India's PMJDY partners UN's `Better Than Cash Alliance' to accelerate financial inclusion
02 September 2015
The Government of India is joining the UN-based `Better Than Cash Alliance' that would help accelerate digitisation of payments while achieving financial inclusion by replicating Prime Minister Narendra Modi's flagship financial inclusion programme Pradhan Mantri Jan-Dhan Yojana (PMJDY) elsewhere.
The PMJDY has helped the government open about 180 million new accounts, with deposits totaling more than Rs22,300 crore ($3.4 billion), in one year of operation.
The new partnership with the `Better Than Cash Alliance', which is made up of governments, companies, and international organisations, is an extension of Indian government's commitment to reduce cash in its economy. Digital financial services lower the cost of providing financial services and make it more convenient for poor people to access their accounts.
''The scale of ambition of Pradhan Mantri Jan-Dhan Yojana has been much higher than for any other financial inclusion initiative in the past. The project has been instrumental in bringing almost all families of the country into the formal financial system and enabling citizens at grassroots level to perform financial transactions and keep their hard-earned money safe,'' finance minister Arun Jaitley said.
India's announcement comes ahead of next month's United Nations Special Summit in New York, when Prime Minister Narendra Modi and other world leaders will launch the adopted Sustainable Development Goals (SDGs).
Digital financial services are a key tool for the implementation of the goals, and advocates hope India's leadership inspires other governments to harness the power of digital payments as a strategy for achieving the SDGs.
Ruth Goodwin-Groen, managing director of the Better Than Cash Alliance, said India's leadership and progress are inspirational for countries around the world. He said that by making the digitisation of payments to achieve financial inclusion a top priority, the Indian government is showing its commitment to improving the lives of its people and driving inclusive growth.
One year ago, the Government of India had announced PMJDY with a goal of covering every household with a bank account in less than five months' time. The programme focuses on citizens excluded from the formal financial sector, including women, small farmers, and labourers. To ensure that these accounts are actively used, the government is delivering financial products, such as credit for economic activity, as well as remittance facilities, insurance, and pension directly into the accounts.
''We have been recognized by the Guinness World Records for opening over 18 million bank accounts in a single week. As a next step, the aim is to utilize these accounts for extending insurance, pension, and credit facilities to those who are currently excluded from these benefits,'' finance minister Arun Jaitley said.
''PMJDY has been a game changer in the country's financial inclusion efforts. The initiative has demonstrated that when we converge the efforts of all stakeholders, and work in unison with clearly defined goals, unprecedented results follow,'' Hasmukh Adhia, then secretary of the Department of Financial Services, said.
The financial inclusion programme, along with Aaadhar biometric Unique Identity cards that make it easier for the government to identify social benefit recipients and the widespread use of mobile phones, are driving financial inclusion in India. It is also resulting in cost savings. The fuel subsidy programme, which is the world's largest cash transfer programme, is estimated to have saved Rs13,100 crore ($2 billion) by paying cooking gas consumers directly into their bank accounts.
Following up the PMJDY, Canara Bank has opened 12 million accounts and delivered financial literacy and educational tools to poor people in rural areas. Union Bank of India has also prioritised financial inclusion in rural areas, with a particular focus on women by providing weekly education trainings in villages and garment factories.
By joining the Better Than Cash Alliance, the Indian government will have a research, technical, and policy partner as it continues to create a digital financial economy. Other government members of the alliance will also benefit by gaining access to the lessons and insights of India's experience and growing expertise.
The Better Than Cash Alliance is a partnership of governments, companies, and international organisations that accelerates the transition from cash to digital payments in order to reduce poverty and drive inclusive growth. The United Nations Capital Development Fund serves as the secretariat.