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.