggregation of decades of actions to achieve effective alleviation of poverty comes into play. It’s now being proposed that there is a need to create a human development index across the globe. The index will provide us with a score of what a newly born would probably achieve 18 years down the calendar in terms of marketing his skill.

The entire score would depend on the opportunities that would be available to him in skilling himself and fighting off ailments. I have already discussed in my previous blogs the implications of health as an important component of fighting the curse of poverty. Here I would love to bring to you the current thoughts that are getting consolidated into policy reactions and the more and more responsibility that the financial sector is being called upon to play.

It’s being proposed now that the financial sector must deepen its effort in the global fight against poverty. As in the case of financial inclusion, wherein the sector has been tasked with creation of awareness and providing easy access to finance, here the financial sector is being tasked with providing resources for education and healthcare.

It’s now generally accepted that the governments across the globe have limited ability in fighting poverty. They can act as main agent in creation of a proper environment in which private actors play out an active role. For example, the private sector by earmarking a part of their earning (as in the case of CSR) for such efforts can contribute more than the government can.

But such effort requires intermediation of the financial sector. The financial sector by devising products, such as student loans or micro insurances can deepen the entire delivery into effective means. The role of the government would be to create intervention policy at the micro, meso and macro level. While we are familiar with the meaning of micro and macro level interventions, meso is a sociological terminology that is now finding wide use in policy sphere as well. It essentially implies patterns or interaction types specific to a group, community or organisation and their impact on various fields.

In short, what is being proposed here is that in alleviation of poverty we need to focus on creation of human capital and its development. The only way to do so is through financial deepening. In this process, financial actors are called upon to devise products and make them accessible to target groups by aggregating resources raised from various sectors of the economy.




Financial inclusion is defined by awareness about and access to financial resources. Any situation that provides focus on the creation of awareness presupposes lack of it. And, globally, it is seen that where functional literacy is very low, there is a correspondingly and even proportionally higher lack of financial awareness. In any country characterized by the problem of literacy, this problem is, therefore, really acute.

In the case of financial inclusion, it is observed that lack of literacy leads to a lack of understanding about the need for keeping and maintaining proper documentation. Without documentation, financial engagements with organized institutions are ruled out. According to a World Bank survey as part of their digital onboarding report for G20, there are about a billion people globally who lack official foundational identification. In simpler words, it means that these people do not even have an acceptable document to prove their identity.

This problem, in its extension, means that such lack of documentation becomes a critical barrier to access financial services. This problem becomes even more critical if we take into account gender inequality. Among the poor, this issue is endemic almost without exception. The women in a situation of gender inequality are almost completely disenfranchised socially, politically and economically. Their physical existence, more often than not, lacks any fundamental identification document. In short, if the existence of the menfolk on paper is tenuous, the existence of the women tend to be merely physical.

The survey says among the poorest 40 per cent about 30 per cent of the women are less likely to have an ID than men. This data by itself prove how dire the situation is. No country can progress without providing equal financial access to all bar none. But without even foundational identity documentation how can any organized financial structure solve this issue?

The answer to this question was found in digital technology. There was also another problem with the paper identification system. The traditional ID tends to easily lend itself to counterfeits and creation of fake identity. But biometric identity is unique. Therefore anyone with a biometric identification paper can uniquely identify himself and a financial institution can not only depend on that but also can use it as the person’s signature as well through instruments of transactions incorporating that ID. In one stroke, digital ID, therefore, allows the system to bypass issues of literacy in providing access to institutional finance and also, due to its extreme digital compatibility, makes it an instrument of branchless banking.

In India, Aadhar has provided the system with the trump card for fanning out to the remotest region with digital access to institutional finance. It has made remittances feasible and made money orders an instrument that is more a relic than a convenience. With access having been made easy by digital ID the only issue that is left to tackle in the mandate of financial inclusion is awareness. But with access becoming digitally universal, literacy is spreading more as a pull generated by access to financial system.




