Independent Research and Policy Advocacy

Financial Inclusion and the Urban Economy – IUC 2011

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India is rapidly urbanizing and the rate of urbanization is expected to climb steeply over the next few decades. The urban population of India will be close to 600 million by 2030, as compared to 340 million in 2008. The next three decades will, therefore, see the unfolding of a variety of urban issues, the responses to which will ultimately determine the long-term course of India’s development. Therefore, the design and implementation of appropriate urban policies based on data and evidence will be crucial in addressing these emerging urban issues and providing the ballast for sustained, long-term development of the nation.

In this backdrop, the India Urban Conference 2011 was envisaged as a series of events designed to raise the salience of urban challenges and opportunities in the ongoing debate on India’s development. The conference intended to bring together central, state and local policy makers, policy implementers, academics, students, civil society, and industry stakeholders to identify challenges and chart strategies for India’s urban development. The Conference saw the successful completion of its first year with three events that took place at Yale (April 2011), Mysore and Delhi (November 2011). It was jointly organised by Janaagraha Centre for Citizenship and Democracy, and the Indian Institute of Human Settlements, in partnership with Yale University.

IFMR Finance Foundation anchored one of the eight themes covered in the India Urban Conference, namely “Financial Inclusion and the Urban Economy” . In recent times, with the growing realisation that financial services are in the nature of a public good, this was an opportunity to accelerate the national economic and financial policy towards ensuring complete access to financial services for all Indians. Therefore, the theme delved in detail, into issues underlying access to finance to the three critical segments: low-income households, small and medium enterprises and local governments.

The sessions were organized into three main plenary sessions and four smaller workshop or deep-dive sessions. All these sessions delved deep into a number of issues such as: (i) quality of financial access to households and enterprises in the informal sector; (ii) challenges faced by practitioners in operationalising financial inclusion; (iii) city government finances and the issues in public infrastructure and service delivery; and (iv) efficacy of data generation through participatory planning processes.

The rich discussions yielded a number of insights into the types of data gaps that prevent: (a) the development of high-quality financial products to serve the needs of the informal economy and (b) the design of optimal policy responses for financial inclusion.

These data gaps include: household level financial information, government banking data and official statistics that are not public, real costs of service delivery to the bottom of the pyramid, housing arrangements of the urban poor, city level finances, public infrastructure quality and performance levels among others. While this lack of data emerged as a major constraint in promoting the cause of financial inclusion, it also became apparent that institutions with available data sets were not translating this data, through analysis, into meaningful and usable insights. In the context of data generation for public infrastructure, the discussions revealed that the processes of planning needed to be re-looked at so as to ensure meaningful citizen participation in generating data about cities.

The detailed outcomes of the day’s discussions will be presented in the form of conference proceeds in the coming months.

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