Millions of people in the world go to bed hungry. Yet, the amount of food that we waste could have fed all of us and would still have leftovers for the next day. It’s also said the amount of tax dodged by the rich properly deployed would have ended the global poverty twice over.

Be that as it may, the fact remains that the poor are extremely disenfranchised both in the society and of course in the market. This is to say that unlike those who are not poor, the poor lack access to both economic and social infrastructure. With no money in their pocket, schools and other socially empowering enablers are beyond their reach. The everyday market is also not accessible to them.

Given the extremely limited means that they are forced to live with, male get the first right to everything with the women being the eternal last in the right to everything. Yet they are the ones who keep the family together, create the surplus to bring up the kids and do their utmost to save the next generation from the curse of poverty.

The role of women and gender deprivation in the vicious cycle of poverty is a very well researched area now. And there is a universal acceptance of the fact that if poverty were taken as a social malady that creates extreme disenfranchisement, women bear the brunt of it.

All studies, almost without exception, are of the opinion that if we are to reach the goal of elimination of extreme poverty by 2030 as mandated by the United Nations, the women should be seen as the crucial change agents. Finding ways to enfranchise them through empowerment is the only strategy that could translate this mandate into reality.

The challenge here, therefore, is seen as two-pronged. One is the global – alleviation of poverty. The other is within the cohort of the poor and more micro in that sense which is the creation of a strategy to bridge the gender inequality, the persistence of which would run the risk of pushing back all efforts at poverty alleviation.

The studies, however, have incontrovertibly thrown up a singular strategy. Women have been empirically found to have the inalienable tendency to strive towards the creation of surplus for investment in the family’s economic growth. This is also seen as a more effective sustainable model. Therefore if the UN mandate is to be realised, women should remain in focus as the change agent in poverty alleviation.




The fact that there is a need to define boundaries of business is not a contested issue. In any civilized society, rules are needed so that no stake-holder can harm the interest of another to further its interest. A state, therefore, takes note of it and frames legal boundaries to preserve the freedom of its citizens and entities. This ensures that everybody is free to enjoy his or her freedom without infringing the freedom of another. The role of regulation in this context is purely promotional and enabling.

However, a multiplicity of regulations and far too diverse controls can also harm instead of promoting the cause of free growth. Business is one example that immediately leaps into mind. Globally, in all countries, regulation tends to grow with a crisis. No regulation can be foolproof. And there is a natural inclination to find the loopholes in any regulation to further the interest of the business. And the authorities keep trying to plug the loopholes by expanding the ambit of control.

We all understand this. Then there is the case of multiple regulatory bodies converging into controlling businesses. This necessarily tends to create confusion about the operational space of the regulatory body concerned. There are cases where the boundary of control of one body ends, control of the other starts. But between the boundaries lies a grey space that tends to be undefined in the rule-books.

Globally, such cases abound and have created disastrous consequences with markets crumbling, regulators scrambling to plug loopholes to prevent similar disasters from happening again. In every such case, while common sense cried for simpler and clear rules, the reverse has happened.

Simply translated, it means the creation of layers of licensing and compliance. While too lax a regime may lead to an anarchic market situation, too tight and layered licensing and complex compliance environment may also harm business initiative. A layered regulatory environment makes business operations expensive. It’s so because any business strategy in such an environment needs to evolve through layered bureaucracy internally. Each stage of strategy would then require checking for multiple licensing syncing.

While an older business that has grown through the process, will have an expensive but experienced bureaucracy to deal with the system, it will act as a deterrent for a new enterprise to come up. While for the former it will add to the cost of production, for the later it will add to the cost of setting up the business itself thus acting as a deterrent to the growth of business in the country concerned.

Therefore a country should strive for a simple but effective regulatory environment. An ideal environment, therefore, should be one that has zero tolerance for malpractice but is positively encouraging for growth instead of acting as a shackle.

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